What Is Net Metering? Net Metering vs Net Billing, Explained With Real Numbers

What is net metering? It is a billing rule that credits each kWh your solar panels send to the grid at the same retail rate you pay for electricity. Daytime surplus becomes a credit you use at night or in winter, so you pay only for your net use. Many utilities now pay less than retail for exports instead.

Whether your utility uses true net metering, net billing or something in between can change your solar savings by hundreds of dollars a year. This guide explains each method in plain terms, shows what they are worth on the same home, and covers what to ask your utility before you size a system.

How does net metering work?

Your utility measures power flowing both ways through your meter. When panels make more than the house uses, the extra flows to the grid and earns a credit. When the house uses more than the panels make, you draw from the grid and use those credits first. At the end of the billing period you pay for the net amount.

A typical day looks like this. Around midday, your panels may produce two or three times what the house needs, so the meter records exports. In the evening, your home draws power from the grid. Under full net metering, each exported kWh cancels one imported kWh, so the grid works like a free battery.

Most net metering programs also roll extra credits forward month to month. Summer surplus can cover part of a winter bill. Once a year, at the true-up, the utility settles any leftover credit, often at a lower rate than retail.

What is the difference between net metering and net billing?

Under net metering, exports earn the full retail rate. Under net billing, the power you buy still costs retail, but exports earn a separate rate that is usually lower, often based on the utility's avoided cost. Solar you use at home as it is produced saves the full retail rate under either method.

There are several common designs:

1. Full retail net metering. One exported kWh offsets one bought kWh. Florida's investor-owned utilities work this way under Rule 25-6.065 (opens in a new tab).
2. Reduced-rate net metering. Exports earn a set share of retail. NV Energy credits excess exports at 75% of the retail rate for new customers, locked for 20 years, per its net metering page (opens in a new tab).
3. Net billing at avoided cost. Exports earn what it would have cost the utility to get that power elsewhere. California's Net Billing Tariff (opens in a new tab) uses hourly values that vary by month and time of day.
4. Value of solar rates. You pay for all the power you use and earn a separate credit for all the solar you make. Austin Energy's Value of Solar rate (opens in a new tab) is one example.
5. Retail-provider buyback plans. In competitive Texas markets, there is no statewide rule; your retail electric provider decides whether and how much it pays for exports.

How often your utility nets matters too. Monthly netting lets midday exports cancel evening use. Instantaneous or 15-minute netting counts almost every midday kWh as an export, which raises the share credited at the lower export rate.

How much is net metering worth compared with net billing?

On the same home, the export rule can nearly halve the value of solar. With 10,000 kWh of solar a year, 40% used at home and an 18.2 cent retail rate, the system is worth about $1,820 a year with full net metering, $1,547 at 75% of retail and $968 at a 4 cent export rate.

We used our net metering calculator with its defaults: 10,000 kWh of yearly production, 10,800 kWh of use, 40% self-use, and the EIA's 2026 forecast national residential price of 18.2 cents per kWh. The house uses 4,000 kWh of solar directly and exports 6,000 kWh.

Notice what stays the same: the $728 from power used at home. Self-use is protected from export rule changes because it never touches the export credit. That's why self-use becomes the most important number when exports are cheap.

How does California's net billing work?

California's three big utilities moved new solar customers to the Net Billing Tariff for applications on or after April 15, 2023. Exports earn hourly avoided-cost values locked for nine years, power you buy is on a time-of-use rate, and the annual true-up remains. Solar-only exports average roughly 15% of retail.

The CPUC adopted the tariff in Decision D.22-12-056 (opens in a new tab). Export values come from the Avoided Cost Calculator and are low at midday and higher on summer evenings, when the grid needs power most. Customers who enroll in the first five years keep their export value schedule for nine years.

Because California rates are high, self-use is very valuable there. The EIA reports California's average residential price at 33.25 cents per kWh for January through July 2026. Using a 5 cent average export value, a 10,000 kWh system with 40% self-use is worth about $1,630 a year; at 60% self-use, about $2,195. Our California NEM 3.0 guide covers battery sizing and the ACC Plus adder in detail.

Existing NEM 1 and NEM 2 customers keep their tariff for 20 years from interconnection, according to the CPUC's Q&A (opens in a new tab). If you are buying a home with solar, ask which tariff it is on and when the 20 years end.

How should the export rule change the size of your system?

Under full net metering, system size barely changes the value of each kWh, so sizing to your yearly use makes sense. Under a low export rate, every extra kWh beyond what you use in daytime earns little, so a smaller system sized closer to daytime use often pays back faster.

Here is a simple comparison at $3.00 per watt and 1,350 kWh per kW, for a home that uses 4,000 kWh of solar directly as it is produced. The simple payback below divides price by first-year value and ignores rate increases and panel aging, so it only shows the direction of the effect.

With full credit, both sizes pay back in the same time, and the bigger system simply saves more. With 4 cent exports, the smaller system pays back more than three years sooner, because the extra 2,200 kWh the bigger system makes are almost all exported at low value. The best answer for many net billing homes is a smaller array, more daytime use or a battery.

Can net metering credits cover your whole bill?

Rarely. Solar credits offset energy charges, but most utilities also bill fixed monthly charges that credits can't touch. The FTC reminds solar buyers that they still pay utility fixed charges. In California, a new income-graduated fixed charge applies whether or not you have solar.

California's Base Services Charge is $24.15 a month for most customers, about $12 for FERA households and about $6 for CARE households. SCE and SDG&E began billing it in late 2025 and PG&E in March 2026, alongside lower per-kWh rates, according to PG&E (opens in a new tab). Lower per-kWh rates also make each solar kWh slightly less valuable.

Other utilities use minimum bills, grid-access fees or small monthly solar charges. Before you size a system, find your fixed charges on a current bill. The Federal Trade Commission's solar guide (opens in a new tab) also suggests asking about these costs before you sign.

How do you check your utility's export rules?

Find your utility's net metering, net billing or distributed generation tariff on its website, or call and ask what a new customer would get today. Five questions cover most of what you need: the export rate, the netting interval, rollover rules, the true-up rate and any required rate plan.

Ask your utility:

• What is the credit per exported kWh, and does it change by season or time of day?
• How often is usage netted: monthly, hourly, every 15 minutes or instantly?
• Do extra credits roll over month to month, and what happens at the true-up?
• Is a time-of-use or other rate plan required for solar customers?
• How long are these terms locked in, and what happens when you sell the house?

Then use those answers in our solar savings calculator, setting the export credit as a share of retail. Our guide on solar incentives by state summarizes the main rules in major solar states.

Should you add a battery if your utility pays little for exports?

Often, yes, but only if the numbers work. A battery stores midday surplus and uses it in the evening, turning low-value exports into full-value self-use. It pays most where exports are cheap and evening rates are high, as in California. Under full retail net metering, a battery rarely pays back on savings alone.

Under full net metering, the grid already gives you full credit for every exported kWh, so a battery adds backup power but little bill savings. Under net billing with time-of-use rates, each stored kWh can be worth the gap between the export credit and the evening price. Our guide to whether solar batteries are worth it runs those numbers, and our guide to whether solar panels are worth it shows how the export rule changes overall payback.