Granted, the CPUC's position is untenable. I think any entity should be incentivized to invest in distributed energy generation. But let's not kid ourselves that churches need special carveouts versus residential in the current climate of CA politics.
what you're missing is that the federal law allows non-profits to receive direct pay benefits. it is not possible for the federal government to distinguish between types of non-profits, or congress simply didn't even attempt to this time. the entire 500-section tax code is eligible, 501(c)3, 4, 5, 6, 7, private operating foundations, private non-operating/grantmaking foundations, public charities, labor groups, fraternities, religious institutions everything
how we got here: the prior "tax credit" approach was not useful for builders and producers, because organizations in the renewables energy spend so much on operations that there typically isn't a net profit any given year to reduce by a tax credit. simultaneously, Congress and the IRS do a lot to try to reduce fungibility of tax credits. So now the tax credits are useless and the behavior they are intended to incentivize is not done.
so finally, they've come to the conclusion that fungibility is okay but to non-profits, but non-profits also don't have any tax liability to reduce, so they are just going to pay them cash equivalents at rates set by the department of energy.
but churches! okay. we're about to have the greenest megachurches the world has ever seen. and the CPUC? state level predilections aren't really a factor here