How Are Net Metering Rates Calculated by Utilities?

Utility Calculation Methods

Utilities usually calculate net metering rates using a formula that takes into account the total costs of the grid network, the customer’s solar generation, and the overall energy consumption. For instance, a utility might use a “time-of-use” (TOU) rate structure where the customer is charged a lower rate for excess energy generated during off-peak hours and a higher rate during peak hours. The TOU rate structure can be as simple as charging 2 cents per kilowatt-hour (kWh) for off-peak hours and 6 cents per kWh for peak hours.

Historical Net Metering Rate Examples

Net metering rates have varied across different utility companies and regions. For example, in California, the Pacific Gas and Electric Company (PG&E) has a net metering rate of 2.8 cents per kWh, while the Southern California Edison (SCE) has a rate of 2.8 cents per kWh for residential customers and 3.2 cents per kWh for commercial customers. In contrast, utility companies in Hawaii, such as the Hawaiian Electric Company (HECO), have a net metering rate of 34.5 cents per kWh for commercial customers and 39.5 cents per kWh for industrial customers. It’s essential to note that these rates are subject to change over time.

Impact of Net Metering Rates on Solar Customers

Net metering rates directly impact the financial viability of solar grid-tie systems, as the rates can influence the customer’s savings from generating excess energy. Customers with solar systems that produce more energy than they consume during peak hours may benefit from higher net metering rates during off-peak hours. On the other hand, customers who consume more energy during peak hours may not benefit as much from net metering. It’s crucial for solar customers to understand their utility’s net metering rate and how it affects their overall energy bills.