Net Energy Metering (NEM)

For information on the California Public Utilities Commission's (CPUC) open NEM Successor Tariff Rulemaking (R.) 14-07-002, please visit this page.

NEM Overview

Customers who install small solar, wind, biogas, and fuel cell generation facilities to serve all or a portion of onsite electricity needs are eligible for the state's net metering program. NEM allows customers who generate their own energy ("customer-generators") to serve their energy needs directly onsite and to receive a financial credit on their electic bills for any surplus energy fed back to their utility.  Participation in the NEM does not limit a customer-generator's eligibility for any other rebate, incentive, or credit provided by an electric utility.  More than 90% of all megawatts (MW) of customer-sited solar capacity interconnected to the grid in the three large investor-owned (IOU) territorities (PG&E, SCE, and SDG&E) in California are on NEM tariffs.

The current NEM program was adopted by the Commission in Decision (D.)16-01-044 on January 28, 2016 and is available to customers of PG&E, SCE and SDG&E.  The current NEM program went into effect in SDG&E's territory on June 29, 2016, in PG&E's territory on December 15, 2016, and in SCE's territory on July 1, 2017.  The program provides customer-generators full retail rate credits for energy exported to the grid and requires them to pay a few charges that align NEM customer costs more closely with non-NEM customer costs.  Any customer-generator applying for NEM will:

  •  Pay a one-time interconnection fee.  Customer-generators with facilities under 1 MW must pay a pre-approved one-time interconnection fee based on each IOU's historic interconnection costs.  PG&E's fee is $145; SCE $75; SCE $75; and SDG&E $132.  Customer-generators with systems over 1 MW must pay $800 interconnection fee and pay for all transmission/distribution system upgrades.
  •  Pay non-bypassable charges.  Customer-generators, similar to other utility customers, will pay small charges on each kilowatt-hour (kWh) of electricity they consume from the grid.  These charges fund important programs such as low-income and energy efficiency programs.
  •  Transfer to a time-of-use (TOU) rate.  If a customer-generator is not already on one, they will be required to take service on a TOU rate to participate in NEM.

If you are interested in installing a renewable system with NEM, or if you are encountering issues with your current system, please visit our Resources for NEM Customer page.  If you interconnected your system before the current NEM tariff went into effect, please see the Former NEM tariff section at the bottom of the page.

Billing

Bill Credits

Under NEM tariffs, participating customers receive a bill credit for excess generation that is exported to the electric grid during times when it is not serving onsite load, offsetting energy costs.  On a month-to-month basis, bill credits for the excess generation are applied to a customer's bill at the same retail rate (including generation, distribution, and transmission components) that the customer would have paid for energy consumption according to their otherwise applicable rate structure.

NEM customer-generators must pay the same non-bypassable charges for public services as other IOU customers, which includes Department of Water Resources' bond charges, the public purpose program charge, nuclear decommissioning charge, and competition transition charge.  NEM customer-generators are exempt from standby charges.

Net Surplus Compensation and Renewable Energy Credits (RECs)

At the end of a customer's 12-month billing period, any balance of surplus electricity is trued-up at a separate fair market value, known as net surplus compensation (NSC).  The NSC rate is based on a 12-month rolling average of the market rate for energy.  That rate is currently approximately $0.02 to $0.03 per kWh (for up-to-date NSC data, follow these links:  PG&E, SCE, SDG&E).  This rate structure was established in Commission Decision (D).11-06-016 pursuant to Assembly Bill (AB) 920 (Huffman, 2009).  More information on the Commission's implementation of AB 920 can be found here.

Customer-generators may also receive compensation for the renewable energy credits (RECs) associated with this excess generation.  To receive compensation, a customer-generator must register their generation facility with the Western Renewable Energy Generation Information System (WREGIS) and follow the eligibility guidelines contained in the latest version of the Overall Renewable Energy Program Guidebook from the California Energy Commission.

Other NEM Programs

Virtural Net Energy Metering (VNEM)

Virtual Net Metering (VNM) is a tariff available to multitenant properties that enables an owner of such property to allocate a solar system's benefits to tenants across multiple units.  Tariff rules allow the system owner to allocate renewable generation bill credits between common load areas and tenants along a single service or multiple service delivery points.  Otherwise the bill credits function the same as the NEM program.

NEM Aggregation (NEMA)

Senate Bill (SB) 594 (Wolk, 2012) authorized NEM aggregation (NEMA).  NEMA allows an eligible customer-generator to aggregate the electrical load from multiple meters, and NEM credits are shared among all property that is attached, adjacent, or contiguous to the generation facility.  A customer-generator must be the sole owner, lessee, or renter of the properties in order to utilize NEMA.

For example, an agricultural customer could use a single renewable generation system to provide NEMA bill credit to offset the electrical load from their home as well as from an irrigation pump located on an adjacent parcel.  As of December 31, 2016, roughly 5% of all NEM projects were NEMA projects.  The Commission authorized the IOUs to implement NEM aggregation in Resolution E-4610 and established a bill credit calculation methodology in Resolution E-4665.

Renewable Energy Self-Generation Bill Credit Transfer (RES-BCT)

This program enables local governments and universities to share generation credits from a system located on one government-owned property with billing accounts at other government-owned properties.  The system size limit under RES-BCT is 5 MW, and bill credits are applied at the generation-only portion of a customer's retail rate.  RES-BCT was established by AB 2466 (Laird, 2008) and codified in Section 2830 of the Public Utilities Code.

NEM Fuel Cell (NEMFC)

Fuel cells that use non-renewable fuels and meet a greenhouse gas (GHG) emissions standard are eligible for the NEM Fuel Cell program (NEMFC), pursuant to Section 2827.10 of the Public Utilities Code.  The program has a separately defined program cap.  NEMFC bill credits are applied at the generation-only portion of a customer's retail rate.  As of March 2017. 135 MW of fuel cells were installed under this program.

Former NEM Tariff

AB 327 (Pera, 2013) directed each large investor-owned utility to switch over to the current NEM tariff on July 1, 2017 or after their NEM capacity exceeded 5% aggregated customer peak demand, whichever came first.  Each of three large investor-owned utilities consequently transferred to the current NEM tariff on the different dates:

San Diego Gas & Electric:      June 29, 2016
Pacific Gas & Electric:            December 15, 2016
Southern California Edison:    July 1, 2017

Customer-generators that interconnected their systems to the grid prior to these dates were grandfathered into the form NEM tariff, pursuant to Decision (D.)14-03-041.  These customer-generators are allowed to remain on the former tariff for 20 years from the date they interconnected, or they are permitted to switch to the current NEM tariff.  The former NEM tariff is sometimes referred to as "NEM 1.0", and the current NEM tariff as "NEM 2.0" or "NEM Successor Tariff." 

Key differences between the two tariffs are described below:

 NEM Tariff
If you have any additional questions, you can contact Kerry Fleisher at the CPUC Energy Division:

If you are interested in installing a renewable system with NEM, or if you are encountering issues with your current system, please visit our Resources for NEM Customer page.


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