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Incentives/Policies for Renewables & Efficiency

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Net Metering   

Last DSIRE Review: 09/02/2014
Program Overview:
State: California
Incentive Type: Net Metering
Eligible Renewable/Other Technologies: Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, Geothermal Electric, Fuel Cells, Municipal Solid Waste, Biogas from manure methane production or as a byproduct of the anaerobic digestion of biosolids and animal waste, Anaerobic Digestion, Small Hydroelectric, Tidal Energy, Wave Energy, Ocean Thermal, Fuel Cells using Renewable Fuels
Applicable Sectors: Commercial, Industrial, Residential, General Public/Consumer, Nonprofit, Schools, Local Government, State Government, Fed. Government, Multi-Family Residential, Low-Income Residential, Agricultural, Institutional
Applicable Utilities:All utilities except LADWP
System Capacity Limit:1 MW
5 MW for systems operating under the bill credit transfer program authorized by Public Utilities Code 2830. System must be owned by, operated by, or on property under the control of, a local government or university.
Aggregate Capacity Limit:5% of aggregate customer peak demand (statewide limit of 500 MW for fuel cells)
Net Excess Generation:Credited to customer's next bill at retail rate. After 12-month cycle, customer may opt to roll over credit indefinitely or to receive payment for credit at a rate equal to the 12-month average spot market price for the hours of 7 am to 5 pm for the year in which the surplus power was generated. (If customer makes no affirmative decision, credit is granted to utility with no compensation for customer.)
REC Ownership:Customer owns RECs. If customer receives payment for net excess generation at the end of a 12-month cycle, utility owns RECs associated with those electricity credits.
Meter Aggregation:Virtual net metering allowed for multi-tenant properties.
Meter aggregation allowed for local governments if all participating accounts receive a time-of-use rate.
Pending determination from the CPUC and ratemaking authorities of other utilities, meter aggregation may be allowed for all customers with multiple meters on parcels of land contiguous to the location of the renewable energy system. See below for more explanation.
Web Site:
Authority 1:
Date Enacted:
Date Effective:
Cal Pub Util Code § 2827, et seq.
1995 (subsequently amended)
Authority 2:
Date Enacted:
CA Public Utilities Code § 2830
Authority 3:
Date Enacted:
AB 327

California's net-metering law originally took effect in 1996 and applies to all utilities with one exception*. The law has been amended numerous times since its enactment, most recently by AB 327 of 2013.

Eligible Technologies
The original law applied to wind-energy systems, solar-electric systems and hybrid (wind/solar) systems. In September 2002, legislation (AB 2228) allowed biogas-electric facilities up to 1 megawatt (MW) to net meter until December 31, 2005, under a pilot program. This pilot program was extended until December 31, 2009, upon the enactment of AB 728 in September 2005. SB 489 did away with the pilot program, and instead allowed for biomass and all other RPS-eligible technologies to participate in net metering under the same terms available for solar and wind.

Other legislation enacted in October 2003 (AB 1214) made fuel cells eligible for net metering until the cumulative rated generating capacity of net-metered fuel cells reaches 112.5 MW statewide. AB 2165 increased the statewide maximum to 500 MW, and requires each utility to provide net metering for eligible fuel cells until it reaches its proportionate share of the 500 MW cap. Previously restricted to fuel cells that begin operation prior to January 1, 2014, AB 2165 of 2012 extended the eligibility deadline to January 1, 2015, and AB 327 of 2013 further extended the deadline to January 1, 2017.

Aggregate Capacity Limit
The aggregate capacity limit of net-metered systems in a utility's service territory is equal to 5% of the utility's aggregate customer peak demand. Historically, all three investor-owned utilities had interpreted "aggregate customer peak demand" differently, and had been using different methodologies to calculate their net metering caps. The CPUC approved a proposed decision in May 2012 to more clearly define "aggregate customer peak demand" for all utilities. The decision defines aggregate customer peak demand as the sum of the non-coincident peak demands of all utility customers. This methodology was later codified by the Legislature with AB 327 of 2013. Alll utilities, even those not regulated by the CPUC must use the methodology explained above to calculate their aggregate capacity limit. The rule for the investor-owned utilities is a bit more nuanced as explained below. 

AB 327 of 2013 specifies that "large electrical corporations" with more than 100,000 service connections must offer net metering until it reaches its net metering program limit or July 1, 2017, whichever comes first. For additional clarity, the legislation assigns a specific net metering program limit for each of the three large electrical corporations, as shown below. Beginnning July 1, 2017, or when the utiility reaches its net metering program limit, the utility must offer a standard contract or tariff, as described below.

Net metering program limits:

  • San Diego Gas and Electric: 607 MW of nameplate generating capacity
  • Southern California Edison: 2,240 MW of nameplate generating capacity
  • Pacific Gas and Electric: 2,409 MW of nameplate generating capacity  

Net Excess Generation
Net excess generation (NEG) is carried forward to a customer's next bill. Under prior law, any NEG remaining at the end of each 12-month period was granted to the customer's utility. AB 920 of 2009 gave customers two additional options for the NEG remaining after a 12 month period. Customers have the option of rolling over any remaining NEG from month-to-month indefinitely, or they can receive financial compensation from their utility for the remaining NEG. The CPUC set the compensation rate at the 12-month average spot market price for the hours of 7 am to 5 pm for the year in which the surplus power was generated. Click here to read more about net surplus compensation. The rate making authorities of municipal utilities must develop their own compensation method for the remaining NEG through a public proceeding.

Renewable Energy Credits
The renewable energy credits (RECs) associated with the electricity produced and used on-site remain with the customer-generator. If, however, the customer chooses to receive financial compensation for the NEG remaining after a 12 month period, the utility will be granted the RECs associated with just that surplus they purchase.

Virtual Metering Options
AB 2466 of 2008 allows a local government, if certain conditions are met, to distribute bill credits from a renewable energy system across more than one meter. To be eligible for this billing arrangement all electrical accounts involved must receive electricity under a time-of-use tariff, and all accounts must be owned by the same entity. Click here to learn more about the bill credit transfer program for local government.

California also allows virtual net metering for certain utility customers.  Originally authorized just for customers participating in the Multifamily Affordable Solar Housing (MASH) program, the CPUC voted in July 2011 in favor of a proposed decision which extends virtual net metering to all multi-tenant properties and to all distributed generation technologies. Virtual net metering allows the bill credits associated with the electricity produced by the system to be distributed across all the tenants' electricity bills. Click here to read more about virtual net metering.

Meter Aggregation
SB 594 of 2012 allowed for the possibility of meter aggregation under net metering pending a favorable determination by the CPUC and the ratemaking authorities of publicly-owned utilities. A publicly-owned utility must make this determination with 180 days of receiving the first request from a customer to aggregate their meters. The CPUC considered meter aggregation and approved it with Resolution E-4610. A single customer with multiple meters on contiguous property may elect to aggregate the electrical load of their meters and apply the generation credits of a renewable energy system also located on contiguous property to all of the meters.   

Restriction on Additional Fees
California does not allow any new or additional demand charges, standby charges, customer charges, minimum monthly charges, interconnection charges, or other charges that would increase an eligible customer-generator's costs beyond those of other customers in the rate class to which the eligible customer-generator would otherwise be assigned. The CPUC has explicitly ruled that technologies eligible for net metering (up to 1 MW) are exempt from interconnection application fees, as well as from initial and supplemental interconnection review fees.

Publicly owned utilities may elect to provide co-energy metering, which is the same as net-metering, but incorporates a time-of-use rate schedule. Customer-generators with systems sized between 10 kW and 1 MW who are subject to time-of-use rates are entitled to deliver electricity back to the system for the same time-of-use (including real-time) price that they pay for power purchases. However, time-of-use customers who choose to co-energy meter must pay for the metering equipment capable of making such measurements. Customer-generators retain ownership of all renewable-energy credits (RECs) associated with the generation of electricity they use on site.

Standard Contracts or Tariffs (Future)
AB 327 of 2013 tasks the CPUC with designing a standard contract or tariff to be used by eligible customer-generators in the service territory of one of the investor-owned utilities once net metering is no longer available. According to the law, as described above, the investor-owned utilities must make net metering available until that utility reaches its net metering program capacity limit or July 1, 2017, whichever comes first. At that point, the utility must make available to new customer-generators the standard contract or tariff developed by the CPUC. The CPUC has broad authority to develop this standard contract or tariff, but AB 327 provides some general parameters regarding costs and benefits to customer-generators and the electrical system. The bill also allows for a period of transition, the length of which will be determined by the CPUC, during which time existing net metering customers can continue to net meter under the old rules. Click here to read more about the CPUC's efforts to create a customer-generator successor tariff or contract.

Additional Resources:

* Publicly-owned electric utilities with more than 750,000 customers which also provide water are exempt from offering net metering. Los Angeles Department of Water and Power (LADWP) is the only utility that falls in this category.

  Ehren Seybert
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, CA 94102
Phone: (415) 703-5991
  Gabe Petlin (Virtual Net Metering)
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, CA 94102
Phone: (415) 703-1677
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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

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