New California bill would undo some 20-year rooftop solar contracts

California lawmakers are considering a bill that would renege on decades of commitments to customers who’ve installed solar panels on their homes — all to shrink only a tiny fraction of the utility costs that are driving electricity rates through the roof.

The bill in question is AB 942, introduced by Assemblymember Lisa Calderon, a Democrat who previously worked for decades at utility Southern California Edison. And unlike the cuts to rooftop solar incentives that California regulators have imposed over the past few years, which apply only to solar systems installed after the new policies have been put in place, AB 942 would undermine the value of solar on the nearly 2 million homes that installed panels years ago.

The original version of the bill would have unilaterally cut from 20 years to 10 years the net-metering contracts those households have with utilities Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. That would have forced an increasing number of households grandfathered into the state’s legacy net-metering program onto the far less lucrative net billing tariff, which applies to solar systems installed after April 2023. That tariff pays roughly 75% less for solar power sent back to the grid than the net-metering program.

The blowback has been fierce. Nearly 100 California environmental justice and community organizations warned in a letter to lawmakers that passing AB 942 would ​“gut consumer confidence and trust in government, right when we need more Californians to make the choice to invest in clean energy technologies.”

Last week, the state Assembly Utilities and Energy Committee stripped that universal contract-clawback provision from AB 942. The amended version of the bill passed by the committee now requires only homes that are sold or transferred to move from legacy net metering to the less lucrative net billing tariff.

That’s still a problem for rooftop solar backers. ​“A lot of homeowners are selling solar as a positive feature, which makes perfect sense. It’s a valuable asset,” said Brad Heavner, executive director of the California Solar and Storage Association, a solar industry trade group. Cutting the value of that system at the time of sale ​“reduces value for the seller,” he said.

Households with leased solar systems, which make monthly payments based on 20-year contract terms, are in an even worse position, Heavner said.

“If the buyer doesn’t get the same value, they’ll be underwater on the lease,” he said. ​“That would either force you to lower the price, or more likely, force you to buy out the lease. If you suddenly have to buy out the lease, you’ve suddenly lost a lot of money.”

California policy that changes contracts already in place is almost certain to draw legal challenges. In Nevada, a move by state regulators in late 2015 to retroactively reduce compensation and contract terms for existing net-metered systems was successfully challenged in court. Regulators eventually reinstated the original terms in 2016 and 2017 — although not without severe disruption to the state’s rooftop solar market in the meantime.

In California, the 20-year contract terms that apply to legacy net-metering programs were set into law in 2013. Then-Gov. Jerry Brown, a Democrat, warned in his signing letter to that legislation that preexisting net-metered customers should be ​“protected under those rules for the expected life of their systems.”

An April memo from law firm Davis Wright Tremaine, to solar companies Prologis, Sunrun, and Transform Energy and advocacy groups Solar Rights Alliance and Environmental Working Group, noted that ​“this 20-year guarantee attaches to the solar system, not the customer that owns it,” based on the ​“reasonable and contractual expectation that the rights associated with the system that they have purchased will be assigned to a buyer upon sale.”

Ahmad Faruqui, an energy economist and utility-rate expert who has vocally opposed California’s policy shifts against rooftop solar, agreed that the retroactive clawback of existing net-metering contracts would see legal challenges.

“It would be like, I bought a car with a 10-year warranty, and now all of a sudden it’s five years with no rhyme or reason,” he said. ​“Let’s say an air conditioner has a 15-year warranty, and they suddenly said it’s 7.5 years. There would be a class-action lawsuit.”

Undercutting state commitment to rooftop solar could also deal another dire blow to a sector that’s suffered significantly in the wake of a series of decisions by the California Public Utilities Commission (CPUC), Faruqui said. Those include the shift from net metering to the net billing tariff in 2023, as well as other moves reducing the value of rooftop solar for schools, farms, multifamily properties, and small businesses.

Rooftop solar has also helped lead the way on California’s energy transition, making up nearly half of the state’s solar power capacity. But installations have fallen sharply since the net billing tariff went into effect two years ago, forcing many residential solar companies to lay off staff or close down.

“California has a very aggressive net-zero goal. It also wants to end the sale of gasoline vehicles by 2035. None of those will happen if rates keep going up,” Faruqui said. ​“And the CPUC’s answer — that rates are going up because of solar — is BS, plain and simple.”

If rooftop solar isn’t driving skyrocketing power bills, what is?

Faruqui’s critique echoes broader pushback by rooftop solar advocates against the argument that utilities and a subset of consumer advocates have used to justify cutting rooftop solar compensation: that paying some customers for the solar they generate increases utility rates for all other customers.

Assemblymember Calderon invokes this ​“cost-shift” thesis as a rationale for the policies proposed by AB 942.

“Solar power is an important part of our state’s renewable energy grid, but we have to reevaluate how our current solar subsidy programs impact Californians who may not be able to afford solar-panel systems,” she said in a statement last week. ​“Our energy bills are becoming increasingly unaffordable, and we must address this ratepayer inequity.”

Calderon cited a claim from the CPUC’s Public Advocates Office that found payments from the state’s three major utilities to existing net-metering contracts have caused customers without solar to pay $8.5 billion more than they otherwise would have in 2024, or up to a quarter of those customers’ monthly bills on average.

A spokesperson at the Public Advocates Office, which is tasked with protecting utility customers, told Canary Media that it neither supports nor opposes AB 942. The bill has earned the approval of The Utility Reform Network, a consumer advocacy group, which wrote in its support letter that while it ​“recognizes the desire of legacy [net energy metering] customers to retain 20 years of tariff protection, the high costs of these protections are borne entirely by the general body of customers.”

The rooftop solar cost-shift is one of the most fractious and complicated issues in the utility policy world, particularly in California, which leads the country in rooftop solar installations. Proponents argue that solar-equipped customers are failing to pay their fair share of the costs of maintaining the power grid and sapping utility finances that could be better directed toward cheaper large-scale clean energy. Critics accuse utilities of overstating costs and undervaluing the benefits of customer-owned solar in service of finding ways to prevent residents from using their own systems to reduce their utility bills.

But even taking the cost-shift argument at face value, the savings that AB 942’s author claims it would shift back to utility customers at large would hardly help resolve the state’s utility affordability crisis.

Average residential electricity rates in California rose about 47% from 2019 to 2023, and customers of the state’s three big utilities now pay roughly twice the national average for their power.

Calderon’s office claims the bill would save Californians $423 million next year. But that’s less than 1% of the ​“revenue requirement” of PG&E, SCE, and SDG&E — the amount of money the three major utilities must collect from customers every year to fund utility operations, grid maintenance and expansion, and all the other tasks they do. That revenue requirement stood at $54 billion in 2024 and was expected to rise by 5% to 9% in 2025, according to the CPUC’s February report to Democratic Gov. Gavin Newsom on how the state can tackle its skyrocketing electric rate increases.

The majority of California’s utilities’ increasing costs, which are passed through to customers in the form of higher rates, are driven by spending on power grids and, to a lesser extent, the electricity they purchase. Recent polling shows that an overwhelming majority of Californians support efforts by policymakers and regulators to rein in utility spending and profits to keep electricity costs in check.

As the environmental and community groups that signed the AB 942 opposition letter put it, ​“California must focus on what’s really wrong with our energy system: uncontrolled utility spending and record utility profits. We’ll never control rates or meet our goals for clean, reliable energy if we don’t get at these roots of the problem.”