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Net Energy Metering (NEM)

For information about the NEM Successor Tariff or Contract mandated by AB 327, and related Energy Division workshops, please visit our NEM Successor Tariff or Contract page.


NEM Overview

Customers who install small solar, wind, biogas, and fuel cell generation facilities (1 MW or less) to serve all or a portion of onsite electricity needs are eligible for the state's net metering program. NEM allows a customer-generator to receive a financial credit for power generated by their onsite system and fed back to the utility.  The credit is used to offset the customer's electricity bill.  NEM is an important element of the policy framework supporting direct customer investment in grid-tied distributed renewable energy generation, including customer-sited solar PV systems.

  • The vast majority of solar PV customer-generators choose to be on a NEM tariff, with over 120,000 residential and non-residential accounts enrolled in California's NEM program.
  • NEM allows the customer to size their generation to meet their annual load instead of the peak demand.  This allows for a slightly smaller system to meet the load than would otherwise be required because of seasonal variation in both the demand for electricity and the solar resource itself.
  • NEM also reduces concerns about short term fluctuations in generation. Solar PV generation is relatively predictable on an annual basis, but shows strong variability, even on an hourly basis, as passing clouds, inclement weather or other fluctuations in the available solar resource affect the actual output of the solar system.  Since customer load also varies, at any given moment it is very difficult to determine if a solar PV system will be serving onsite load or exporting energy to the grid.  NEM means that load and generation do not have to be precisely coincident to return value to the customer.
  • NEM provides a long term, predictable benefit tied to market value (bundled retail rates) for the customer, improving the financial viability of distributed generation (DG) investments.
    • DG, like Solar PV systems, typically have very high up-front costs, and capacity based incentives cover only a small portion of that cost.
    • At a minimum, NEM allows customers to receive the fully bundled retail rate for generation that offsets load (coincident or non-coincident), and may be expanded to cover net excess generation.  This is significantly more incentive than would be provided by exported energy valued at the utility avoided cost rate, which may be as little as half of the retail rate.
  • NEM program rules and regulations allow regulators and utilities to provide transparent, simplified and expedieted interconnection procedures for small customers.
    • NEM systems are primarily intended to offset onsite load, mitigating to some extent the impact on the Transmission and Distribution system, allowing for simplified interconnection procedures.
    • NEM is particularly useful for encouraging interconnection of small to medium sized PV systems, which represent a significant resource in California and elsewhere, and is thus an excellent companion policy for more traditional procurement.
    • Most NEm projects pay little to no charges to interconnect to the utility grid.  NEM customers do pay nonbypassable charges, such as the Department of Water Resources surcharge and the Public Goods Charge ( a nobypassable surcharge to fund public goods research, development and demonstration, energy efficiency activities, and low income assistance programs) but bsed on net rather than gross consumption.

The PUC submitted a net metering status report to lawmakers in March 2005. PUC staff recommended increasing the number of eligible systems allowed to participate in net metering and clarifying jurisdictional authority (state vs. federal) regarding sales of electricity from net metered customer-generators to utilities.  The PUC released an updated NEM cost effectiveness evaluation to the Legislature in 2010, and is in the process of updating the NEM study for 2012-2013.  Additional information is available on the GoSolarCalifornia NEM page, and on the utilities websites:

Virtual Net Metering

Virtual Net Metering (VNM) is a special tariff available to MASH incentive recipients that enables a multifamily housing owner to allocate a solar system's benefits to tenants across multiple units.  Current tariff rules allow the system owner to allocate bill credits of a percentage of the solar generation between common load areas and tenants along a single service delivery point.  Under VNM, MASH Track 1a incentives are granted to common load offset and Track 1b incentives to tenants' load at the determined allocation rates.

For more information, please contact the Program Administrator for you utility service territory, or click on the links below to go to the Utility tariff books:

AB 920

On October 11, 2009, Governor Schwarznegger signed into law AB 920, requiring California utilities to compensate Net Energy Metering (NEM) customers for electricity produced in excess of on-site load over a 12-month period. The law requires that the utilities notify their NEM customers by January 31, 2010, that they are eligible for net surplus electricity compensation, and it directs the CPUC to establish by January 1, 2011, a net surplus compensation rate to be paid to NEM customers who produce more kilowatt hours than they consume in a 12-month period. Customers may sign up for net surplus compensation immediately, although they will not know the rate at which they will be compensated until the CPUC establishes the rate, some time in 2010.

AB 920 stipulates that the utilities will receive the renewable energy credits (RECs) associated with those excess kilowatt hours for which they have provided customers compensation. In addition, the law requires the CPUC to set the net surplus compensation rate at a level that is just and reasonable for the net surplus customer-generator but that does not create a cost for other bundled service customers.

As a first step in this process, on January 15, 2010, the CPUC issued an Assigned Commissioner Ruling directing the utilities to file applications proposing a net surplus compensation rate that meets the requirements of AB 920.  Utilities filed applications on March 15, which were  then consolidated into a single proceeding, and the public was provided several opportunities to provide input before a final net surplus compensation rate was put forward for Commission vote. Customers may sign up for net surplus compensation immediately, and will be compensated at the rate determined on June 9, 2011 in Decision (D.) 11-06-016 following staff advice letter disposition.


Last Modified: 4/28/2014

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