Net Metering Explained: Net Metering vs Net Billing

Net metering vs net billing is the most important utility rule to understand before you buy solar. Both programs credit the power your panels send to the grid. The difference is how much each exported kWh is worth, and that can change your payback by years.

What Happens to Your Extra Solar

At midday your panels often make more power than your home uses. The extra flows back through your meter to the grid. At night you draw power from the grid. Your utility’s tariff decides how those two flows get settled on your bill.

Net Metering vs Net Billing: The Key Difference

	Net metering (NEM)	Net billing
Export credit	At or near the retail rate	A lower value, often set by time of day or avoided cost
How it nets	kWh in vs kWh out over the billing period	Imports billed at retail, exports credited separately
Best strategy	Size to yearly use	Use more solar yourself, add a battery, avoid oversizing
Example	Many legacy programs	California’s Net Billing Tariff (since April 2023)

Net metering works like the meter running backward. A kWh you export cancels a kWh you import.

Net billing treats each direction separately. You buy grid power at the retail rate and sell exports at the export rate. California’s version (the CPUC’s Net Billing Tariff, often called “NEM 3.0”) sets export values from an “avoided cost” calculation that changes by hour and month.

Example Math (Illustrative)

Say you export 400kWh and import 400kWh in a month, with retail at $0.30/kWh:

• Net metering: 400 − 400 = 0kWh net, so you pay about $0 in energy charges (plus fixed fees).
• Net billing at an assumed $0.08 export rate: you pay 400 × $0.30 = $120 and get a credit of 400 × $0.08 = $32, for a net of $88.

Example rates only. Your tariff sets the real numbers.

Other Terms to Look For

• True-up: an annual settlement of credits and charges.
• Non-bypassable charges: fees that solar credits can’t offset.
• Grandfathering: existing customers often keep their old terms for a set number of years.
• System size caps: many utilities limit size to roughly your past use.

How to Find Your Rules

Search your utility’s website for “net metering” or “interconnection,” or ask your state utility commission. DSIRE (dsireusa.org) tracks state policies. Get the tariff name and export rate in writing from any installer.

The Four Main Export Programs

Net metering and net billing are the two most common programs, but utilities use other structures too. DSIRE and the N.C. Clean Energy Technology Center track which ones each state uses.

Program	How exports are valued	How imports are billed
Net metering	Retail rate, netted kWh for kWh	Only net kWh billed
Net billing	Lower export rate (avoided cost, hourly or fixed)	All imports at retail
Buy-all/sell-all	All solar output sold at a set rate	All home use bought at retail
Value of solar tariff	All output credited at a calculated “value of solar” rate	All home use bought at retail

Austin Energy’s Value of Solar rate is one well-known example of the last type. The program your utility uses decides how you should size the system and whether a battery helps.

Worked Example: A Seasonal Year Under Net Metering

Net metering often carries extra kWh credits forward month to month until an annual true-up. Here’s a simplified four-month look at a home with solar (illustrative numbers):

Month	Solar produced	Home used	Net kWh	Credit bank after month
March	700	700	0	0
April	800	650	−150 (exported)	150 kWh
May	900	700	−200 (exported)	350 kWh
July	950	1,000	+50 (imported)	300 kWh

Spring surplus covers summer shortfalls. At the true-up, many utilities pay out leftover credits at a much lower wholesale or avoided-cost rate rather than retail. That’s one reason sizing far above yearly use rarely pays under net metering.

Worked Example: The Same Day Under Net Billing

Net billing counts flows in and out separately, often hour by hour. Take one sunny day for a home that uses 30 kWh with a 7 kW array making 35 kWh (illustrative rates: $0.30 retail, $0.06 export):

Flow	kWh	Rate	Value
Solar used directly in the home	12	$0.30 avoided	$3.60 saved
Solar exported at midday	23	$0.06	$1.38 credit
Grid power bought evening and night	18	$0.30	$5.40 cost
Net for the day			$4.02 cost

Under net metering, the same day would net 35 − 30 = 5 kWh exported, so roughly zero energy charge. The difference is $4 to $5 a day on a sunny day, which adds up over a year.

How to Raise Self-Use Under Net Billing

1. Shift flexible loads to midday: dishwasher, laundry, pool pump, water heater timers.
2. Charge an EV at home during solar hours where possible. See solar to charge a Tesla.
3. Pre-cool or pre-heat with a smart thermostat in the afternoon.
4. Add a battery sized to your evening use. See is a solar battery worth it.
5. Consider west-facing panels if evening rates are highest. They produce more in late afternoon.

Using the daily example above, moving 8 kWh of evening use into solar hours saves 8 × ($0.30 − $0.06) = $1.92 that day.

Sizing Under Each Program

Program	Typical sizing goal	Battery role
Net metering	Close to 100% of yearly kWh, within any size cap	Mostly backup
Net billing	Daytime use plus battery charging	Bill savings and backup
Buy-all/sell-all	Set by the sell rate and roof space	Little bill value
Value of solar	Set by the credit rate and roof space	Little bill value

Under net metering, the grid effectively stores your surplus at full value, so a battery adds backup more than savings. Under net billing, every kWh you keep instead of exporting is worth the gap between retail and export rates.

Reading a Solar Bill

Bills differ by utility, but under either program, look for:

• Delivered kWh: what you imported from the grid.
• Received kWh: what you exported.
• Net kWh (net metering) or export credit $ (net billing).
• Minimum or fixed charges: fees that solar can’t offset.
• True-up date and balance if your utility settles annually.

Our guide to reading kWh on your electric bill walks through a sample bill.

Questions to Ask Your Utility or Installer

• What is the name of the tariff I’ll be on, and is it net metering or net billing?
• What is the current export rate, and how often does it change?
• Is there grandfathering for systems that apply by a certain date, and for how long?
• Is there a system size cap?
• What happens to unused credits at the true-up?

For California specifics, see NEM 3.0 explained. For sizing under each program, see how many solar panels do I need.

FAQ

Is net metering going away?

Several states have moved new customers to net billing or reduced export rates. Check your state’s current rules.

Does net billing make batteries worth it?

It improves the case, because stored solar can offset expensive evening power instead of being exported cheaply.

Can I go off-grid instead?

Possible, but it usually costs much more for the battery and backup capacity you’d need.

What is the difference between net metering and net billing?

Net metering credits exports kWh for kWh at the retail rate. Net billing buys all imports at retail and pays a separate, usually lower, rate for exports.

What happens to extra net metering credits at the end of the year?

It depends on the utility. Many pay out leftover credits at a lower wholesale or avoided-cost rate at the annual true-up. Some let them expire.

Can my utility switch me from net metering to net billing?

Rules vary by state. Many states have moved only new customers to net billing and let existing customers keep their terms for a set period. Ask your utility how long your terms last.

Do I still pay an electric bill with net metering?

Usually yes. Fixed monthly charges and any non-bypassable charges remain even if your net kWh is zero.

Sources: California Public Utilities Commission, Net Billing Tariff (cpuc.ca.gov); PG&E Net Billing Tariff overview (pge.com); DSIRE; DOE Homeowner’s Guide to Going Solar; N.C. Clean Energy Technology Center (DSIRE); Austin Energy, Value of Solar. Accessed Oct 2026.

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