Net Metering – How Utilities Pay You For Your Solar Energy

NEM basics:

• During the day, your solar system generates energy.
• When you’re away, most of your solar energy will probably go to the grid.
• When you’re home, you may use some or all of your solar energy, and you may need additional energy from the grid.
• During the night, all the energy you use will come from the grid. (For people who add batteries to their system, the batteries can supply a portion of the nighttime energy requirement. Check out this article to learn about adding batteries.)
• You’re paid for your solar energy at close to the same rate as you pay for grid energy.

When you use more energy than you generate during a month (called a “billing cycle”), your PG&E meter tracks how much you used from the grid. When you generate more energy than you use during a month, your meter tracks how much you sent to the grid. At the end of the billing cycle, PG&E lets you know how much you owe, or how much PG&E owes you. For example, if you use 400 kilowatt-hours (“kWh” – the unit of energy PG&E uses to bill you) from the grid during a month, and you send 350 kWh of solar to the grid during that same month, you’d owe PG&E for the “net” difference of 50 kWh. Because the monthly amounts are often small and because of seasonal variations, you’ll either pay or be paid just once per year, called the true-up. This happens approximately on the anniversary of your solar “interconnection” date. PG&E has an easy short video about NEM concepts on its Understanding NEM page.

The following image showing typical patterns of energy consumption and generation appears on Wikipedia.

The concepts here are good, however there are some devils in the details. There are rate plans and tiers, territories, and time of use charges, and the “minimum bill.” Let’s take these in order.

Rate Plans – Baselines and Tiers and Time of Use (TOU)

Rate Plans are also known as Rate Schedules, and they determine how much you pay for energy based on how much and/or when you consume it during the billing cycle.

As a rate payer, you have some choice on which rate plan you adopt. E-1 (or E1) is the typical non-solar residential rate schedule. Under this plan, you pay a certain amount for each kWh you use up to a “baseline” number. The baseline varies with the season and where you live (the PG&E territory you live in, usually either “t” or “x” for the bay area) and ranges from about 210 to about 330 kWh/month. Once you’ve used more than your baseline (also known as Tier 1), you’re charged at a higher rate for the next 210 or 330 kWh or whatever amount your baseline was. This is called Tier 2. Everything above Tier 2 is Tier 3 and is billed at a yet higher amount. For E-1, Tier 1 is currently about $.18/kWh, Tier 2 is about $.24/kWh, Tier 3 is about $.40/kWh. For example, if your baseline quantity is 210 kWh/month and you use a total of 600 kWh/month, you’d be charged $.18/kWh for the first 210 kWh ($37.80) plus $.24/kWh for the next 210 ($50.40) plus $.40/kWh for the remaining 180 kWh ($72) for a total of $160.20. You can easily find your average cost per kWh by diving your total dollars by total kWh usage: $160.20 / 600 kWh = $.26/kWh.

Some rate plans include a Time of Use (TOU) feature. This means that you’re charged most if you’re using energy during “peak” hours and you’re charged least during “off peak” hours. With some plans, there are also “partial peak” hours. For the common residential TOU plan E-TOU-A, rates range from about $.15/kWh for off-peak to about $.40/kWh for peak hours. E-TOU-A peak hours are 3pm to 8pm Monday – Friday (except holidays). All other times are off peak. E-TOU-A also has Tiers: the $.15/kWh above is for baseline off-peak, the $.40/kWh is for above-baseline peak hours. Some rate plans, like E-TOU-A have tiers and TOU, some have only tiers, some only TOU. Because there has been significant overlap between when the sun is up and peak hours, many solar customers have selected a TOU plan. And as of January 2017 all PG&E solar customers must be on a TOU plan.

The images below show peaks and tiers for the E-TOU-A rate plan, for summer and winter. The two E-TOU-A tiers are named with and without “baseline credit” but the effect is the same as a lower per-kWh charge for a baseline quantity, and a higher per-kWh charge for additional usage. These charts, and much more information about TOU plans appear at on their original PG&E Explore the PG&E Time-of-Use plans page.

Full details on all rate plans, tiers and TOU rates ​are beyond the scope of this article. It gets complicated! 

SunWork can help you think through rate plan choices. Note that from time to time, PG&E changes per-kWh prices for all rate plans and tiers, and for which hours are considered peak, partial-peak and off-peak. One of the many benefits of going solar is you know in advance what you’ll be paying for the bulk of the electricity you use over the next 25 years.

Minimum Bill – $10 per Month

The minimum bill is how PG&E has charged solar customers for using their wires and infrastructure. The minimum bill means all solar customers pay up to about $10/month for “transmission and distribution” fees, meaning substations and transformers and high-voltage pylons, the wires, the “line losses,” the labor and maintenance and overhead. If you use $10 per month or more of grid electricity, you won’t be charged the minimum bill. Because the minimum bill cannot be offset with solar, most people choose to install enough solar to cover all but about $10/month worth of electricity from the utility. This is typically the economically optimal target unless you plan on adding electrical loads in the future such as an Electric Vehicle.

For those on PG&E’s CARE low income rate, the minimum bill is roughly $5 per month.

Final Points

PG&E’s rate plans and net metering policies can be confusing, but with California’s relatively high electricity prices (nearly double the US average) and strong commitment to clean energy, rooftop solar is an excellent financial as well as environmental investment.

SunWork can help provide the information you need to assess your home for solar.

Here is a link for additional information on tips and resources to consider when going solar.