California Opposes Rooftop Solar For All The Wrong Reasons

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Last Updated on: 12th May 2025, 06:05 pm

Way back when electric utilities were invented, it quickly became obvious that the traditional attributes of capitalism — vigorous competition between multiple suppliers — would lead to chaos. Instead of one set of poles, wires, transformers, and substations, there would be two or more of everything, which would be ruinously expensive for everyone — especially utility customers. So a decision was made to give one utility company a monopoly within a defined service area. That was long before rooftop solar became a factor.

To protect the public from price gouging by those monopolies, they were to be regulated by public boards and commissions that would set the maximum rates they could charge their customers while guaranteeing the companies a stable rate of return on their investments. This model has worked fairly well for more than 100 years, but it never anticipated that customers one day would be able to generate their own electricity with solar panels or small-scale wind turbines.

A monopoly, by definition, opposes any influence that might undermine its power. From the perspective of the utilities, they came to believe they had the exclusive right to generate and distribute power to customers within their assigned territory. Therefore, any electricity generated by any means within that territory belongs to them and should be controlled by them. The corollary to that principle is that the electrons flowing from rooftop solar systems do not belong to homeowners or solar leasing companies, they belong entirely and exclusively to the utility company for that area.

California has some of the highest prices for electricity in the nation. Utility rates have been going up an average of 12.5 percent a year for the past several years, which also happens to be the fastest rate of increase in the US. In 2024, California Governor Gavin Newsom issued an executive order that instructed state energy agencies to look for ways to cut the cost of electricity in the state.

High Utility Bills? Blame Rooftop Solar!

CleanTechnica readers know what happened next. People in the industry and the regulators looked around for the causes of high utility bills and came up with the obvious answer. The problem was not the damages the utility companies have to pay as a result of the wildfires sparked by faulty transmission lines. Nor is it the cost of putting transmission lines underground to prevent future wildfires. No, in fact, the cause of high electric rates is rooftop solar! Imagine that.

As soon as the grid in Texas or Spain suffers an outage, the blame gets placed on renewables. It’s so easy to point the finger at solar and wind, instead of doing the hard work of identifying the actual causes and doing something about them. It’s all the fault of those newfangled renewables. Case closed. Meeting adjourned.

A bill pending in the California legislature known as AB 942 would punish rooftop solar, even though it is not the culprit. It would retroactively break contracts with millions of solar consumers by cutting the compensation they receive from providing energy to the grid if their home is sold or transferred. Those with solar leases, who are predominantly lower income, will be forced to buy out those contracts when they sell.

In an op-ed for the San Francisco Chronicle, Richard McCann, an energy consultant for more then four decades and a founding partner of M.Cubed, a public policy consulting service, dares to ask why the state would do that to homeowners who have invested in rooftop solar. The reason, he suggests, is that too many officials have bought a key utility company excuse for rising energy prices, a fallacy he calls “cost shift.”

To the utilities’ way of thinking, “cost shift” means that maintaining, operating, and expanding the electrical grid is expensive. Transmission lines, substations, and other facilities need to be built and repaired to deliver electricity to homes — and that is built into the utility bills customers pay each month. McCann says “cost shift” theory argues that since home solar users generate their own electricity, everyone else is forced to pay more to keep the system running.

The evidence to support the theory is “based on a seriously flawed notion” that claims utilities own 100 percent of the electricity generated by its customers and are entitled to full profits — even for energy it does not deliver. “PG&E’s claim that it is ‘losing money’ on rooftop solar is only true when it claims ownership of the kilowatt-hours generated and used by home solar,” he says.

In other words, embedded in the seemingly dire calculations of the role “cost shift” plays in rising energy bills is the idea that PG&E deserves a profit on the energy generated by home solar owners” (emphasis added). But PG&E is not entitled to those profits, McCann claims, and does not need them to run a sustainable business.

He points out that rooftop solar actually saves ratepayers money by reducing the need to expand generating capacity. It has played a major role in keeping energy demand flat since 2006, especially on hot summer days when demand for electricity to keep air conditioners operating increases. In fact, the California Independent System Operator (CAISO) credited rooftop solar in its decision to cancel 18 transmission projects, saving ratepayers $2.6 billion in 2018.

“By my calculations, solar users provide 12,000 megawatts of energy to the system that would have needed to be filled through utility-controlled generation and assets,” McCann asserts. “Without rooftop solar customers paying to add that capacity, those expenses would have been added to current electric rates. That is why California launched the Million Solar Rooftop program in 2006 — it was wildly successful at meeting growing loads with customers’ own resources.” The investments California homeowners have made in rooftop solar saved all ratepayers $1.5 billion in 2024 because they decreased demand for electricity from the grid and other shared benefits, he argues.

Challenging The Utility Compensation Model

McCann also has questions about the entire utility compensation model. Every company wants to increase profits, but the existing model rewards utility companies for investing in more infrastructure, not reducing the cost of generating electricity. Solar and wind cost less than thermal generation, but that does not necessarily create more profits for utility companies. He says spending on grid infrastructure has increased more than threefold over the past two decades — four times faster than the rate of inflation — while demand for electricity has remained essentially flat during that period.

“If electricity demand has remained flat for so long, what is PG&E spending all that money on exactly? That’s the question state officials should be asking,” McCann says. If the system’s costs are mostly ‘fixed’ as PG&E claims, then these costs should not have increased so rapidly.

“Of course, flattened demand and cancelled investment projects do mean less profit for utilities like PG&E. To keep earning higher profits, PG&E must keep finding new ways to spend ratepayer money on grid infrastructure, and the commission must keep giving it the green light. Yet utility profit motive should not be what drives energy policy in California,” he says.

Our readers will spot some similarities between the arguments the utility companies are making and the arguments heard frequently about electric cars. Think about that for a moment. Transportation and electricity both are highly dependent on fossil fuels. Is it possible the fossil fuel industry is working in the background to torpedo rooftop solar? After all, if it is lowering demand for electricity from the grid, it is lowering demand for fossil fuels as well. We leave it to our readers to draw their own conclusions.