Net Energy Metering

From San Diego Public Policy and Fiscal History

Net Energy Metering (also referred to as NEM) is when a single, non-demand, and non-time-differentiated meter is utilized to measure the difference between the electricity supplied by a utility and and the electricity generated by an eligible customer-generated and fed back to the utility company over an entire billing period in the effort to reduce one's utility bill.

In addition, Net Energy Metering is also when an individual or groups of people install renewable energy production mechanisms (Solar panels, etc) to their own private residences which allows for ratepayers to supply themselves with enough energy 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.[1]

NEM Tariffs

NEM 1.0

The creation of NEM occurred in 1996 when the California legislature wished to stimulate California populations to adopt solar with the benefit that residential customers that have their own generators with solar installations of up to 10 kW in capacity could resell their excess energy to their utility company and be credited at a full retail rate. In addition, the introduction of NEM 1.0 also intended to stimulate private investment in renewable energy, increase in-state economic growth, as well as further create a more diverse and clean energy economy in California.

Parties that initiated NEM 1.0:

The California Legislature and the CPUC would initiate NEM 1.0, with the intention to stimulate the private sector to adopt renewable methods (solar) of generating energy.

Policy of NEM 1.0:

California legislature placed a cap on SDG&E and SCE, with total solar power systems in the territory of each utility being capped at 5% of total peak electricity demand.

  • Interconnection Fee - None
  • Non-Bypassable charges - Yes, based on "netted out" quantity of energy consumed over the course of a year.
  • Time-of-Use Rate - Not Required
  • Installation Size Limit - 1 MW
  • IOU Program Cap - 5% of IOU's aggregate peak demand

NEM 2.0

The reform of NEM 1.0 and creation of NEM 2.0 occurred in 2016 with the intention of implementing new dues and TOU's into the issue of solar power which creates a more difficult barrier for the average ratepayer to contend with when transitioning to NEM 2.0, reducing the incentive of people to adopt solar energy. In addition, by 2015 with the explosive growth of solar in California since the introduction of NEM 1.0, all three utilities were approaching their caps by the end of the year, which led to the CPUC wanting to ensure solar further expanding in the state. This led to the creation of Net Metering 2.0 that extends California Net Energy Metering for years to come.

Parties that initiated NEM 2.0:

Some of the parties that initiated NEM 2.0 is Pacific Gas & Electric (PG&E), San Diego Gas & Electric (SDG&E), and Southern California Edison (SCE), and the CPUC which allowed for California utility companies to raise the cap on the generation of solar energy and implement new dues and TOU's into NEM.

Policy of NEM 2.0:

Through the reforming of NEM 1.0 and adding new aspects to NEM 2.0 that was intended to further expand the solar industry in California:

  • The interconnection fee of the current NEM tariff is $75-$145.
  • Non-bypassable charges are incurred based on “netted out” quantity of energy consumed in each metered interval (metered interval is 1 hr for residential customers and 15 min for nonresidential customers)
  • Time-of-use rate being required
  • Installation size limit being no limit; and can only be sized up to customers annual load of electricity.
  • No IOU cap on the IOU program cap
  • Will be subject to higher charges by the utility company that cannot be offset by solar energy credits such as:
  • Has to pay a grid-interconnection fees anywhere from $75 to $150
  • Must pay non-bypassable charges for the grid power consumed. This averages between $0.02 and $0.03 per kilowatt-hour.
  • Will be required to switch to a time-of-use (TOU) rate schedule starting in 2019. Under Time Of Use billing, the cost of electricity delivered by the utility company varies throughout the day based on demand.