What Is Net Metering?

Net metering is a system that allows homeowners with solar panels to sell their extra energy back to their utility company for credits. Homeowners can offset all or part of their electric bill with the credits. The credits can be used for power from the grid when solar is unavailable, like at night.

Solar Net Energy Metering And TOU

The value of solar is directly tied to Net Energy Metering (NEM). With net energy metering, SCE, SDG&E, and PG&E credit your utility account for the solar power you send to the electric grid (excess generation). The retail rate you get paid depends on what time of day you send it back. Each utility has different rates and metering programs. As required by the California Public Utility Commission, solar customers must be on a Time of Use rate plan. (For utility customers of SCE, SDGE, or PGE)

Secrets About Net Metering: Discover How Net Metering Works

Utility rates go up frequently and have led to the popularity of the battery back up. Batteries offer protection against rate hikes that affect solar payback, plus give you emergency power in an outage. Are battery backup systems worth it? Find out here.

Woman contemplating Time of Use utility rates and energy savings
Time Of Use Rates are required when you go solar in California

How Does Net Metering Work?

When you create power, it flows into your service panel and feeds your home’s power needs first. After that, any excess power flows into the electric grid. Your utility company gives you retail rate credits for that power. When your home uses power from the grid, any accumulated credits will offset that usage. Energy consumption beyond your credits will be charged at the applicable rate and accrue on a month to month basis until true up.

Without this solar energy credit system, solar return on investment for single family homes would take over 20 years, unless you have an energy storage system like a battery. The utility grid is your virtual storage or back up system in net metering. This means that if it’s night and your solar produces no power, you can use it from the utility grid. After 12 months, you receive a “True-Up” bill, with either a credit or an amount due for your energy usage. It’s like a renewable energy bank account for residental customers on the grid.

How Net Metering Works In 4 steps- Infographic
How Net Metering Works Infographic

True Up Period

Solar billing is a 12-month cycle. If your energy consumption didn’t go up, then you’ll have a credit or a small bill when the True-Up period ends, as long as your solar was designed correctly. Keep in mind you still receive monthly electric bills with basic program charges due monthly. Your accrued metering credits and energy charges for the 12 month period appear on your monthly statement. The excess generation on your statement never matches the self generation shown on your monitoring statement. This confuses many people why they don’t match. Electric meters don’t register the customer generation from the solar that feeds the house first, only the excess generation.

SCE allows you to roll the surplus compensation credits earned over to the next period after the 12-month cycle ends. PGE and SDGE send you a check for the power at wholesale rates, which is about .3 per kWh. This is incredibly low considering how much they charge you at peak hours (.40+ per kWh). Never oversize your solar unless you plan to increase your usage. You may be able to upsize your solar system, but you can never downsize it.

Time of Use Rates

A clockface on a dollar bill to represent Time of Use power rates
Pro Tip: Get a smart thermostat to avoid peak rates

With NEM 2.0, solar customers must be on a Time of Use applicable rate. On-Peak rates are higher for power used during high demand periods. On-Peak time is in the afternoon, and off-peak is night, mornings, and weekends. Because of that, timing your power usage is critical to saving the most money. Also, the time of your self generation of power matters too. Many installers will maximize the westerly roofs for higher afternoon self generation of power. Smart thermostats and battery storage help ensure the value of your solar investment in the ever-changing landscape of utility rates. EV rates are the lowest but you must qualify by proving you own an EV. If you own a commercial property, your demand charges and rate schedule will determine if solar can offset your utility service costs. 

Municipal Power

If your city is also your utility company, then your rates are much cheaper than the big three. The return on your solar investment may take a few more years, but most allow customer generators. Some municipalities have solar rebates, while some pay you energy credits on top of the retail power rates when you send power back to the grid. They tend to restrict your solar system’s size to produce no more than 100% of the past 12 months’ usage. You may not even have a smart meter installed yet, but once you go solar, your city will install it.

SCE Solar True Up electric bill
Pro Tip: SCE may take months to switch your account

Understanding Your NEM Bill

Time of Use and Net Metering doesn’t simplify your utility bill. The big three utility companies know that NEM bills are even harder to comprehend than the standard utility bill. They all have guides to help you understand your bill better. Click your utility provider below to see how your Net Metering bill will look and how to read it.

One important note is that SoCal Edison has been running months behind in transferring residential customers’ accounts over to Net Metered billing; In some cases, over 8 months. You can call their Net Metering department, and they will freeze your energy charges until they transfer you to the net metering program. If you received Permission to Operate, and your bills haven’t changed, call them immediately. After 6 or more months, escalate your case to the CPUC.

Quick NEM 2.0 FAQs:

How long can I carry over net metering credits?

“When your panels produce more energy than you can use over the course of one month, you will receive bill credits on your utility bill that can be used in future months. However, if you have excess credits remaining after a 12 month period, you are credited for the extra kilowatt-hours at a lower, wholesale rate. This rate, otherwise referred to as the net surplus compensation rate (NSCR), varies from month to month.” Source: Energysage

What is NEM 3.0 and when is it coming?

Read our update on NEM 3.0 here!

“The California Public Utility Commission has formally opened its NEM.3 proceeding, which will redefine the rules for the Net Energy Metering (NEM) tariff in California. The final NEM.3 decision will have far-reaching impacts on the future of customer-sited solar and energy storage projects in California and beyond.” (https://pv-magazine-usa.com) Expect a decision by the commission on the rules of the successor tariff by the end of 2021. NEM 2.0 will be replaced by NEM 3.0 after 2021, but you will be grandfathered into NEM 2.0 if you’re currently enrolled in it.

How long does my net metering basis last?

It’s a 20 year agreement for NEM 2.0.