Does the California Solar Rights Act (“Act”) limit actions that can be taken by Community Choice Aggregators (“CCAs”)?  Arguably, yes.

In California, a CCA’s rates and programs for solar customers are not regulated by the California Public Utility Commission (“CPUC”).  Does this mean that solar customers’ only protection is through the net energy metering (“NEM”) rulemaking process at the CPUC?  Arguably, no.

The decisions that CCAs make related to solar policies and rates impact a variety of solar users including homeowners, renters, businesses, non-profits, and schools, among others. Any proposed changes to their rates and programs for solar customers that damage the investments of existing solar users in their territories would significantly discourage home and business owners from investing in solar in the future. Thus, in addition to potentially frustrating California’s state-wide climate goal, a CCA’s proposed policy and rate changes could violate California’s Solar Rights Act.

Reasonable NEM terms have been the driving factor in the growth of California’s local solar installations, including over a million statewide. Policies that allow for the installation and generation of local, distributed renewable energy creates local jobs that benefit the community, improves grid safety and resiliency, and protects the climate from additional greenhouse gas emissions. In contrast, relying solely on long distance, utility-scale solar system is less efficient and sends many of the benefits of solar outside of the local communities that CCAs serve. Solar program changes by CCAs could impact local, customer-owned energy generation by decreasing the value of solar, putting local solar systems out of reach for CCA customers, and depriving the CCA’s customers of the benefits of local solar generation.

The determinative analysis with respect to a CCA’s proposed solar program changes must be analyzed together with current and/or future proposed state-wide policy changes to ascertain the potential increase in the payback period for a solar energy system. For instance, if using actual customer data, an expert determines that the payback period for a customer would increase a payback period by 10 or more years, then arguably a significant financial impact has occurred.

Any solar program changes being considered by CCAs could have a number of impacts. First, by pushing any payback timelines out, they would discourage home or business owners from purchasing solar energy systems and make it prohibitively expensive for working-class families. Second, changes could retroactively strip existing solar customers of the value of their investments already made in solar energy systems. Thus, by enacting certain proposed solar program changes, CCAs could find themselves in violation of the California Solar Rights Act.

Why Must CCAs Comply with the California Solar Rights Act?

The California Solar Rights Act (1) (“Act”) was enacted in 1978 to develop solar access rights for individual solar energy system owners. The Act provides that it is the policy of the state of California to “promote and encourage the use of solar energy system and to limit obstacles to their use.” Cal. Govt. Code § 65850.5(a). It includes protections that allow consumers physical access to sunlight, but also limits the ability of HOAs and local government entities from adopting policies that would prevent or restrict the installation and use of solar energy systems.

The Solar Rights Act states that “[a]ny … contract, or other instrument affecting the transfer or sale of, or any interest in, real property, …that effectively prohibits or restricts the installation or use of a solar energy system is void and unenforceable.” Cal. Code Civ. Proc. § 714(a). The Act goes on to explain that:

This section does not apply to provisions that impose reasonable restrictions on solar energy systems. However, it is the policy of the state to promote and encourage the use of solar energy systems and to remove obstacles thereto. Accordingly, reasonable restrictions on a solar energy system are those restrictions that do not significantly increase the cost of the system or significantly decrease its efficiency or specified performance, or that allow for an alternative system of comparable cost, efficiency, and energy conservation benefits.

Cal. Code Civ. Proc. § 714(b).

As a public entities, the Act requires that CCAs comply with Section 714 of the Code of Civil Procedure (“Section 714”) by not imposing restrictions that significantly affect the cost of a solar energy system. Section 714 is regularly applied to prevent the adoption of zoning and permitting policies that make it more difficult or impossible to install or use a solar energy system. However, a CCAs’ solar program and rate changes that significantly increase costs to solar customers over typical state-wide IOU solar rates would be analogous in effect to public actions taken though zoning and permitting decisions.

If adopted, a CCA’s proposed solar program and rate changes could violate the California Solar Rights Act if the changes significantly increase the cost of solar systems for all customers in their territory. Like zoning restrictions that discourage or prohibit solar energy systems, any blanket solar program or rate changes for a CCA’s solar customers could be equally unlawful. Solar program changes would affect customers’ interest in real property, which in this case is the customers’ solar panels which are fixtures under state law unless contractually determined otherwise.  Thus, in California, any proposed solar program or rate changes that would make the purchase, installation and use of solar energy systems prohibitively expensive, would arguably be a violation of the Solar Rights Act.

In addition to any such solar program and rate changes being “void and unenforceable,” subsection (h)(1) of Section 714 prohibits public entities like CCAs from receiving state-sponsored grant funding or loans for solar energy program if it fails to comply with Section 714. As a result, adoption of solar program and rate changes could put a CCA at risk of litigation and at risk of losing state-sponsored grants and loans, both of which would further harm a CCA’s customers.

(1) The Solar Rights Act includes the following California codes of law: Civil Code sections 714, 714.1, 801, 801.5, Government Code sections 65850.5, 66475.3, and 66473.1, and Health & Safety Code section 17959.1.