Net Energy Metering (NEM) demystified

Net Energy Metering 2 (NEM 2) is program established by the California Public Utilities Commission to encourage homeowners to install solar power systems.  The fundamental idea behind NEM is that your electricity meter can run both forward and backward.  During summer days, when the sun is shining brightly, your roof-top solar system will generate more power than you are consuming, your meter will run backward, and you will be credited for the power you send to PG&E at full retail price. During nights and winter days you will consume electricity from PG&E, your meter will run forward, and you will be charged the full retail price for each kilowatt-hour (kWh) you consume. Ideally, over the course of a year, the power you consume equals the power you generate, your credits offset your charges, and your overall bill is zero.

In reality, PG&E charges a minimum fee of about $10 each month just to be connected to their grid. And if you generate more power than you consume, PG&E only credits you with the wholesale price of this “excess” power (about $0.035/kWh), instead of the retail price (about $0.26/kWh). What this means is that it is not financially worthwhile to generate an excess of solar power over the course of a year. Instead you want to generate an annual total of a little less power than you consume from PG&E.

NEM with PG&E
The way PG&E handles NEM is complicated. Once you are accepted into their NEM program, they send you a monthly bill, but only charge you the minimum (currently about $10/mo). Then, after 1 year, they send you a true-up bill that adds up your total consumption charges, subtracts your total generation credits, and charges (or pays) you for the difference. Your true-up bill could be several hundred dollars and a big surprise.

NEM with MCE
MCE’s program is much simpler and more in your favor. First they pay you about $0.07/kWh for “excess” power — double what PG&E pays. Second, they adjust your bill each month. If you have generated more than you consume, they give you a credit that month which carries forward to the next month.  If you have consumed more than you have generated, they bill you for the difference. So, at the end of the year, instead of a big surprise you face a small true-up bill or perhaps get a check.

Starting NEM
Your installer will file a NEM application on your behalf a few days after your solar installation passes final inspection by the City. PG&E requires as much as 30 business days to interconnect and activate NEM. However, during the past 2 years, PG&E typically takes 8-10 business days to complete the process. For solar systems with batteries, it typically takes closer to the full 30 business days. PG&E charges $145 to process the NEM application; this fee is usually not included in the installer’s contract. The process is the same whether you are currently getting your power from PG&E or from MCE.

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