What Is Net Metering?

How net metering works

When your solar panels makes more electricity than your home uses, the extra power flows into the electrical grid through your utility meter. Your utility company tracks this and pays you in one of two ways:

• Bill credits: Most commonly, the value of your excess generation is applied as credits on your future utility bills. This helps cover your electricity costs during times of lower solar production, like in the winter.
• Direct payments: In some areas, utilities issue a check (or deposit) for the electricity you supplied, usually at a set rate per kilowatt-hour.

Net metering requirements

Your utility will have to reprogram your current meter or install a new meter that measures electricity flowing both ways. You'll also need utility approval. You may pay a one-time connection fee (usually $94 to $145, depending on your provider).

Key requirements

• Solar system connected to the utility grid
• Utility company participation
• Proper metering equipment
• Completed interconnection process

State and local policies

Currently, 41 states plus Washington D.C., American Samoa, the U.S. Virgin Islands and Puerto Rico have mandatory net metering policies. Even states without mandatory programs often have utilities offering voluntary net metering services.

Changes to state policies

Many states now pay less for excess solar energy you send to the grid. For example, California’s NEM 3.0 pays at wholesale rates instead of retail, and Illinois stopped crediting delivery charges in 2025.

California shows the clearest example of how policy changes can surprise homeowners. The state's Net Billing Tariff (NEM 3.0), established by the California Public Utilities Commission, started in 2023. It cut payment rates for exported electricity by about 75% compared to the old NEM 2.0 program.

If you want to go fully off-grid, net metering isn't for you. It requires that you work with a local utility company.

"Unlike previous versions, NEM 3.0 bases compensation on the time of day," Vinnie Campo, co-founder and CEO of Haven Energy, explained. "This means the value of exported electricity fluctuates with demand." The shift was made to encourage battery storage for grid stability. But it greatly hurt expected payback for homeowners who installed solar after April 2023.

Many homeowners felt blindsided by the sudden shift. For instance, one California customer told us: "They buy back your energy from the panels at the current rate of 6 cents a kilowatt but charge you 30 to 80 cents. On top of that, I'm paying $125 in monthly fees that have nothing to do with the energy I use."

» EXPLORE: Solar rebates and tax incentives by state

How much does net metering cost?

Net metering is not one fixed cost. Fees can vary a lot by state and even by utility provider, but here's a breakdown of typical net metering costs in 2025:

• Interconnection fees: A one-time charge to connect your solar system, usually $75 to $300 for homes under 10 kilowatts (kW). It can be higher if upgrades are needed.
• Monthly fixed charges: Some utilities charge $10 to $20 per month to cover grid maintenance.
• Equipment costs: You may need a new electric meter, inverter or wiring, which the customer usually pays for.

To learn more, ask the contractor installing your solar system about net metering in your area. These companies often have departments specifically for helping residential customers set up net metering.

Why participate in net metering?

Net metering helps you save money by lowering your monthly power bill and improving the payoff of your solar panels. It’s especially useful if you don’t want to buy expensive batteries to store extra energy.

» COMPARE: Best solar energy companies.

Pros and cons of net metering

Net metering can help lower your solar energy costs. But it's not for everyone, especially if you want to go fully off the grid.

Benefits of net metering

The main advantage of net metering is getting paid for your extra electricity. You also save money because you don't need to buy batteries to store extra solar power. On cloudy days or in winter months, when your system isn't making enough solar electricity, you can get backup power from the electric company instead.

The net metering “clock” only starts after utility approval. Delays here directly impact ROI.

Another good thing is that you give clean, eco-friendly energy to the power grid. Solar is an emissions-free form of renewable energy. When used to replace energy from fossil fuels, it reduces greenhouse gases that cause climate change.

Potential disadvantages of net metering

The biggest problem with net metering is the runaround you can get from the electric company. For example, depending on where you live and the utility company, you may or may not get paid the full retail rate for the electricity your solar panels make. Companies can also limit how much electricity they pay you for. They can restrict how many solar customers can join net metering in your area.

Why net energy metering is controversial

Net metering requires utilities in some states to pay homeowners for the extra electricity their solar panels send back to the grid. The challenge is that utilities may end up buying that power at nearly the same price they sell it for, which can cut into their profits.

So, electric utility companies may raise rates for their nonsolar-producing customers to make more of a profit.

This creates tension: Solar owners want fair compensation, while traditional utility customers don’t want higher bills. On top of that, some solar customers have trouble getting the compensation they feel they earned.

Important considerations

• System size limits: Many states cap eligible system sizes.
• Enrollment caps: Some utilities limit the number of customers who can join. Also, if you do get a credit, it may expire before you can use it. Be sure to check your state laws and the policies of the utility company.
• Grandfathering provisions: Existing customers often maintain original rate structures when policies change.
• Time-of-use changes: Some programs (like California's NEM 3.0) base compensation on when electricity is exported.

Real-world examples: when net metering gets complicated

Even when rooftop solar panels work as promised, the money benefits of net metering can be surprisingly weak. Utility billing errors, confusing policies and wrong expectations often leave homeowners frustrated. Getting issues fixed can turn into a long battle.

Billing errors and bureaucratic nightmares

One homeowner, Tim in Illinois, found that their net metering credits for extra power stopped showing on their ComEd bill. When Tim asked for a refund, he first got a $1,300 check. But then it was canceled without warning. "I no longer had access to the funds and was charged a $12 fee for the voided check," Tim told us. Nearly a month later, he was still being told to "call back in a week" for updates, with no clarity on when the billing department would fix the problem.

Tim’s experience reveals a common tension: The advertised simplicity of net metering — "sell your extra power and save" — can break down when the fine print takes over.

Timing and system design problems

Solar companies may focus on system designs that don't match the customer's net metering goals, such as deliberately avoiding overproduction.

For instance, Jeff in Texas found that their installer had deliberately sized their system to avoid overproduction. This prevented them from selling excess power back to the utility. While the installer saw this as "optimal" design, Jeff felt cheated of potential credits.

True-up dates, credit expirations and billing cycles greatly impact savings.

Another solar customer, Drew in Virginia, realized their utility resets credits every January. Because their system started in winter, Drew would lose fall-generated credits before peak summer energy use. “By going on the grid in January, I miss September, October, November and December credits," he explained. "When my highest bills come in June, July and August, I'll still have to pay out of pocket."

Types of net metering

With standard net metering, your home uses grid electricity while all solar production gets credited to your account. There are other types of net metering: buy all, sell all; net billing; and aggregate net metering (ANM).

Buy all, sell all

Some utility companies offer "buy all, sell all" deals. With this type of metering, two separate meters track home use and solar production separately. You buy all electricity from the utility and sell all solar production back, often at different rates.

Like with other net metering, the electric company may charge you more for using electricity than it pays you for the solar energy you sell it. So, you might not break even on each billing period.

Net billing

This is similar to net metering, but payment is based on wholesale electricity rates rather than retail rates. This usually means lower payments for solar exports.

With net billing, a solar panel kilowatt-hour is worth the same amount as a kilowatt-hour from the grid. You get paid at the wholesale rate, while net metering often pays residents with retail rates. Net metering is the better choice if you're looking to make a little profit while saving on your monthly bill.

Aggregate net metering (ANM)

Aggregate net metering is the same as regular solar net metering, but it's for people who own multiple properties. It lets the utility company track your solar energy system's output and use for multiple apartments or condos.

Virtual net metering

Virtual net metering is when a community shares a solar system and benefits from metering the shared unit. For example, if a condo association decides to collect from members to buy a solar system for everyone to share, virtual net metering makes sure each member gets the benefits. The credits are shared across multiple meters.

FAQ

Bottom line

Net metering is a good way to use any excess electricity your solar panels produce while earning credits for your electricity bill. It also lets you support your local power grid with renewable energy. However, the terms and practices of the electric company you partner with can make the process a little aggravating — but thorough research can alleviate some of these problems.

But net metering isn't a set-and-forget benefit. Its value depends on a complex web of factors: utility rules, true-up cycles, installer design choices and even the timing of when your system goes live. Understanding these details upfront can mean the difference between long-term savings and long-term frustration.