Net metering vs net billing

Net metering and net billing are the two ways your utility pays for the solar power you don't use — and the difference is worth real money over a system's life. This guide explains both and shows what each means for the battery decision.

The short version

• Net metering (NEM): exported kWh are credited at (or near) the retail rate — the same price you pay for electricity. The meter effectively runs backward, so the grid becomes your free battery.
• Net billing: you buy at retail but sell exports at a below-retail price — usually the utility's avoided cost (wholesale). Using your own power matters much more.
• Buy-all-sell-all (BASA): the blunter successor tariff — you sell every generated kWh at below-retail and buy every consumed kWh at a below-retail tariff.

How net metering works

Net metering is an electricity billing mechanism: a household that generates some of its own power offsets its consumption across the billing period, not only at the moment of generation. With monthly net metering, solar produced during a sunny day offsets the power you draw at night in the same month; with annual net metering, unused kWh credits roll into following months, so July production can offset December consumption.

Net metering originated in the U.S.: the first projects were in Massachusetts in 1979 and Minnesota adopted the first formal net-metering law in 1983. The Energy Policy Act of 2005 required all U.S. utilities to consider offering net metering upon request, and by 2013 net metering rules existed in 43 states plus utilities in three others.

The catch is the compensation rate. A 2017 survey of U.S. utility programs found only about 3% of utilities offered full-retail compensation for exports — the rest paid less than retail, expired credits annually, or restricted rollover. “Net metering” without the retail credit is a far weaker deal than the name suggests.

Who is paid retail, who gets wholesale

The two mechanisms in practice are described in the utility-policy review and regulator filings:

“Net billing pays the retail rate for customer-consumed PV generation and a below-retail rate for exported generation.”

— U.S. successor-tariff survey (compiled from state commission filings), accessed 2026-08-08.

Thirteen states switched their retail-credit net-metering programs to successor tariffs in 2017 and three more followed in 2018. The retail-credit era is shrinking; the question for a new buyer is which rate their utility pays for exports.

The flagship example: California's NEM 3.0

California ran two generations of near-retail net metering (NEM 1.0, then NEM 2.0 from 2016–2017 by utility, which added a one-time interconnection fee, non-bypassable charges and time-of-use rates). On April 15, 2023, the Net Billing Tariff (NEM 3.0) took over for new systems under CPUC Decision D.22-12-028 (rulemaking R.20-08-020):

• Exports are now paid at the utility's avoided cost — typically about $0.05 per kWh, in the few extreme peak-demand hours, credits can briefly spike far higher.
• Retail rates in the state are around $0.30+/kWh for residential customers — so an exported kWh earns roughly a sixth of what an imported kWh costs.
• The economics flipped toward solar-plus-battery: store the day's surplus, use it in the evening at retail value, export little.
• Customers who connected under NEM 1.0 or 2.0 kept their legacy export terms for up to 20 years — the new rules applied to new systems only.

What this means for your decision

• Retail net metering makes the economics simple: size the array to your usage and let the meter do the banking. A battery's value is mostly resilience, not money.
• Net billing shifts the value toward self-consumption: a battery that moves daytime generation into the evening is worth far more, and the payback should be modelled at export rates, not at retail.
• Always check your utility's actual tariff — the state label ("net metering") no longer tells you the export rate.

See your state guide for the export-credit chip that applies to a new install, and the payback estimator to run the numbers both ways.

Sources

1. CPUC — Decision D.22-12-028, rulemaking R.20-08-020 (Net Billing Tariff), docs.cpuc.ca.gov — accessed 2026-08-08.
2. CPUC — "Net-Energy Metering 2.0 Lookback Study" (Verdant Associates, 2021) — NEM 2.0 rollout and rate elements, accessed 2026-08-08.
3. Wikipedia — "Net metering" (definition, history, state counts, successor tariffs, with its own citations to primary sources) — accessed 2026-08-08. Where a figure is still unverified at the original source, this page says so.