Net Energy Metering (NEM)
NEM 2.0 Program


The Net Energy Metering (NEM) program was established in 1995 to facilitate the installation of small customer-owned renewable electricity generation that is connected to the utility electric distribution grid.  This allowed customers who install and operate small renewable generation facilities, such as a solar photovoltaic system on a residential rooftop, to receive credit on their utility bill for power generated by their system that is fed back into the electric grid during times when the system’s generation is greater than the customer’s usage.   

In October 2013, Governor Jerry Brown signed AB 327, which requires the CPUC to develop a replacement for the NEM program by December 31, 2015. This legislation requires the CPUC to develop a NEM successor tariff that considers whether or not participants in the current NEM program are paying their full and fair costs of utility service, and whether there is an undue subsidy in the current NEM program at the expense of customers who are not participating the program. In response to AB 327, the CPUC established a Rulemaking to gather proposals and input from consumer groups, the investor owned utilities, the solar industry, environmental groups, and other stakeholders. The CPUC is holding a series of stakeholder workshops to obtain input on analytical and policy issues as well as opportunities for stakeholders to formally file their comments with the CPUC.     

In September 2014, the CPUC issued a Ruling to gather stakeholder input on analytical issues for testing options for a successor to the existing NEM tariffs, referred to as the “Public Tool.”  

Scope of Issues & Policies

In January 2015, the CPUC issued a Scoping Memo and Ruling which set the proceeding schedule and determined  the scope of issues to be addressed: 

  • One or more tariffs/standard contracts  
  • NEM program elements  
  • Secondary customer benefits 
  • Measurement and evaluation plans and budget 
  • Consumer protections 
  • Safety issues 
  • Integration of storage and other Distributed Energy Resources 

In February 2015, the CPUC issued a Ruling requesting that parties address specific policy issues to comply with AB 327, including:  

  • Sustainable Growth 
  • Disadvantaged Communities 
  • Costs and Benefits 
  • Metrics 
  • Program impacts 
  • Inter-connection issues 
  • Fixed Charges


The Public Tool

The Final Version of the Public Tool has been released.

On March 26, 2015, CPUC staff released its Draft Public Tool - a spreadsheet based calculator that will be used to conduct benefit cost analyses, cost of service analyses, and forecast solar installations and GHG reductions under various rate design and solar tariff scenarios. The Calculator can be found under the “Public Tool Documents” section of the CPUC’s webpage. Stakeholders are providing input on the Draft Public Tool. 


CPUC Evidentiary Hearing

The CPUC held an Evidentiary Hearing in San Francisco on October 5-7, 2015. On September 4, 2015, the CPUC issued a Ruling, outlining the scope of the Hearing, and that parties may address the basis for:  

  • Projections of prices of rooftop solar installations that are different from those used in the Public Tool.  
  • Utilities’ proposed charges for interconnection of small systems.   
  • Proposed fixed charges that are different from the assumptions used in the Public Tool, such as demand charges, capacity fees, standby charges, access fees, use charges, etc.  


 CPUC Final Decison

On January 28, 2016, the CPUC issued a Decision, which largely continues the same Net Energy Metering program but with the following changes: 

 Eligibility and Assurances  

  • Increases participant eligibility size to larger than 1 MW. 
  • Establishes a 10-year service warranty and minimum equipment safety requirements for installations. 
  • Provides that customers of this NEM successor tariff can maintain service under this tariff for 20 years. 

Fees and Charges  

  • The implementation of a “reasonable” interconnection fee, except for those customers participating in the Single-Family Affordable Solar Homes (SASH) program. 
  • Implements nonbypassable charges (e.g., public purpose programs, nuclear decommissioning, etc.)  

Time-of-Use Rates & Pricing  

  • Requires customers to be on a time-of-use rate as a condition of participation (except for SDG&E customers, whose time-of-use rates will be determined in another proceeding).  
  • Requires Customers on Net Energy Metering prior to when time-of-use rates become default in 2019, can remain on their original rate for up to five years (SDG&E customers can remain on their tiered rate for up to five years). 
  • Requires all Net Energy Metering successor tariff customers to be on a time-of-use rate after default time-of-use rates are in effect in 2019, with a limited exception for certain SDG&E customers. 

The CPUC will consider adjustments to this NEM successor tariff in 2019. A second phase of this proceeding will determine how to develop alternatives for residential customers in disadvantaged communities, and more fully develop the consumer protection and evaluation measures. 


The Public Advocates Office (the Office) Position

 The Office’s goals are for a new NEM tariff to:    

  • Continue to provide a cost-effective means for utility customers to generate their own electricity with a renewable generator.   
  • Limit subsidies for NEM systems to only what is necessary to preserve a value proposition for customers who generate their own electricity with a renewable generator.   
  • Offer viable means for low-income customers and disadvantaged communities to access the benefits of generating their own electricity with a renewable generator.   
  •  Ensure robust consumer protection measures for customers who choose to generate their own electricity with a renewable generator.   

The Office NEM 2.0 Proposal

 On August 3, the Office issued its Proposal for a Net Energy Metering (NEM) successor tariff for residential utility customers, with the following features:  

  • A continuation of the existing NEM, at full retail rate.   
  • An additional fee based on the installed capacity of the generator.    
  • Gradual increase on the fee with a three step glide-path.    
  • Fee increases tied to NEM adoption milestones.  
  • 10-year grandfathering provisions for customers who take the NEM tariff.  
  • Discontinuation of existing NEM fee waivers and NEM exemptions for projects greater than 1 MW.  
  • A continuation of consumer protection measures that were part of the California Solar Initiative Program.  
  • Possible expansion of the existing Single-Family Affordable Solar Homes third party financing program to serve Disadvantaged Communities.   

See the Office's September 21, 2015 Testimony. 

See the Office's: 

August 3, 2015 Comments with its full proposal for a NEM Successor Tariff.  


January 7, 2016 Opening Comments on the CPUC's Proposed Decision. 

January 15, 2016 Reply Comments. 


March 16, 2015 Opening Comments on policy issues.       

October 1, 2014 Opening Comments on analytical issues.    

October 20, 2014 Reply Comments on analytical issues.     

August 26, 2014 Comments on the CPUC’s Order Instituting Rulemaking.  


Proceeding Docket

See the Proceeding docket.   

 Subscribe to proceeding information here.   



Other Resources

The Office's Distributed Resources Plan Webpage

CPUC NEM Webpage

CPUC Workshops

March 30, 2015: The Analytical Tool that stakeholders will use to test their NEM proposals   

April 7, 2015: Disadvantaged Communities