Utilities Call on CPUC to Incorporate Cut Inflation Act Tax Credit Changes into Net Energy Metering Procedure | Buchalter
On August 19, 2022, California’s investor-owned utilities filed a joint motion for formal notice with the California Public Utilities Commission (CPUC), claiming that the recently passed Inflation Reduction Act of 2022 (HR 5376 ) is “directly relevant” to the CPUC’s Open Net Energy Measurement (NEM) procedure.
The CPUC is currently considering a revision to its NEM tariff (referred to as NEM 2.0), which is a billing mechanism that allows utility customers to generate their own electricity, for example from solar panels, to meet their own energy needs. on the spot. Customers also receive a financial credit on their electricity bills for any excess energy that is returned to the utility. On December 13, 2021, the CPUC issued a draft decision revising the NEM 2.0 tariff, finding that it “currently negatively impacts non-participating customers; is not profitable; and disproportionately hurts low-income taxpayers. The proposed changes in the ruling to export rates and compensation were controversial and caused an outcry from the solar industry. The CPUC is expected to issue another draft decision in the short term.
The joint utilities (Pacific Gas and Electric Company, San Diego Gas & Electric Company, and Southern California Edison Company) filed their case in the open process, saying the Inflation Reduction Act restores and extends the following clean energy credits that were to be scaled back:
- Sections 13102 and 13702 (extending and modifying the energy credit) amend sections 48 and 48E of the Internal Revenue Code, respectively, providing a 30% credit for certain renewable energy projects (including solar and energy storage) that (a) are sized less than one megawatt; or (b) meet certain salary and apprenticeship requirements.
- The Residential Clean Energy Credit (Section 13302) amends Section 25D of the Internal Revenue Code (26 USC § 25D) to (a) extend until December 31, 2034 the tax credit available to individuals for expenses qualifying solar electricity property (among other types of clean energy property spending); (b) restore the credit available to 30% of eligible expenses (which, before the amendment, had fallen to 26% and was to fall to 22% as of January 1, 2023); (c) extend the availability of the 30% credit until January 1, 2033 and phase out the credit thereafter; and (d) extend the credit to apply to qualifying battery storage technology expenditures.
The joint utilities explain that “the extension of the 30% tax credit for non-residential and residential solar projects is directly relevant to modeling a new net energy metering tariff in this proceeding.” The CPUC has not issued a ruling or response to the utilities’ joint request for a formal notice, and it remains to be seen how well the alternative ruling will incorporate the Inflation Reduction Act.
The IRA is complex legislation with many nuances.