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Net-Energy Metering 2.0 in California

With the original Net-Energy Metering (NEM) tariff due to expire, the California Public Utilities Commission (CPUC) filed a decision regarding the successor tariff. The number of installations permissible under the initial NEM tariff is approaching the cap (398K of 410K as of September 2015), thus requiring a successor tariff in the midst of several related ongoing proceedings. The NEM successor tariff proposal extends the NEM policy for new interconnections through at least 2019, with some notable modifications to reflect costs to the utility and better align payments across the rate base.

Key Details:

  • NEM (including virtual and aggregated) will continue through 2019 to allow for progress in the proceedings that will value DER on a locational basis, determine compensation for locational value, and reform rates
  • NEM eligibility is extended to systems up to 1MW, so long as the interconnecting customer pays all study and grid upgrade costs
  • NEM customers will be required to move to applicable Time of Use (TOU) rates to match grid needs with economic signals
  • The original and successor NEM tariffs are applicable for 20 years from the year of interconnection
  • Utilities can charge a reasonable interconnection fee ($75–$150) to cover processing, administrative, engineering, metering installation, inspection, and commissioning costs
  • NEM customers will pay non-bypassable charges ($0.02-$0.03/kWh) for electricity consumed instead of net volume, to align with volumetric charges paid by other customers


The decision that continues NEM and expands the coverage to large distributed generators is widely seen as a victory for solar providers. Though the decision provides some measures to compensate the utility for the costs of interconnection, the three Investor Owned Utilities (IOUs) contested the decision in their comments when it was proposed. In their reply comments, PG&E argues that the successor tariff results in a $3.6B–$7B cost shift from NEM customers to non-NEM customers by 2025 and that the time-of-use rates must be mandatory for NEM customers by 2018. SCE assesses the subsidy paid by non-NEM customers to NEM customers at $17B by 2025. The IOUs have 30 days to file their updated tariff and fees. The NEM successor tariff will be revisited in 2019 once the related proceedings have had time to further develop.

More Information

Decision Adopting Successor to Net-Energy Metering Tariff, 1/28/16

California’s NEM 2.0 Decision Keeps Retail Rate for Rooftop Solar, Adds Time-of-Use, Greentech Media, 1/28/16

NEM 2.0 Update: What You Should Know, Sage Renewables, 2/1/16

PG&E Reply Comments to Proposed Decision Adopting a Successor to the Net Energy Metering Tariff

SCE Amended Comments on Proposed Decision Adopting Successor to Net Energy Metering Tariff

This report is part of the Grid Edge Minute series. To view all featured Minutes, please click here.

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Contributing Authors

Chris Sturgill Director

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