Net Energy Metering
Frequently Asked Questions
- In 1995, the California Legislature created Net Energy Metering (NEM) to encourage residents to install rooftop solar on their homes and businesses by providing incentives to help drive down costs, help customers pay off their systems over a reasonable period, and stimulate growth of what was then a new technology. The goal was to reach 10,000 systems. There are more than one million systems in California today.
- NEM provides rooftop solar customers with a credit on their bills for the excess energy produced by their systems that they don’t need and is sent to the grid.
- Today, the credit that customers are receiving well exceeds the price of solar energy produced by large-scale, commercial solar and wind facilities. The credit is tied to the full retail price of electricity, which incorporates transmission, distribution, and public purpose program costs.
- SDG&E, along with PG&E and SoCal Edison, filed a joint NEM reform proposal with the California Public Utilities Commission on March 15, 2021 that is designed to benefit customers across all of California while continuing to support customer choice in adopting clean energy solutions.
- No changes to existing NEM customers were proposed by the utilities. However, the filing encourages the CPUC to adopt a structure that stop bill increases related to NEM in the future impacting millions of Californians, including many who are lower income.
- The utilities are proposing:
- A transitional program to help provide access to clean energy to lower-income customers,
- Adoption of solar paired with storage to help support resiliency and reliability, and
- A reasonable payback horizon for rooftop solar systems in line with other states’ NEM policies.
- So much has changed since the program was established 25 years ago but the NEM program has not kept up. The full retail price of electricity has increased over the years for many reasons. However, the cost of rooftop solar and large-scale renewable energy, such as solar and wind, has decreased significantly over time. In fact, the cost of rooftop solar has decreased more than 70% since NEM was first established.
- State law (AB327), passed in 2013, recognized the need for change and directed the CPUC to review NEM. In August 2020, the CPUC opened a new proceeding to revisit how rooftop solar customers are compensated for excess energy produced by their systems that they don’t need. The CPUC is expected to issue its proposed decision in the proceeding before the end of the year.
- Several recent studies, including one by the CPUC, have consistently shown that rooftop solar customers are disproportionately higher income relative to the general population and the current NEM structure increases bills for non-rooftop solar customers.
- Customers without rooftop solar are paying an additional $2.8 billion more annually in their bills, or as much as $200 more per year, because rooftop solar customers are not paying their fair share of the fixed electric grid costs even though they use it more than others to send and receive power to their homes. If no changes are made to NEM, this cost-shift will grow to $4.7 billion in 10 years, or more than $300 per customer annually.
- More than 80% of the customers in SDG&E’s service territory are paying more on their electric bill than they should because of the outdated NEM structure.
- Without a fix, thousands of lower to middle income renters and homeowners in San Diego who can’t afford or aren’t able to install solar will continue to pay more than their fair share of electric grid costs and for state mandated energy efficiency and customer assistance programs.
- The residential cost shift in SDG&E’s service territory stands at $542 million as of February 2021 and the commercial cost shift is $70 million (combined total is $612 million).
- As of February 2021, there are a total of 210,464 solar installations in our service territory. Of those, 206,000 are residential rooftop solar.
- Rooftop solar penetration is approximately 16%.
- SDG&E customers who qualify for the CARE program pay an average of $9.50 more per month, or 13% extra on their bill, to help subsidize solar rooftop systems.
On Dec. 13, 2021, the CPUC issued a proposed decision recommending changes to the existing NEM program. The proposed decision is currently up for comment and could change.
Until and unless the Commission hears the item and votes to approve it, the proposed decision has no legal effect. The proposed decision may be heard, at the earliest, at the CPUC’s Jan. 27, 2022 voting meeting.
- Yes there is, including:
- “…the successor tariff should encourage the adoption of customer-sited renewable generation without burdening non-NEM customers with additional costs.” – National Resources Defense Council
- “NDC strongly supports the goal of this proceeding to reform the NEM tariff and appropriately balance costs and benefits for all ratepayers...” - National Diversity Coalition
- “The inequitable cost shifts resulting from NEM 1.0 and 2.0, particularly for low-income customers who disproportionately bear the impact of rate increases, must be addressed.” – The Utility Reform Network
- “…reform of the existing NEM tariff is needed immediately.” – Public Advocates Office
- “…because of SMUD’s NEM rate, our non-solar customers, including our low-income customers, are paying more than their fair share of SMUD’s fixed costs.” – Sacramento Municipal Utility District
- Comments excerpted from opening comments on NEM reform guiding principles, filed December 4, 2020. R. 20-08-020.
- No. The amount of revenue SDG&E is allowed to collect from customers by the CPUC would not change if NEM is restructured. Reforming NEM is intended to address a significant cost shift from solar customers to non-solar customers. See response to earlier question on why NEM reform is needed.
More than 230,000. SDG&E’s service territory – comprising San Diego and south Orange counties – has seen faster growth in this area than the majority of our state and nation.
Solar Installation by City:
- Carlsbad: 9,064
- Chula Vista: 14,597
- Del Mar: 1,165
- El Cajon: 11,863
- Encinitas: 4,350
- Escondido: 15,323
- Imperial Beach: 634
- La Mesa: 5,300
- National City: 1,084
- Oceanside: 11,283
- Poway: 6,127
- San Diego: 73,075
- San Marcos: 7,697
- Santee: 5,527
- Solana Beach: 853
- South Orange County cities: 18,011
- Vista: 7,249
The CPUC issued a proposed decision in the NEM proceeding on Dec. 13, 2021, and it’s currently up for comment. It may be heard, at the earliest, at the CPUC’s Jan. 27, 2022 voting meeting. To learn more, visit https://www.cpuc.ca.gov/news-and-updates/all-news/cpuc-proposal-aims-to-modernize-state-decarbonization-incentive-efforts
You can find a summary of the CPUC’s proposed decision, as well as a link to the full document at: https://www.cpuc.ca.gov/news-and-updates/all-news/cpuc-proposal-aims-to-modernize-state-decarbonization-incentive-efforts.