Net Metering: The Controversy

Opening your monthly power bill to see a lower-than-expected payment is one of the great rewards of owning a rooftop solar system.

During peak sunlight hours, your solar panels convert large percentages of sunlight into electricity, which is credited on your monthly power bills. That billing arrangement, known as net metering, keeps track of both the electricity you pull from the grid, and how much you put back on the grid.

California’s net metering policies offer residents huge incentives to go solar, but some organizations don’t like that. Explore how net metering works, and the arguments for and against it:

  • How does net metering work?
    • Solar customers zero out monthly electric bills by contributing to the grid
  • Why is net metering controversial?
    • Utilities claim extra costs are pushed onto non-solar customers
  • Solar professionals defend net metering
    • Industry leaders say net metering saves money for utilities
  • The coming fight over net metering
    • CPUC officials are examining the true costs of net metering

How does net metering work?

When you install solar panels, you’ll also receive a new electric meter that runs forward (like a normal meter) and backward.

Now, your electric meter will not only keep track of how much electricity you use, but also how much electricity you generate. During certain parts of the day, you’ll be able to walk outside and actually watch your meter spin in reverse.

At the end of your billing period, you’ll receive a bill from the electric company just as you normally would. The difference is that any power you used will be offset by the power you generated, lowering or even completely eliminating your electric bill.

In the chance that you generated more than you used, you’ll actually get money back from the utility for that electricity, credited at the retail rate.

Why is net metering controversial?

It makes sense that electric utilities wouldn’t fully support net metering policies. Every time a customer installs solar panels, it represents a loss of revenue to them.

The electric utilities aren’t using that argument to fight against net metering though. Instead, they’re claiming that the electricity generated by solar isn’t worth the retail rate for electricity they’re paying back to customers.

That’s because they say electric bills actually consist of three elements – the power generation, transmission system expenses, and distribution system expenses. While net metered customers might help utilities reduce power generation costs, they say the remaining costs are passed on to non-solar customers.

Electric utilities argue that over time, these costs will add up to noticeable amounts, forcing them to raise rates. As rates rise for customers, even more will make the switch to solar, costing the utilities millions in revenue.

Solar professionals defend net metering

The split between the solar industry and electric utilities is widening over the fight for net metering.

Solar professionals say that rather than cost utilities money, net metering lets them save big on energy and transmitting costs. While utilities claim net metering is leading to increased costs, they haven’t offered solid data proving that, according to solar industry leaders.

Because most electricity is transported over long distances via transmissions lines, it loses some of its power during that time. Solar-generated electricity that goes back on the grid doesn’t travel very far, and mainly heads to other nearby homes. Since the travel time between neighbors is quick, the electricity doesn’t incur many loses.

Additionally, due to these shorter transmission distances, professionals say utilities will save millions in future transmission construction. Such large delivery and transmission networks will be unnecessary when more solar contributes power to nearby homes.

The coming fight over net metering

The California Public Utilities Commission (CPUC) is studying the real costs of net metering in a new study that will decide the future of the policy.

While utilities and solar companies have fought over net metering’s costs, a true non-partisan study has yet to be conducted. Industry professionals on both sides of the issue are awaiting a new report this fall from the CPUC that is predicted to set the record straight.

Until then, the CPUC has suspended net metering for new solar customers beginning in January 2014. Whether or not net metering will return as a strong incentive will be decided in the coming months.

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