What Is Net Metering?
Net metering is a utility billing arrangement that allows residential solar owners to export excess electricity to the grid and receive credit for that power on their electricity bill. When your solar panels produce more than your home uses at any given moment, the surplus flows to the grid and your meter runs backward — or, in modern smart meter setups, a separate export register records the exported kilowatt-hours.
At the end of your billing period, your utility calculates your net usage: power imported minus power exported. If you exported more than you imported, you receive a credit — the rate and structure of that credit is what varies dramatically by state and utility.
How Net Metering Appears on Your Bill
Under traditional net metering, exported power is credited at the same rate you pay for imported power — the full retail rate. If you pay 14¢/kWh to import power, you receive 14¢/kWh credit for exports. Monthly credits accumulate and can offset future bills. At the end of a 12-month true-up period, most utilities pay out any remaining annual credit at either the retail rate or the lower avoided cost rate, depending on their tariff.
Under newer avoided-cost or value-based programs (like California's NEM 3.0 or New York's VDER), export credits are calculated at a rate lower than retail — sometimes dramatically lower. California NEM 3.0 customers receive 3–5¢/kWh for exports compared to the 25–35¢/kWh they pay to import. This changes the economics of solar significantly and explains the rapid growth of battery storage in California.
Net Metering by State
| State | Program | Export Credit Rate | True-Up Period |
|---|---|---|---|
| Arizona (APS) | Net Metering | Avoided cost (~4–6¢/kWh) | Monthly |
| Arizona (SRP) | Customer Generation Price Plan (CGPP) | Time-of-use avoided cost | Monthly |
| California (IOUs) | NEM 3.0 / Net Billing Tariff | Avoided cost (~3–5¢/kWh, time-varying) | Annual (12-month) |
| Colorado (Xcel) | Net Metering | Retail rate up to 120% of annual use | Annual |
| Florida (FPL/Duke/TECO) | Net Metering | Full retail rate (1:1) | Annual |
| Georgia (Georgia Power) | Net Metering | Avoided cost | Monthly |
| North Carolina (Duke) | Net Metering | Retail rate (2-year contract) | Annual |
| New Jersey | Net Metering / Successor Tariff | Retail rate (transitioning) | Annual |
| New York | Net Metering 2.0 / VDER | Value Stack (varies by hour/location) | Monthly |
| Ohio | Net Metering | Retail rate | Annual |
| Texas (ERCOT) | No mandate — REP programs vary | $0 to near-retail (depends on REP) | Varies |
California NEM 3.0 — What Changed and Why It Matters
In April 2023, the California Public Utilities Commission (CPUC) replaced the previous NEM 2.0 program with the Net Billing Tariff (NBT), commonly called NEM 3.0. The change dramatically reduced export credit rates for PG&E, SCE, and SDG&E customers.
Under NEM 2.0, a homeowner exporting solar power in the middle of the day received a credit equal to the retail rate — typically 28–35¢/kWh. Under NEM 3.0, that same export receives credit at the avoided cost rate — typically 3–8¢/kWh during daytime hours (though rates are higher in evening peak hours). The ratio between import and export value has roughly inverted.
The practical consequence: solar-only systems in California now have significantly longer payback periods than under NEM 2.0. Battery storage — which shifts solar-generated power from daytime (low export value) to evening (high import cost avoidance) — now substantially improves system economics. Most California installers now include battery storage in proposals as a default, not an option.
California customers who submitted their interconnection application before April 14, 2023 are grandfathered on NEM 2.0 for 20 years from their Permission to Operate date. If you're on NEM 2.0, your export credits remain at the retail rate under your existing agreement. Only new applications after April 14, 2023 fall under NEM 3.0.
Battery Storage and Net Metering
Under any net metering program, battery storage changes the optimization strategy for your solar system. Without storage, excess solar generation during the day is exported to the grid at whatever the current export credit rate is. With storage, that excess power can be captured and used later — either to avoid importing expensive peak-hour power, or (in California) to avoid the dramatic difference between daytime export rates and evening import rates.
Under programs with full retail net metering (Florida, Colorado, Ohio, North Carolina), the case for battery storage is primarily about backup power during outages — the economic case is less compelling since export and import rates are equal. Under avoided-cost or NBT programs (California, Arizona APS), battery storage now offers a strong economic case independent of backup power value.
Net Metering and Interconnection
Net metering enrollment happens through your utility's interconnection process — not the county permit process. After your solar system receives Permission to Operate (PTO), you are automatically enrolled in your utility's applicable net metering or successor tariff program. Your billing will switch from standard residential to the net metering billing structure at your next meter read after PTO.
Full interconnection guide: Solar Interconnection Application Steps.
Frequently Asked Questions
Possibly — in months with high production and low consumption, your bill may be zero or a small minimum charge. Most utilities charge a minimum monthly customer charge ($5–$15) regardless of net usage. Over a full year, a well-sized solar system in a net metering state can reduce annual electricity costs by 70–90% for many homeowners. 'Zero bill' is achievable but depends on system size, usage patterns, and your utility's specific program.
At the end of the 12-month true-up period, most utilities pay out any remaining annual credit in cash — but at the avoided cost rate (not the retail rate), even in retail-rate net metering states. This is why oversizing a solar system to maximize annual credits is typically not cost-effective: the year-end buyout rate is usually much lower than the credits you'd accumulate.
Yes. Grid-tied battery storage systems with solar participate in net metering the same way as solar-only systems. The battery changes your usage pattern (charging during low-rate periods, discharging during high-rate periods) but the net metering billing structure works the same — your utility meter measures net import/export from the property, regardless of whether power comes from panels, batteries, or both.