Back to top Jump to featured resources
Article, Rule filed under Energy

Net Metering

| Written by ILSR Admin | No Comments | Updated on Jan 30, 2012 The content that follows was originally published on the Institute for Local Self-Reliance website at

Net metering is a practice that encourages consumer investment in on-site electric generators – typically small-scale, renewable energy technologies. When a customer/generator is producing and consuming electricity at the same time, the laws of physics dictate that the electricity being produced flows to where it is being used. But what about when electricity is being generated and none is being consumed? In these instances net metering allows customer/generators to spin their meter backwards, in effect paying the customer/generator the retail rate for the electricity they generate but don’t immediately consume. If a customer generates more electricity than they consume over a period of time, they are typically paid for that net excess generation (NEG) at the utility’s avoided cost, or the wholesale rate.

Without net metering, small customer/generators usually have two meters, one measuring incoming electricity, for which they pay the retail rate, and one measuring the power they produce, for which they are compensated only at the utility’s avoided cost. Thus net metering provides a strong economic incentive for electricity customers to install on-site, small-scale, renewable generating capacity.

A majority of states have some type of net metering programs. Most have some common characteristics, including a size limit for qualifying generators and a statewide limit of qualifying capacity (typically about .01% of a utility’s peak load). Compensation for NEG is typically at the wholesale rate that the utility pays for electricity.

Two states, Minnesota and Wisconsin, stand out from the crowd because their net metering rules allow participants to be paid the going retail rate for the net excess electricity they generate for each billing cycle. New Jersey and Colorado allow projects up to 2 MW to use net metering. The Sacramento Municipal Utility District also pays the retail rate for excess solar electricity generation.

Note: Dozens and dozens of states have enacted net metering rules. We are highlighting only a few of the more interesting ones here on our site. IREC is tracking state activities on net metering developments at this link.

More Information:


Net Metering – California

California’s net metering law was established in 1995. There have been many modifications over the years including 3 separate bills enacted in 2005. The are many exceptions but, in general, the current rules allow on-site energy projects of up to 1 MW access to net metering. The combined capacity of net-metered systems may not exceed 0.5% of any utility’s peak demand [except for SDG&E, which has a limit of 50 MW]. Continue reading

Net Metering – Minnesota

Only electric generators less than 40 kilowatts (kW) are eligible and include fossil fuel cogeneration facilities.There is no statewide limit on the amount of electricity that can qualify for net metering payments, all customer classes are eligible for the program, and all utilities are required to offer net metering.

Continue reading

Net Metering – New Jersey

In 2004, existing net metering provisions were revised by the New Jersey Board of Public Utilities. Net metering is available for qualifying projects up to 2MW. Customers eligible for net metering own the renewable-energy credits (RECs) associated with the electricity they generate. Continue reading

Net Metering – Wisconsin

Wisconsin is the other state to offer the retail rate for net excess generation (NEG), but unlike Minnesota it does so only for electricity generated from renewable resources. For non-renewable generation the net energy rate is the utility’s avoided cost of electricity production. Continue reading

About ILSR Admin

Contact ILSR   |   View all articles by ILSR Admin