Customer-Sited Renewable Energy Generation

Key Information

For prospective or existing solar customers: 

• For important information on going solar for residential customers, please visit the California Solar Consumer Protection Guide webpage.
• For additional information on going solar, or If you are encountering issues with your current system, please visit visit our Resources for Solar Customers webpage.

General customer-sited renewable energy information:

• For information on the current NEM Revisit Rulemaking (R.)20-08-020 and Net Billing tariff, please visit the NEM Revisit webpage.
• For data on the number of projects and capacity of customer-sited renewable energy generation, please visit the California Distributed Generation Statistics website.

Note: The content on this webpage applies in the territories of the large electric investor-owned utilities (IOU): Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E). Also, this webpage only covers retail transactions for energy (not "non-export" interconnection, energy sales at avoided cost, or wholesale market transactions).

Overview

California allows customers to install renewable electrical generation facilities primarily to offset the customers’ electrical needs, and to interconnect these facilities with the electrical grid. Customers have mostly installed solar, wind, and fuel cell facilities, but other energy sources such as biogas, biomass, geothermal, small hydroelectric, and ocean currents also count as renewable. A variety of California laws, listed below, have directed the CPUC to create rules (or “tariffs”) under which the IOUs must allow customers who generate their own energy ("customer-generators") to serve their energy needs directly onsite and to receive a financial credit on their electric bills for any surplus energy fed back to their utility.  Participation in these tariffs does not limit a customer-generator's eligibility for any other rebate, incentive, or credit provided by an electric utility.

Net Energy Metering and Net Billing

Net Energy Metering

More than 90% of all megawatts (MW) of customer-sited solar capacity interconnected to the grid in the three large IOUs’ territories are on net energy metering (NEM) tariffs. Under NEM tariffs, participating customers receive bill credits for excess generation that is exported to the electric grid during times when it is not serving onsite load.  These bill credits are applied to customers' monthly bills at the retail rates (including generation, distribution, and transmission components) that the customers pay for energy consumption according to their otherwise applicable rate structures.

NEM customer-generators pay the same non-bypassable charges for public services as other IOU customers, including Department of Water Resources bond, public purpose program, nuclear decommissioning, and competition transition charges.  These charges fund important programs such as low-income and energy efficiency programs.  NEM customer-generators are exempt from standby charges.  

At the end of a customer's 12-month billing period, any balance of surplus electricity is trued up at a rate based on the recent market rate for energy resulting in "net surplus compensation" (NSC).  The NSC rate is 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). 

Pursuant to SB 656 (Alquist, 1995), the CPUC created the first NEM tariff, commonly known as “NEM 1.0,” in 1996. Customer-generators interconnected their systems to the grid under the NEM 1.0 tariff between then and the 2016-2017 NEM 1.0 sunset dates. The CPUC created the second NEM tariff, “NEM 2.0,” in 2016 pursuant to AB 327  (Perea, 2013). For information on the NEM 2.0 Rulemaking, R.14-07-002, please visit the NEM Successor Tariff webpage.  To align NEM customer costs more closely with non-NEM customer costs, NEM 2.0 requires customer-generators to:

• Pay a one-time interconnection fee.  Customer-generators with facilities under 1 MW pay a fee based on each IOU's historic interconnection costs.  PG&E’s fee is $145; SCE’s $94; and SDG&E’s $132.  Customer-generators with systems over 1 MW pay an $800 fee and pay for all transmission/distribution system upgrades.
• Pay non-bypassable charges in each metered interval.  Customer-generators pay small charges on each net kilowatt-hour (kWh) of electricity they consume from the grid in a metered interval. 
• Transfer to a time-of-use (TOU) rate.  Customer-generators must take service on a TOU rate to participate in NEM 2.0.

Pursuant to D.14-03-041, customer-generators are allowed to remain on the NEM 2.0 tariff for 20 years from the date they interconnected, or they are permitted to switch to the current tariff.

Net Billing

Since April 15, 2023, customers applying for interconnection have taken service on the new net billing tariff (NBT) pursuant to D.22-12-056. The NBT applies to the types of renewable electrical generation facilities that would previously have used standard NEM tariffs (i.e., not facilities eligible for the tariffs listed in the next section).

As with NEM, onsite generation is first used to serve onsite load under the NBT, offsetting energy costs. The NBT’s major difference from NEM 2.0 is that under the NBT, compensation for excess generation exported to the electric grid is applied to a customer’s bill at a rate reflecting the value of this generation to the grid. The value of the export compensation is usually lower than the retail rate, but can rise above the retail rate on late summer evenings. Customer-generators can maximize bill savings under the NBT by installing battery storage along with their generation, so they can use or export stored energy during these high-value hours. There are some additional aspects of the NBT that are different from NEM 2.0:

• Export compensation adder: Residential PG&E and SCE customers who apply to interconnect NBT facilities to the grid before the end of 2027 receive slightly higher-than-normal bill credits for exported energy for nine years. (SDG&E customers are excluded because their solar systems generate more bill savings due to SDG&E’s higher electric rates.) Customers who are required to add solar (e.g., by California’s building code for new construction) do not receive the adder.
  

• “Electrification” TOU rate requirement: Customer-generators are required to take service on a specific TOU rate with lower off-peak prices and higher on-peak prices than other TOU rates. These rates reduce GHG emissions and strain on the electric grid by discouraging energy use at peak demand times of day, and they encourage customers to use electric vehicles and appliances by charging less for energy at other times. The rates currently approved are E-ELEC for PG&E, TOU-D-PRIME for SCE, and EV-TOU-5 for SDG&E.
  

• Nine-year legacy period: The original customer who causes a generation facility to be interconnected to the grid under the NBT is guaranteed the use of the NBT tariff for nine years. Customer-generators who move to the NBT from a previous NEM tariff are not eligible for the NBT legacy period.
  
  
• Monthly bill payment: Payment for bill charges is due monthly, so that customers are not surprised by a large annual bill after their true-up date. In months when there are excess solar bill credits, the credits roll over to following months, until the annual true-up.

For more information on the NEM Revisit Rulemaking (R.20-08-020) and Net Billing tariff, please visit the NEM Revisit webpage.

Other Customer-Sited Renewable Energy Programs

Virtual Net Energy Metering (VNEM)

Virtual net energy metering (VNEM) enables an owner of a multi-tenant property to allocate a renewable electrical generation facility’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 or multiple service delivery points.  Otherwise, the bill credits function the same as under the standard NEM tariff.

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 credits to offset the electrical load from their home as well as from an irrigation pump located on an adjacent parcel.  As of November 30, 2022, roughly 1% 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 tariff 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.  In 2021, SB 479 was signed into law, which expanded RES-BCT eligibility to California Native American tribal governments. Information on the IOUs’ RES-BCT programs can be found at the following links: PG&E, SCE, and SDG&E.

NEM Fuel Cell (NEMFC)

Fuel cells that use renewable or non-renewable fuels and meet a greenhouse gas (GHG) emissions standard are eligible for the NEMFC tariff.  NEMFC was established by AB 1214 (Firebaugh, 2003) and codified in Section 2827.10 of the Public Utilities Code.  NEMFC bill credits are applied at the generation-only portion of a customer’s retail rate.  The program has a separately defined program cap of 500 MW.  As of November 2022, 120 MW of fuel cells were installed under this tariff.  Pursuant to SB 155 (2021), fuel cells must commence operation on or before December 31, 2023 to participate in NEMFC.

Income Qualified Solar Programs

The California Solar Initiative included a Single-family Affordable Solar Homes Program and a Multifamily Affordable Solar Housing Program.  Both of those programs are closed, though the MASH VNEM tariff can still be used by eligible properties.  The Solar on Multifamily Affordable Housing (SOMAH) Program provides financial incentives for the installation of solar PV systems on multifamily affordable housing properties.  Additionally, there are several programs, described on the Solar in Disadvantaged Communities webpage, that are designed to increase adoption of renewable generation in disadvantaged communities.

Renewable Energy Credits (REC)

Customer-generators may be eligible to receive compensation for the RECs associated with any excess generation.  To receive compensation, a customer must register their generation facility with the Western Renewable Energy Generation Information System and  have it certified to be eligible by the California Energy Commission. For small customer-sited generation facilities, the compensation that would be earned by RECs is not generally high enough to be worth the time and fees involved in this process.

Comparison of Standard NEM Tariffs and NBT

Key differences between the three standard NEM/NBT tariffs are described below.

Contact Us

If you have any additional questions about information on this webpage, please contact the CPUC Energy Division at energy@cpuc.ca.gov.