Net Metering Explained: How Solar Credits Work in 2026

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It’s noon on a clear June day. Nobody’s home, the panels on the roof are making more power than the house can use, and the meter in the side yard is quietly counting electricity flowing out to the street. What that power is worth to you, and whether it’s worth as much as the power you buy back at 7 p.m. when everyone’s cooking, depends on one policy: net metering.

The short answer: net metering credits the solar power you send to the grid at the same retail price you pay for grid power, so your meter effectively runs backward. Net billing, which California and a growing number of utilities now use, credits exports at a lower “avoided cost” rate. Which one your utility uses can change your solar savings by thousands of dollars.

How net metering works

Solar panels make the most power at midday, often more than your home is using. A grid-tied system doesn’t throw that extra away: it flows back through your meter to the utility’s lines, and your neighbors use it. With classic net metering (sometimes called NEM, for net energy metering), the utility subtracts what you export from what you import over the billing period. If you imported 900 kWh in a month and exported 300 kWh, you pay for 600 kWh.

If you export more than you use in a month, most programs carry the extra forward as a credit to the next month. Once a year, at the “true-up,” the leftover credit is settled. Many utilities pay out the extra at a low wholesale-type rate or let it expire, so net metering rewards systems sized to match your use, not bigger ones.

Net metering vs net billing

Net billing keeps the same wiring and the same meter idea, but it values the two directions differently. Power you buy is charged at your retail rate, often a time-of-use rate that’s higher in the evening. Power you export is credited at a separate, usually lower, rate. And the netting happens over short intervals (often instantly or hour by hour) instead of across a whole month.

	Net metering (retail)	Net billing
Credit for exported power	Same as your retail price	A separate export rate, usually lower
Netting period	Monthly, with an annual true-up	Short intervals (instant or hourly), credits in dollars
Best way to save	Size the system to your annual use	Use your own solar power as it’s made, or store it in a battery
Value of a home battery	Mainly backup during outages	Backup plus everyday savings
Payback time	Shorter	Longer for solar only; a battery can help

A simple bill example (our estimate)

Take a home that imports 900 kWh in a month and exports 300 kWh of midday solar. Assume a flat retail price of 16.5 cents per kWh (the 2024 U.S. average, per EIA) and, for the net billing case, an export credit of 5 cents per kWh. Both figures are only for illustration; your utility’s rates will differ.

• Net metering: (900 − 300) × $0.165 = about $99. The 300 exported kWh are worth $49.50.
• Net billing: 900 × $0.165 − 300 × $0.05 = $148.50 − $15 = about $134. The same 300 kWh are worth $15.

Under net billing, the solar power you use yourself is still worth the full retail price, since you don’t buy it. So the game changes: run the dishwasher, laundry, pool pump or EV charging at midday, and store the rest in a battery for the evening. That’s why the same panels can pay back years faster in one state than in another.

California NEM 3.0 (the Net Billing Tariff)

California is the best-known example. On December 15, 2022, the California Public Utilities Commission (CPUC) adopted Decision D.22-12-056, which replaced NEM 2.0 with the Net Billing Tariff for customers of PG&E, Southern California Edison and San Diego Gas & Electric. People call it “NEM 3.0”; the utilities call it the Solar Billing Plan. Here’s what the CPUC says:

• Who it applies to: customers who applied to connect solar on or after April 15, 2023.
• Export credit: based on the CPUC’s Avoided Cost Calculator, which the CPUC says is “usually lower than import rates” but can rise above retail on late-summer evenings.
• Billing: you pay monthly, with an annual true-up; credits roll over for 12 months.
• Rates: new solar customers go on time-of-use rates with big gaps between peak and off-peak prices, meant to reward batteries.
• Lock-in: the CPUC says customers can lock in their export credit values for 9 years. Residential PG&E and SCE customers who apply before the end of 2027 also get slightly higher export credits for nine years.
• Existing customers: the decision didn’t change compensation for existing rooftop solar customers. NEM 2.0 customers can stay on it for 20 years from the date they connected.
• No solar-only charge: the final decision dropped the proposed monthly fee on solar customers.

When it adopted the decision, the CPUC estimated that average customers would save about $100 a month with solar alone and at least $136 a month with solar plus storage, paying off the system in nine years or less on average. Those were the CPUC’s 2022 estimates, made when the 30% federal credit still existed; the credit ended for homeowner-owned systems installed after 2025, so payback for a purchased system today is likely longer. Ask installers to model your bill under your actual rate plan.

Net metering in other states

There’s no single U.S. rule: each state’s utility commission or legislature sets it, and some leave it to the utility. The National Conference of State Legislatures last counted 38 states, Washington, D.C., and four territories with net metering, plus voluntary utility programs in Idaho and Texas. That count dates from 2017, though, and states have been busy since. The NC Clean Energy Technology Center’s “50 States of Solar” tracker found that 49 states plus D.C. and Puerto Rico took some distributed solar policy action in 2025, and net metering was the top topic again in the first and second quarters of 2026.

A few recent examples show how differently states move:

• Virginia: on April 30, 2026, state regulators ruled on Dominion Energy’s successor program. Trade press reports say they kept monthly netting with an annual true-up, credited year-end excess at an avoided-cost rate plus about a penny per kWh, rejected Dominion’s proposed application fees and added a $1 monthly administrative fee for new customers.
• Maryland and Connecticut: in the second quarter of 2026, lawmakers in both states required successor net metering programs, according to the NC Clean Energy Technology Center. Details are still being worked out.
• West Virginia: regulators approved a net metering successor tariff for Appalachian Power and Wheeling Power in 2025.
• Arizona, Georgia, Hawaii, Indiana, Nevada, Maine and Mississippi were listed by NCSL as having statewide rules other than classic net metering (as of its 2017 count).

Because rules change every year, check three places before you trust a savings estimate: your utility’s net metering or “distributed generation” tariff page, your state utility commission, and DSIRE (dsireusa.org), the database of state incentives and policies run by the NC Clean Energy Technology Center. Ask the installer which tariff your quote assumes, and whether existing customers keep their terms if the rules change (many states “grandfather” them for a set number of years).

Watch for these on your bill

• Fixed charges and minimum bills: solar can’t erase the basic monthly customer charge. Residential fixed charge increases were among the most common state actions in the second quarter of 2026, per the “50 States of Solar” report.
• Time-of-use rates: if your rate is higher in the evening, a kWh exported at noon may earn less than a kWh you buy at 7 p.m., even with net metering. See our time-of-use rates guide.
• System size caps: many programs limit how big your system can be, often relative to your past usage.
• Leftover credits: check what happens to unused credits at the true-up. They may be paid out at a low rate or lost.

Getting the most from solar under net billing

When exports earn less, the goal is to use more of your own solar power. Three tools help: an energy monitor that shows, live, when you’re exporting; smart plugs or appliance timers to shift flexible loads to midday; and, for bigger savings, a home battery that stores midday solar for the evening peak. A battery also keeps essentials running in an outage, which net metering alone doesn’t do: grid-tied solar without a battery shuts off when the grid goes down, for the safety of line workers.

Prices change often. The prices below are what we saw at the maker or a major retailer in October 2026; check the current price before you buy. Home batteries are sold and installed through certified installers, so get two or three quotes.

The Emporia Vue 3 clamps around your main lines and up to 16 circuits inside the breaker panel and tracks solar production and net metering in one app; have a licensed electrician install it. The Kasa KP125M plugs show what each appliance uses, now and over time, and the Kasa app can estimate its cost with time-of-use rates, so you can see what’s worth moving to midday. Tesla’s Powerwall 3 and Enphase’s IQ Battery 5P are sold and installed only through certified installers.

Check the Emporia Vue 3 price on Amazon

Keep exploring: our solar panels for home guide covers the basics, and how many solar panels do I need shows how to size a system to your use. Choosing how to pay? Read buy vs lease solar panels and are solar panels worth it. For storage, see home battery backup, and for the bigger picture, solar energy and electrical energy. More in solar energy.

Net metering questions

Does my utility have to offer net metering?

It depends on your state. Most states require at least some utilities to offer net metering or a successor program, but rules differ for investor-owned utilities, co-ops and city utilities. Check your utility’s tariff page, your state utility commission and DSIRE (dsireusa.org) for the program that applies to your address.

Is NEM 3.0 the same as net billing?

Yes, in California. “NEM 3.0” is the popular name for the CPUC’s Net Billing Tariff, which the big three utilities call the Solar Billing Plan. It applies to customers who applied to connect solar on or after April 15, 2023, and credits exports using the CPUC’s Avoided Cost Calculator instead of the retail rate.

Will my net metering deal change after I install solar?

Usually not right away. Many states let existing customers keep their terms for a set period; California, for example, lets NEM 2.0 customers stay on it for 20 years from interconnection. But retail rates, fixed charges and time-of-use periods can still change. Read the grandfathering rules for your utility before you sign.

Do I need a battery with net billing?

Not required, but it often helps. Under net billing, power you export earns less than power you buy, so storing midday solar for the evening raises its value. The CPUC estimated higher monthly savings for solar plus storage than for solar alone. A battery also adds outage backup. Compare the extra cost with the extra savings in your quote.

Does net metering pay me cash?

Mostly it gives bill credits, not checks. Extra credits usually roll forward month to month. At the annual true-up, leftover credits are often paid at a low avoided-cost rate or expire, depending on the program. That’s why installers size systems to match your yearly use rather than to sell power.

Does net metering work during a power outage?

No. Grid-tied solar inverters shut off when the grid goes down so they don’t send power onto lines that crews are repairing. To keep power during an outage you need a battery or a system designed to run disconnected from the grid, installed by a licensed electrician with the utility’s approval.