California Gov. Gavin Newsom vetoes school solar bill

California Gov. Gavin Newsom has vetoed a bill that aimed to make rooftop solar systems more affordable for school districts. The decision drew immediate rebukes from groups that say it will harm schools by preventing them from using solar to curb their rising utility bills and help meet state climate goals.

With his veto of SB 1374 late Friday night, Newsom, a Democrat, has dealt yet another blow to the state’s rooftop solar sector. Over the past two years, the California Public Utilities Commission has cut the compensation that customers of the state’s three major utilities can earn from the solar power they generate with their own panels. The moves have been motivated in part by a desire to rein in the state’s spiraling utility bill costs, but so far their clearest outcome has been a crash in the state’s nation-leading rooftop solar market.

In November, the CPUC decided to slash the value of shared-solar programs used by schools, farms, multifamily property owners, and small businesses, spurring a strong backlash. The rules it set were much harsher than those for single-family homes. Under the decision, shared-solar users are not allowed to offset their electricity use with rooftop solar — instead they must sell all of their solar power to the utility at comparatively low ​“avoided cost” rates and purchase all of the electricity they need at much higher retail rates.

SB 1374, the newly vetoed bill, would have overturned that decision for schools, allowing them to essentially follow the more lucrative rooftop-solar rules available to single-family homes. Schools would have been allowed to credit the solar power they consume at their properties as offsetting their purchases of electricity from the utility. Any power they sent to the grid beyond their on-site consumption would have been compensated at the same avoided-cost rates that now apply to single-family homes.

Legislation to overturn the CPUC’s decision was supported by clean energy groups, affordable-housing proponents, farming groups, school districts, and more than 135 local elected officials. SB 1374 was passed by large majorities in both houses of the state legislature — a notable feat given that a host of other bills challenging California’s regulatory push against rooftop solar faltered this legislative session in the face of utility opposition.

SB 1374 supporters reacted with anger to Newsom’s veto, citing it as evidence that the governor is taking the side of utilities and labor unions representing utility workers, which have provided significant contributions to his political campaigns over his career, while ignoring the needs of schools and the communities they serve.

California lawmakers can override the veto with a two-thirds vote in both houses of the legislature, but such overrides rare. Moreover, the state’s legislative session ended last month, so lawmakers will have no opportunity to hold an override vote this year.

State Senator Josh Becker, the Democrat who authored SB 1374, argued that the CPUC’s shared-solar decision in November unfairly penalized utility customers by preventing schools and other properties with multiple utility meters from using any of the power they generate to offset their utility bills.

“California needs to be incentivizing solar and not discouraging it,” Becker said in a statement on Saturday. ​“Schools, apartments, and other multiple-metered customers should not be punished for consuming the energy they generate on their properties.”

Steven King, clean energy advocate for nonprofit Environment California, agreed. In a Saturday statement, he said, ​“Schools and apartment buildings should have the same opportunity to install and benefit from solar panels that single-family homes do. We’re disappointed in Gov. Newsom’s decision to pump the brakes on this popular, proven clean energy resource, especially as cuts to solar incentive programs in the last two years have made rooftop solar’s future so uncertain in California.”

Utilities versus schools 

In a Friday statement, Newsom justified the veto on the same grounds that California utilities and consumer advocacy groups have used to demand steep cuts to rooftop solar programs — the idea that they are causing ​“cost shifts” from utility customers who own solar to those who don’t.

Utilities across the country have long made this ​“cost-shift” argument about net-metering programs that pay retail rates for the power rooftop solar systems send to the grid. Solar supporters have pushed back, saying that these arguments overstate the costs to customers at large and fail to account for multiple economic, environmental, and social-justice benefits that rooftop solar provides.

“While I support the continued growth of the customer solar PV market, this bill would compound the challenge of electric bill affordability,” Newsom wrote. ​“Specifically, this bill would increase the amount that most customers would pay for their own electric service to provide a rate subsidy to certain customers, and public schools, that install solar PV systems on their property.”

That argument closely matches the one made by the state’s three major utilities, Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. In a joint letter to the California Senate Energy, Utilities, and Communications Committee, the utilities wrote that SB 1374​“would reverse recent protections for non-solar customers. We believe that creating equitable rates for all customers is crucial, and this bill fails to account for the increased cost to serve customers with multiple meters.”

But SB 1374’s backers say that the CPUC’s own analysis does not support the conclusion that school solar projects come at the expense of other ratepayers. In fact, they say, CPUC data shows the opposite — that solar programs for nonresidential customers have not caused a cost shift.

As Stephanie Seidmon, program director of nonprofit advocacy group UndauntedK12, told Canary Media in April, the CPUC’s shared-solar decision ​“took arguments that were questionable — and made for the residential sector — and then based their policy for the commercial sector on the cost-shift argument that only applies to the residential sector.”

Eliminating the opportunity to cut utility bills will definitely harm the prospects for California schools seeking to invest in solar systems. Nearly one in 10 U.S. public schools had installed solar as of 2022, according to nonprofit group Generation180, enabling them to save hundreds of thousands to millions of dollars per year.

But California school districts have warned the CPUC that its November decision will force them to cancel solar installation plans already in progress because they will no longer save enough money to justify the cost.

Meanwhile, spiking utility rates are hitting school budgets hard.

Energy is the second-highest cost behind staff salaries for many school districts. That’s especially true in California, where electricity rates at the state’s major utilities have grown to among the highest in the nation and are set to continue to increase dramatically over the coming years. Efforts by lawmakers to pass bills that would take on those rising rates were stymied in this year’s legislative session by opposition from utilities and utility-worker labor unions.

What’s more, Seidmon told Canary Media this spring, rising electricity costs make it harder for schools to replace fossil-fueled heating and school buses with electric, emissions-free alternatives — two technological transitions California schools are mandated to undertake over the coming decades.

“We are disappointed that we’ll be forced to divert hard-fought education funding from classrooms to ever-increasing utility profits,” Nancy Chaires Espinoza, a legislative advocate for the School Energy Coalition, a nonprofit group representing school districts that want to transition to clean energy, said in a Saturday statement. ​“Today’s action is a step backwards for clean, reliable power in schools and the critical climate change adaptation that we owe to our students.”