Net Metering Explained: How Your Utility Pays for Solar (and Why It Matters So Much)

Net metering is the rulebook for how your utility credits the electricity your solar panels send to the grid. Under the best rules, every exported kilowatt-hour (kWh) is worth the same as one you buy. Under the weakest, it’s worth a fraction of that. Because a typical home without a battery exports a large share of its solar output, these rules can shift your payback by close to a decade on the same system at the same price.

Before you trust any savings estimate, find out which rules apply to your utility. Our net metering by state page lists them, and the solar calculator models them.

Why exports matter so much

Solar panels make the most power around midday. Most homes use the most power in the morning and evening. So even a well-sized system sends a lot of its output to the grid during the day and pulls power back at night.

How much is exported depends on your habits, home size and system size. For a home without a battery, it’s common for half or more of annual production to flow out to the grid at some point. That exported half is where net metering rules decide your savings.

Two kinds of solar kWh show up on your bill:

• Self-consumed kWh are used in your home the moment they’re made. They always save you the full retail rate, because you didn’t buy that power.
• Exported kWh go to the grid. What they’re worth is set entirely by your utility’s tariff.

The four main ways utilities credit exports

Approach	What an exported kWh earns	Where you’ll see it (examples, as of October 2026)
Full retail net metering	About the same as the retail price you pay	Colorado (Xcel), New Jersey, Pennsylvania, Virginia, Florida investor-owned utilities
Net billing	A set export rate, usually well below retail	California (Net Billing Tariff), Arizona (APS, TEP), Utah (Rocky Mountain Power), Michigan
Avoided cost	The utility’s wholesale cost, often a few cents	Alabama Power, Louisiana outside New Orleans, Tennessee (TVA local power companies)
Buy-all	All production sold to the utility at a fixed rate; you buy all your power normally	Connecticut’s RRES buy-all option, Rhode Island’s REG tariff

Full retail net metering

This is the simplest and most generous version. Your meter effectively runs backward when you export. If you export 500 kWh in July and import 500 kWh in December, those cancel out at full value.

Even “full retail” often isn’t 100%. Massachusetts credits roughly 90% to 95% of the all-in retail rate because a few surcharges are excluded. New Hampshire’s version credits roughly 80% to 90%. New York keeps full retail kWh credits but charges new customers a monthly Customer Benefit Contribution of roughly $0.70 to $1.30 per kW of system size.

Net billing

Under net billing, the utility tracks imports and exports separately. Power you buy is charged at retail. Power you export is credited at a lower export rate. Some examples from our state research:

• California: exports are valued hourly using the state’s Avoided Cost Calculator. One industry analysis puts the average at roughly 3.7 to 4.6 cents per kWh, against retail rates often above 35 cents. See our California Net Billing guide.
• Arizona (APS, TEP): an export rate of about 5.55 cents (APS) or 4.62 cents (TEP) for recent tranches, locked for 10 years.
• Utah (Rocky Mountain Power): about 4.86 cents per kWh exported.
• Nevada (NV Energy): exports earn 75% of the retail energy rate, locked for 20 years. That’s net billing on paper but far better than most.

Avoided cost

Avoided cost means the utility pays you what it would have spent to generate or buy that power itself. That’s usually a wholesale price of a few cents per kWh. In Louisiana outside New Orleans, it’s about 3.6 to 4 cents against retail rates of roughly 11 to 13 cents. Some states, like Missouri and Oklahoma, net your usage at retail within the month but pay only avoided cost for any monthly surplus.

Buy-all (feed-in) tariffs

A buy-all tariff pays a fixed rate for every kWh your system makes, while you keep buying all your power at the normal rate. It can be attractive when the fixed rate is high and locked for many years. Connecticut’s buy-all option was reported at about 33 cents per kWh for 2026 enrollment, fixed for 20 years, though that figure includes renewable energy credit value and should be confirmed with the utility.

How often credits are netted

The second big variable is the netting period: how long your exports and imports are allowed to cancel each other out before the utility settles up.

Netting period	How it works	Effect on value
Annual	Surplus from sunny months carries forward at full value to cover winter	Best for homeowners
Monthly	Usage and production net within each bill; surplus may roll forward or be paid at a lower rate	Depends on what happens to the monthly surplus
Instantaneous (or short intervals)	Every kWh is either self-consumed or exported the moment it’s made	Exports earn only the export rate, so self-consumption matters most

Here’s why it matters. Say your system makes 300 kWh more than you use in June, and you use 300 kWh more than you make in January.

• With annual netting at full retail, June’s surplus covers January. Net bill impact: zero kWh owed.
• With monthly netting where surplus is paid at avoided cost (as in Missouri or Oklahoma), June’s 300 kWh might earn a few cents each, while January’s 300 kWh cost full retail.
• With instantaneous netting, the same thing happens hour by hour, not just month by month.

Nevada shows how much the interval matters. In September 2025, regulators approved 15-minute netting for new Northern Nevada customers, which our research notes “sharply reduces how much usage solar can offset at full price.”

The true-up: where leftover credits go

Most net metering programs settle once a year, at what’s called the true-up or annual reset. What happens to unused credits varies:

• Paid out at a wholesale rate. New Jersey and Pennsylvania pay leftover credits at a low avoided-cost rate. California pays a Net Surplus Compensation rate of a few cents per kWh.
• Forfeited. Montana’s NorthWestern Energy zeroes out excess kWh at the annual anniversary. Washington utilities do the same at the annual reset. Oregon’s big utilities donate them to low-income assistance.
• Rolled forward indefinitely. Massachusetts and Colorado investor-owned utilities let credits carry forward.

The practical lesson: a system that produces much more than you use earns little or nothing for the extra. That’s one reason oversized systems are a red flag. Our system size calculator and how many panels guide help you size to your actual usage.

Fixed charges and minimum bills

Solar can only offset the per-kWh parts of your bill. Most utilities also charge a flat monthly fee just for being connected, and some add a minimum bill. Examples from our research, as of October 2026:

• California investor-owned utilities: an income-graduated Base Services Charge of about $24.15 a month for standard customers (about $12 for FERA and $6 for CARE).
• Florida Power & Light: a $25 minimum bill that net-metered customers still pay.
• Hawaii (Oahu): a minimum bill of about $25.
• Duke Energy in North Carolina: a minimum bill for new solar customers, reported around $22 to $28 depending on the utility.
• NV Energy (Nevada Power): an $18 basic service charge.

A $20 to $25 monthly charge is $240 to $300 a year you’ll pay no matter how many panels you install. This is why promises of a $0 electric bill are almost always wrong. See the zero-bill red flag and our guide on why your bill can stay high with solar.

Worked example: same system, very different payback

To show how much the export rules matter, here is one system run under two sets of rules. These are simple payback numbers with no rate increases and no panel degradation, so treat them as a comparison, not a forecast.

Assumptions:

• 8 kW system at $3.00 per watt (the LBNL 2025 median for cash purchases) = $24,000
• No federal tax credit (the homeowner credit ended for systems installed after 2025; see our tax credit guide)
• Production: 11,000 kWh a year (it varies a lot by location; check yours with our production checker)
• Retail rate: 18 cents per kWh, close to the U.S. residential average of 18.31 cents in July 2026 (EIA)
• 40% of production used directly in the home, 60% exported

	100% export credit (full retail)	30% export credit (net billing)
Self-consumed: 4,400 kWh × 18¢	$792	$792
Exported: 6,600 kWh × export rate	6,600 × 18¢ = $1,188	6,600 × 5.4¢ = $356
Annual savings	$1,980	$1,148
Simple payback	about 12 years	about 21 years

Nothing changed except the export rate, and the payback moved by about nine years. Over a 25-year system life, that’s the difference between a solid investment and a marginal one.

Under the 30% rule, the system’s economics improve in two ways:

• Using more of your own solar. If self-consumption rose from 40% to 60% (by shifting dishwashers, laundry, water heating or EV charging into daylight hours), annual savings in the 30% case would rise to about $1,426 (6,600 kWh × 18¢ plus 4,400 kWh × 5.4¢), cutting simple payback to about 17 years.
• Sizing smaller. Every extra kWh you can’t use earns only 5.4 cents. A smaller system that exports less can have a better payback, even though it saves fewer total dollars.

A battery is the third option, but it adds cost. We cover when that works in do solar batteries pay off?.

Bottom line: Ask for the exact tariff name your installer used in the savings estimate, and check whether it credits exports at full retail. If a quote assumes 1:1 credit in a net billing state, the savings are overstated.

Grandfathering: will your rules last?

When states change net metering, they usually let existing customers keep the old rules for a while. California’s legacy NEM 1.0 and 2.0 customers keep their tariff for 20 years from interconnection, and that protection stays with the home if it’s sold. Arizona locks each customer’s export rate for 10 years. NV Energy locks its 75% rate for 20 years.

But policy keeps moving. In the second quarter of 2026 alone, the NC Clean Energy Technology Center counted 53 net metering actions across states, and Maryland’s 2026 law closes its current program to new enrollees by July 1, 2027 (or sooner if a capacity cap is reached). Any salesperson who says net metering is “guaranteed forever” is overselling. See the net-metering-forever red flag.

Questions to ask before you sign

• What is the exact name of the tariff or rate plan I’ll be on after solar?
• Are exports credited at full retail, a fixed export rate, or avoided cost?
• Is netting annual, monthly or instantaneous?
• What happens to leftover credits at true-up?
• What fixed charges or minimum bill will I still pay?
• Is the export rate locked, and for how many years?
• Will I be required to switch to a time-of-use rate? (See time-of-use rates and solar.)

Bring these answers to the quote comparison tool, and use the payback calculator to check whether the installer’s savings figure holds up under your actual rules.