Net Energy Metering in California

Net Energy Metering in California

Net energy metering, or “NEM”, is a special billing arrangement that provides credit to customers with solar PV systems for the full retail value of the electricity their system generates. Under NEM, the customer’s electric meter keeps track of how much electricity is consumed by the customer, and how much excess electricity is generated by the system and sent back into the electric utility grid. Over a 12-month period, the customer has to pay only for the net amount of electricity used from the utility over-and-above the amount of electricity generated by their solar system (in addition to monthly customer transmission, distribution, and meter service charges they incur).

How Net Energy Metering Works

At any time of the day, a customer’s solar system may produce more or less electricity than they need for their home or business. When the system’s production exceeds the customer demand, the excess energy generation automatically goes through the electric meter into the utility grid, running the meter backwards to credit the customer account. At other times of the day, the customer’s electric demand may be higher than the renewable energy system is producing, and the customer relies on additional power needs from the utility. Switching between solar system’s power and the utility grid power is instantaneous-customers never notice any interruption in the flow of power.

Benefits of Net Energy Metering

NEM is your gateway to optimizing the rate of return on your solar investment.

  • Allows customers to zero-out their bills.
  • Credits customer accounts at full retail rates.
  • Accurately captures energy generated and consumed, providing customers with annual performance data.

Payment for Net Surplus Generation

Customers that generate a net surplus of energy at the end of a twelve-month period can receive a payment for this energy under special utility tariffs. Check the tariff books for PG&E, SCE, or SDG&E for more information on net surplus generation rates.

Billing with Net Energy Metering

Under a net energy metering agreement, your utility will continue to read your meter monthly and you will receive a monthly statement indicating the net amount of electricity you consumed or exported to the utility grid during that billing period. If you are a residential or small commercial customer, you have the option of paying the utility for your net consumption monthly, or settling your account every 12 months. Contact your utility for billing options.

System Sizing

The CSI Program administers rebates on solar systems sized to meet a customer’s expected annual electricity needs, with a minimum of 1kW and a maximum of 1MW. Most residential systems range between two and four kilowatts. Your system size will depend on your needs and how much electricity you want to generate. You can also build your system modularly by starting small and expanding over time as long as the system does not exceed 1,000 kilowatts.

It is important to keep in mind that the electric rates the utility charges you increase in tiers as you use more and more electricity. A smaller system that satisfies part of your electric needs may be more cost-effective to you because you will be avoiding the higher tier rates, while you are still purchasing the lower cost electricity from the utility for your needs.


Most smaller electric customers have simple bidirectional meters-capable of spinning backwards to record energy flowing from their system to the utility grid-and are currently eligible for net energy metering. These basic meters are often referred to as “non-time-of-use meters” because they are incapable of recording when electricity was used: only how much was used. Some utilities may want two meters for net energy metering, one to measure electricity going from the grid to your home or business, and one to measure surplus energy going from your system to the grid.

Time-of-use (TOU) meters are more sophisticated, recording when electricity is used and allowing the utility to charge different rates at different times of the day or week. Currently, TOU meters are optional and not required, but they will be required for recipients of CSI incentives in the future if the California Public Utilities Commission sets TOU rates. Contact your utility for more information.


You are eligible for net energy metering if you are a retail customer of an electric utility in California, you generate at least some of your electricity using solar or wind energy or other qualified generating technologies on your premise, and your generating system’s peak capacity output is 1,000 kW or less. To participate, you must apply and receive approval from your utility to have your system interconnected to the electricity utility grid.

If you already have a solar energy system, you should contact your electric utility and request an application for net energy metering. The utility will outline the requirements for safely connecting your generating system to the grid. If you are or will be participating in a state or utility-sponsored incentive program, the application process will require your system to be interconnected to the utility.

Additional and Future Pricing (Tariff) Options for Solar Systems

There are 3 major pricing or “tariff” options for solar customers:

  1. Net Energy Metering, which will include net surplus compensation by 2011 where customers can receive compensation at the end of the year if they produce more electricity with their solar system than they consume from the grid.
  2. Virtual Net Metering, which allows the electricity produced by a single solar installation to be credited toward multiple tenant accounts in a multifamily building without requiring the solar system to be physically connected to each tenant’s meter. For now, this program is only available as a pilot program to multifamily affordable housing, but the CPUC is currently considering expanding the program in the future.
  3. Renewable Energy Self-Generation – Bill Credit Transfer (RES-BCT), which enables solar customers transfer excess credits to another account. This works similar to net metering, but any production credits that normally would be received by the consumer can be transferred to another account.

Net Energy Metering Contacts

Contact your Program Administrator to learn more about the rebate programs.

Contact your utility’s interconnection and Net Energy Metering tariff offices by following these links:

Contact the CPUC to learn about the CPUC’s oversight of the utility NEM tariffs, including reports on NEM cost-effectiveness.

2016-10-18T13:27:40-07:00June 2nd, 2013|Solar Info|

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