Net energy metering is the arrangement that governs how utility companies reimburse customers with solar panels for the excess energy produced by their systems.

The Backstory

In California, NEM 1.0 was largely tilted in favor of solar panel customers as a way to promote clean energy. Utilities had to pay retail rates for the excess power produced by customers’ solar panel systems, and there were few added fees.

Now that so many customers have switched to solar, though, utilities are worried about decreased profits, and some claimed that solar customers weren’t paying their fair share for maintaining the power grid. NEM 1.0 is set to expire on July 1, 2017, or whenever the utility hits its net energy metering cap, defined as NEM capacity in excess of 5 percent of the utility’s aggregate customer peak demand.

What’s Next for Net Energy Metering

In California, many of the major utilities are already close to hitting that cap. In fact, SDG&E may hit the cap within a few months. That sets the stage for NEM 2.0. But the details are still in limbo.

Utility companies want to pay less—a lot less—for the excess energy that solar panels generated. Retail rates vary, but can be in the range of 15 cents per kilowatt hour. Utilities proposed paying about half that. They also proposed new grid access fees that they claimed would distribute the cost of power grid maintenance more fairly. But by reducing the compensation to solar panel customers and charging new fees, the utilities would effectively undercut many of the cost savings that drive customers to switch to solar.

The California Public Utilities Commission recently released its own proposal for NEM 2.0, and it preserves the retail rate of compensation for customers with solar panels. It also puts the kibosh on many additional fees. In fact, the CPUC proposal will not ““impose any demand charges, grid access charges, installed capacity fees, standby fees, or similar fixed charges on NEM residential customers.”

But customers with solar panels will face some extra charges under the CPUC’s proposal for NEM 2.0—a one-time interconnection fee of about $75 to $150, and non-bypassable charges on all energy consumed. Under NEM 1.0, solar customers only paid these non-bypassable charges, which go toward low-income and energy-efficiency programs, if they drew more power from the grid than they generated over the course of a year.

The Bottom Line

NEM 2.0 isn’t final yet, and the utility companies remain strongly opposed to paying retail rates for that excess energy from solar panels. But the proposal by the CPUC is much more consumer-friendly than what the utilities had proposed.

If you’re considering switching to solar, the best thing you can do is start your project now. As long as SDG&E hasn’t hit its net energy metering cap, you can be grandfathered in to the existing NEM 1.0 rules, and you can lock in those benefits for the next 20 years.

We can help you get your solar project started quickly. To learn more about the benefits of a solar panel system for your home, contact us today. We provide a free consultation to answer all of your questions, with absolutely no pressure. Why wait?


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