A Long-Term Take On California’s Net Metering Policies

Last Updated on: 15th June 2025, 01:08 am

We recently published an article about a lawsuit brought in California in response to the state’s switch to “Net Metering 3.0.” One of the comments in response provided a brilliant long-term take on the state’s changing net metering policies over time. Here it is:

By GoCoyote

As a former electrician in the power industry here in California, I view net metering 3.0 as a money grab for something that the utilities already benefit from. Basically grabbing the full bag of candy once they had a few pieces.

The large utilities have been very resistant to residential and commercial net metering, but ended up benefiting once enough systems were connected for all of the reasons listed and more, plus one very important reason not mentioned.

Since residential customers were mostly paying fixed rates instead of ‘time of use’ rates, they were paying low rates during times of peak use when ‘time of use’ customers were being charged very high rates. Net metering would ‘trade’ the value of PV power fed into the grid for the value of power used during times of no sunlight.

Once a year the utility would settle the accounts, and if the customer had a ‘net usage’ of power, they paid for that. If the customer had a ‘net production’ of power over their usage, then the customer paid nothing (the zero in ‘net zero’), and the utility kept the full value of any excess power production from the customer.

This meant that that the surplus power from residential solar systems was offsetting the power cost to the utility at low fixed rates (or zero for any yearly excess), and then the utility sold it on to commercial customers with ‘time of use metering’ for much higher rates during late afternoons when the grid load was highest due to commercial demand and air conditioning loads being at their peak. The utility could ‘buy’ the solar energy for 20 cents a kWhr, and then sell it on for 60 cents a kWhr, all the while benefiting from not having to run more peaker plants.

Under the original net metering everyone benefited; the PV owners got a direct offset on their power use (down to a zero amount bill for the year), and the utilities got to make a profit on that power. Now that the utility can get the excess PV power for even less (basically the wholesale cost of power) they are able to make even more profit from their net metering customers, while the customers lose out on the value that they used to get from being able to zero out their power bill.

This greatly devalues residential PV systems, since their higher cost could be partially offset by directly offsetting the cost of power on a one to one ratio. Now residential PV systems have to be much larger (and costlier) in order to offset the same amount of grid power they use.

Zeroing out customers’ power bills is now impossible, since even if they could produce enough energy to offset the value of the power purchased, there are now ‘fixed’ monthly charges to just have a PV system connected to the grid that they will have to pay regardless of production.

A more fair system would be for the utilities to pay a slightly lower cost (1 or 2 cents/kWhr) below full rate to the customer until net zero is reached, and then pay them the wholesale rate for all production over net zero. This would incentivize slightly larger systems since excess power would then be purchased, albeit at a lower rate.