SMUD reduces subsidy for rooftop solar. What that means for rates in Sacramento region

SMUD is slashing the credit it gives to rooftop solar customers who ship their excess power to the utility’s grid, a move that SMUD leaders say will reduce an unfair subsidy.

The 7-0 vote late Thursday by the SMUD board of directors was roundly criticized by advocates for the solar power industry, who believe it will slow the adoption of green power and hurt California’s efforts to reduce carbon emissions.

The decision by the Sacramento Municipal Utility District reflects the changing economics of solar energy and could offer a preview of a move to reduce subsidies for rooftop customers across the state. The California Public Utilities Commission later this year will consider a similar proposal being pushed by PG&E Corp., the other big investor-owned utilities as well as some consumer advocates.

SMUD sends its 37,000 rooftop solar customers a credit of 12 cents for every kilowatt hour of electricity they send into the grid. Starting next March for new solar installations, that credit will drop to 7.4 cents — a rate that SMUD officials said is closer to the true value of solar electricity as costs have plummeted.

In addition, customers who install solar after March 1 would have to pay a one-time fee of $475 to connect their solar panels to the SMUD system.

Customers who already have solar panels will continue to collect the more generous credit through 2030 and won’t have to pay the one-time fee.

SMUD directors said the current system amounts to an overly generous subsidy that shifts costs onto rates paid by non-solar customers, who typically are lower income. The utility says this cross-subsidy costs non-solar customers $45 a year.

“Our low-income folks are carrying the solar folks because of this subsidy,” said board member Rosanna Herber.

SMUD officials said the subsidies might have been necessary during the early days of solar, when the technology wasn’t widespread and the cost of installing rooftop panels was $30,000 or so. Now the industry is healthy and costs have dropped by about half.

“The solar industry is different than it was 25 years ago,” said board member Gregg Fishman. The industry doesn’t “need to be nurtured ... or babied.”

‘We could not afford to take the risk’

Solar advocates didn’t see it that way, saying SMUD was turning its back on green energy.

Sean Frame, a SMUD customer, told the board at its Zoom meeting that he had been considering installing solar panels but the new rates “would simply not pencil out, and we could not afford to take the risk.

“You need to do more than make great TV commercials touting your environmental commitment,” he added. “You need to live up to that image.”

Fatima Malik, a SMUD customer who lost an election for a board seat to incumbent Rob Kerth last November, was among those who protested outside utility headquarters Thursday even though the meeting was held online.

“I went solar to help the planet, power my EV, and save money on my utility bill, but I never thought SMUD would claw back the financial benefits of significant customer investments in clean, renewable, energy,” Malik said in a prepared statement afterward. “SMUD used to be a progressive utility, but they have become a backwoods bully. All they seem to care about is hoarding opportunities and monopolizing the solar energy market.”

The SMUD staff had proposed slashing the solar subsidy starting Jan. 1, but board Chairwoman Nancy Bui-Thompson persuaded her fellow directors to postpone the new rates by two months to give more customers a chance to install solar panels and benefit from the more generous rate.

“It’s a little bit of an olive branch,” she said.

SMUD also approved a $25 million rebate plan to encourage solar customers to install batteries that can store solar energy for usage after the sun goes down. Storage is considered essential to California’s effort to make the transition to an all-green power grid without suffering rolling blackouts, as occurred twice in August 2020.