Last Updated February 10, 2023
Eligible Renewable/Other Technologies:
Note: The California Public Utilities Commission (CPUC) issued a decision in December 2022 phasing out the current Net Energy Metering (NEM 2.0) tariff and replacing it with a new net billing tariff. Customer generators who submit interconnection applications on or after April 15, 2023 will only be eligible for the new net billing tariff. The summary immediately below describes the existing NEM 2.0 rules, followed by a summary of the new net billing rules.
California's net-metering law originally took effect in 1996 and applies to all utilities except LADWP. However, a number of publicly-owned utilities have reached the aggregate capacity limit for NEM 2.0 and have adopted a successor tariff of their own design.
The original law applied to wind-energy systems, solar-electric systems and hybrid (wind/solar) systems. In September 2002, legislation (AB 2228) allowed biogas-electric facilities up to 1 megawatt (MW) to net meter until December 31, 2005, under a pilot program. This pilot program was extended until December 31, 2009, upon the enactment of AB 728 in September 2005. SB 489 did away with the pilot program, and instead allowed for biomass and all other RPS-eligible technologies to participate in net metering under the same terms available for solar and wind.
Other legislation enacted in October 2003 (AB 1214) made fuel cells eligible for net metering until the cumulative rated generating capacity of net-metered fuel cells reaches 112.5 MW statewide. AB 2165 increased the statewide maximum to 500 MW, and requires each utility to provide net metering for eligible fuel cells until it reaches its proportionate share of the 500 MW cap. Previously restricted to fuel cells that begin operation prior to January 1, 2014, AB 2165 of 2012 extended the eligibility deadline to January 1, 2015, and AB 327 of 2013 further extended the deadline to January 1, 2017.
Net Excess Generation
Net excess generation (NEG) is carried forward to a customer's next bill. Under prior law, any NEG remaining at the end of each 12-month period was granted to the customer's utility. AB 920 of 2009 gave customers two additional options for the NEG remaining after a 12 month period. Customers have the option of rolling over any remaining NEG from month-to-month indefinitely, or they can receive financial compensation from their utility for the remaining NEG. The CPUC set the compensation rate at the 12-month average spot market price for the hours of 7 am to 5 pm for the year in which the surplus power was generated. The rate making authorities of municipal utilities must develop their own compensation method for the remaining NEG through a public proceeding.
Renewable Energy Credits
The renewable energy credits (RECs) associated with the electricity produced and used on-site remain with the customer-generator. If, however, the customer chooses to receive financial compensation for the NEG remaining after a 12 month period, the utility will be granted the RECs associated with just that surplus they purchase.
Virtual Metering Options
AB 2466 of 2008 allows a local government, if certain conditions are met, to distribute bill credits from a renewable energy system across more than one meter. To be eligible for this billing arrangement all electrical accounts involved must receive electricity under a time-of-use tariff, and all accounts must be owned by the same entity.
California also allows virtual net metering for certain utility customers. Originally authorized just for customers participating in the Multifamily Affordable Solar Housing program, the CPUC voted in July 2011 in favor of a proposed decision which extends virtual net metering to all multi-tenant properties and to all distributed generation technologies. Virtual net metering allows the bill credits associated with the electricity produced by the system to be distributed across all the tenants' electricity bills.
SB 594 of 2012 allowed for the possibility of meter aggregation under net metering pending a favorable determination by the CPUC and the ratemaking authorities of publicly-owned utilities. A publicly-owned utility must make this determination with 180 days of receiving the first request from a customer to aggregate their meters. The CPUC considered meter aggregation and approved it with Resolution E-4610. A single customer with multiple meters on contiguous property may elect to aggregate the electrical load of their meters and apply the generation credits of a renewable energy system also located on contiguous property to all of the meters.
Energy Storage (IOUs Only)
California allows renewable energy systems coupled with energy storage to qualify for net metering. A chief concern when introducing storage to net metering is the risk that a customer would store grid electricity during times when electricity costs are low and export that same grid electricity during times when electricity costs are high. The CPUC developed rules to address this and other concerns. The CPUC developed different rules for PV systems paired with storage devices 10 kW or less, and PV systems paired with storage devices larger than 10 kW or other forms of renewable energy paired with storage of any size.
PV systems paired with storage devices larger than 10 kW and non-PV renewable energy technologies paired with storage of any size:
The CPUC issued a decision in May 2014 establishing rules for net metering systems paired with storage devices larger than 10 kW. In addition to other requirements, these systems must : 1) install a non-export relay on the storage device(s); 2) install an interval meter for the NEM-eligible generation, meter the load, and meter total energy flows at the point of common coupling; or 3) install an interval meter directly to the NEM-eligible generator(s). While these rules originally applied only to systems paired with storage larger than 10 kW, a subsequent CPUC decision extended these requirements to all non-PV technologies paired with storage of any size.
PV systems paired with storage devices 10 kW or less
The CPUC issued a decision in April 2016 establishing rules for net metering PV systems paired with storage 10 kW or less. Rather than installing the extra equipment required for storage devices greater than 10 kW, the rules for PV systems paired with smaller storage protects against rate arbitrage by relying on system output estimations. Specifically, utilities are required to establish monthly maximum allowable output limits for net metering facilities using CPUC-approved tools. Any export by the customer's system which exceeds the monthly limit would not be eligible for net metering credits.
Successor Tariff Provisions
The CPUC issued a decision in January 2016 adopting a successor tariff for the IOUs to use once they reached their aggregate capacity limit for the prior net metering rules. SDG&E and PG&E transitioned to the successor tariffs in 2016, and SCE transitioned in July 2017. The successor tariff credits customer-generators at the full retail rate for energy exported to the grid, but requires them to pay a few new charges: a one-time interconnection fee and all non-bypassable charges for all electricity consumed from the grid (~$0.02-0.03/kWh). Customer-generators on the successor tariff also need to be on a time-of-use rate.
Net Billing Tariff
Customer generators who submit interconnection applications on or after April 15, 2023 must take service under the new net billing tariff established by the CPUC in December 2022.
Rather than traditional net metering, where production and consumption are netted on a monthly basis, the net billing tariff nets production and consumption instantaneously, and any grid exports during the course of the month are credited at a different rate based on hourly Avoided Cost Calculator (ACC) values averaged across days in a month. The exact export credit rate will be determined by taking the 8,760 hourly avoided cost values produced by the ACC, and averaging the monthly values for each hour, differentiated between weekday and weekend. For example, all exports during the hour of 3 PM to 4 PM on weekdays in July 2023 will be credited at the same rate.
For any net billing customer that enrolls in the net billing tariff during the first five years of the tariff, the values for the first 9 years following the customer’s interconnection date will be based on a 9-year schedule of values for each hour from the ACC. This nine-year period is referred to as the lock-in period. The ACC used will be the most recent calculator, adopted as of January 1 of the calendar year of the customer’s interconnection date.
The CPUC adopted a temporary and declining cents-per-kWh adder, referred to as the ACC Plus, to serve as a glide path during the transition to the new net billing tariff. It will be available to eligible residential customers who enroll in the net billing tariff over a 5-year period. The exact value of the ACC Plus adder varies by utility and customer type, and will decrease by 20% each year for five years.