Getty Images

Solar panel installation

Utilities across the state will have to start paying California residents who produce more energy than they use from their solar panels.

The California Public Utilities Commission last week set energy prices that utility companies, such as Pacific Gas & Electric, must pay, but some environmentalists and the CPUC's President said the prices the agency set are too low.

Until now, the electricity produced by customers with solar panels and wind turbines has been used to offset their bill. PG&E did not have to pay for the excess power those customers produced.

But now, PG&E and other utilities will be required to send a check to those customers each year.

More than 27,000 Bay Area customers are already enrolled in PG&E's Net Energy Metering program, and 10 to 15 percent of those customers are expected to receive checks, because they produce more energy than they consume, according to PG&E spokeswoman Lynsey Paulo. The checks will pay for the excess power produced as of January 1, 2011, Paulo said.

The prices the CPUC set last week are based on daytime wholesale electricity rates paid to power plant owners, which fluctuate daily based on market conditions. Small bonuses that will become available for renewable energy producers in California will also be included in the payments.

The pricing plan is controversial. CPUC President Michael Peevey, who voted against the plan, argued that the payments should be set at a higher rate, because the state has a formal policy of fostering the development of a self-supporting solar panel industry by 2017.

During last week's hearing, Peevey said that the incentives to develop such an industry have been ratcheted down to the point that they are “almost meaningless now."

Critics have also argued that rate should have been set higher to encourage solar panel installations, which would help reduce the state’s carbon emissions.

“I am disappointed that the rate was not higher,” said Assemblyman Jared Huffman (D-San Rafael), who passed legislation in 2009 requiring the CPUC to establish the new program. “There will be a new incentive for customers to have renewables, and those who have them will have an incentive to be more efficient, but unfortunately the incentive will not be as strong as I had intended.”

Jeanine Cotter, co-founder of San Francisco-based solar panel company Luminalt, said the rate “will encourage people to limit the size of their (solar panel) systems."

CPUC Commissioner Mike Florio, one of four commissioners who voted to approve the proposal, said the new program would appropriately compensate solar panel owners without burdening other electricity customers with inflated rates.

“If you pay them what the power is really worth, that’s enough,” Florio said.

State and federal programs already provide incentives for residents interested in installing solar panels or wind turbines, Florio said.