California regulators on Monday proposed reducing the discounts people who install home solar panels and storage systems get on their energy bills, meaning it will take more time — a decade — to recoup the costs of installation.

California's wildly successful 26-year-old program to get more people to put solar panels on their homes has been at the center of a fierce debate between the state’s major utilities and the solar industry and the California Public Utilities Commission’s proposed reforms have been highly anticipated.

Current incentives allow residential solar customers to sell whatever energy they don’t use back to power companies at the retail rate for power, usually resulting in a big discount on their energy bills. Power companies say the savings are now so great that solar customers no longer pay their fair share for the operation of the overall energy grid.

Major utilities, the solar industry, consumer advocates and environmental groups all submitted their own ideas for potential reforms. The CPUC's proposal doesn't gut the financial incentives as much as wanted by the utilities, Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison.

The program known as net metering program launched in 1995 with the goal of boosting solar adoption in the famously sunny state. California now has more than 1.3 million residential solar installations, more than any other state, according to the solar industry. That number will only grow because since 2020 all newly constructed homes in California must have solar panels.

But as solar panels proliferated, criticism about the program grew. Utility companies say the current setup allows solar customers to sell their energy back into the grid for more than it’s worth. They say more needs to be done to make sure solar customers — most of whom still rely on power from utilities at nighttime — are paying for all the parts of the energy grid they use.

Power rates include many costs unrelated to energy generation, like transmission, distribution and even wildfire prevention work. When solar households pay significantly lower electricity bills — or no bills at all — they’re contributing less to those things. That means more of the cost is shouldered by other customers, often households and renters without the financial means to install solar. The utilities and the state peg that cost at $3 billion, though the solar industry disputes that number.

CPUC Commissioner Martha Guzman Aceves said the changes announced Monday are aimed at creating fairness while ensuring the financial benefits are still strong enough to encourage people to go solar. The commission’s proposal would lower the amount of money residential solar customers make by selling their excess energy back to the power companies and add a “grid participation charge” of about $40 per month for solar households.

The changes would apply to new solar customers. People who already have panels on their homes wouldn’t operate under the new system until they've had their panels for 15 years.

But state regulators also want to encourage people with solar panels to install storage systems. It costs about $20,000 to $25,000 for people to put solar panels on the rooftop and another $15,000 to install storage systems. Customers who have storage systems — only a fraction of the overall rooftop solar market — can store the extra energy they make during the day for use at night.

The more customers who have solar storage, the fewer people need to rely on the energy grid — and fossil fuels — during the evening. The state has set a goal of generating all retail electricity from renewable or zero-carbon sources by 2045. Under the state’s plan, customers who already have rooftop solar will have access to a $3,200 subsidy to install storage.

Regulators also propose creating a $600 million fund to help low-income households afford solar and storage.

A five-member commission will vote on the final PUC reform proposal, likely in January.

The solar industry had warned a dramatic decrease in financial incentives would entice fewer people to add solar panels to their homes, jeopardizing the market and hurting the state's ability to reach its clean energy goals.

Vincent Battaglia, founder and CEO of Palm Desert-based Renova Energy, criticized the proposal as "utilities fighting so hard to stay relevant and keep money coming into them." 

"My business has picked up not because people are required by law to put solar on their rooftops, but because people like the environmental and financial savings, and now all of that is going away in this proposed decision. It's not the ratepayers who proposed this, it clearly was my number one competitor, which is the utility," said Battaglia. 

It now takes about three to four years for homeowners to recoup installation costs by selling extra energy to the utilities, according to the utilities. The utilities proposed lowering the amount of money solar customers get back so it would take 11 to 15 years for homeowners to recover their costs. They also proposed charges that would have added at least $70 per month to solar customers' bills.

Battaglia said he believes that in the Coachella Valley, the proposal would increase the amount of time for homeowners to recover their costs to 20 years, up from five years, due to the higher amount of electricity used in the desert.

"What they're proposing is not a solar incentive, what it is is a personal solar disincentive," said Battaglia. 

Reuben Schy, sales manager for Palm Springs-based Hot Purple Energy, said he sees the proposal motivating more people to install both solar panels and storage systems. 

"What the opinion really shows is what those of us in the industry already know, which is that the future is pairing solar with storage. The biggest change is the amount that solar customers get credited for the excess generation they sell back to the grid, but for solar customers with batteries, instead of selling their energy back to the grid for five or six cents, they just put that energy in their batteries, and then draw to their batteries later in the day, and then overnight," said Schy. 

Both Schy and Battaglia said they see the proposal making it more difficult for middle-class people to get solar installed. 

"Obviously, we would have hoped for something more friendly to residential solar, although it could have been a lot worse. But overall my opinion is still disappointed," said Schy. 

The Utility Reform Network, a consumer advocacy group that frequently clashes with the utilities over rates, also wanted to lower what households with solar panels are paid back for excess energy and to increase the financial incentives for low-income households to participate.

“We are focused on affordability for everyone,” said Matt Freedman, staff attorney for the group.

The solar industry and its allies, including some environmental justice and clean energy organizations, said regulators should be looking for ways to boost incentives for California residents to buy solar panels, not decrease them.

Bernadette Del Chiaro of the California Solar and Storage Association, which represents 700 businesses involved in the industry, said the state should also make it easier for people to buy solar storage systems alongside the panels. As more people build storage systems, the utilities will need to spend less on new power plants or transmission lines, she said. But it also means they'll have fewer customers relying on them for energy.

“Utilities are really threatened now by batteries,” Del Chiaro said. “They’re really putting up a big fight to try to slow this market down.”

Desert Sun reporter Erin Rode contributed to this report.