What Is Net Metering and Why Utilities Are Changing It

When rooftop solar salespeople promised “your meter will spin backward,” they were describing net metering. For years, it was the policy that made home solar pencil out. The power your panels sent to the grid during sunny afternoons earned roughly the same credit as the power you bought back at night.

That deal is changing. A growing number of states and utilities are replacing classic net metering with net billing, export rates and new fixed charges. If you’re considering solar, the rules your utility uses for exports can matter as much as the price of the panels.

This guide explains how net metering works, what’s replacing it, why utilities are pushing for the change and what it means for your solar and battery decisions.

How net metering works

A solar system produces the most electricity around midday, often more than your home is using at that moment. The extra power flows out to the grid. At night, or on cloudy days, you pull power from the grid.

Under net metering, your utility tracks both flows and bills you on the difference:

• Exports earn credits, usually at the full retail rate you pay for electricity.
• Credits offset future usage, often rolling over month to month.
• At the end of a 12-month cycle, called a true-up, any leftover credits may be paid out at a lower rate, rolled over or forfeited, depending on the utility.

In practice, the grid works like a free battery. You “store” midday production as credits and “withdraw” it at night at no loss.

Net metering spread across the U.S. in the 2000s. Federal law, through the Energy Policy Act of 2005, required state regulators to consider offering it, and most states adopted some version.

Net metering vs net billing vs buy-all, sell-all

Here’s how the main export compensation models compare.

The key difference is what an exported kWh is worth and how often your usage and production are netted against each other. Shorter netting intervals mean more of your production counts as exports, and if exports earn less than retail, your savings shrink.

Key takeaway: Under net metering, an exported kWh is worth about the same as a kWh you buy. Under net billing, it’s often worth less, so the solar power you use yourself becomes much more valuable than the power you send away.

Why utilities are changing net metering

Utilities and regulators give several reasons for moving away from classic net metering:

• Cost shifting. Utilities argue that crediting exports at full retail rates means solar customers avoid paying their share of fixed grid costs, such as poles, wires and customer service, shifting those costs to customers without solar. Solar advocates dispute how large this effect is.
• Midday oversupply. In states with lots of solar, midday power is plentiful and less valuable to the grid, while evening peaks remain expensive. Regulators want export credits to reflect when power is actually needed.
• Grid planning. Encouraging customers to store solar for evening use, rather than exporting it at noon, can help utilities manage peak demand.
• Maturing markets. Some regulators see net metering as an incentive that was meant to help an early industry and is no longer needed at full strength.

The change is widespread. The NC Clean Energy Technology Center, which tracks distributed solar policy in all 50 states, reported 217 distributed solar policy actions in the third quarter of 2025 alone, with net metering the most common category. It identified utilities continuing to move to net billing tariffs as a leading trend, with examples including West Virginia regulators approving net billing for Appalachian Power and Wheeling Power.

California’s switch: the biggest example

California, the largest U.S. rooftop solar market, made the most watched change. According to the California Public Utilities Commission (CPUC):

• Since April 15, 2023, new customers applying to interconnect with PG&E, SCE or SDG&E take service on the Net Billing Tariff (NBT), which the utilities call the Solar Billing Plan.
• Exports earn Energy Export Credits that reflect the value of the power to the grid. The CPUC says these are usually lower than retail rates, though they can exceed retail on some late-summer evenings.
• New NBT customers are guaranteed the tariff for 9 years after interconnecting.
• Customers already on older net metering tariffs keep their existing arrangements under the rules of those tariffs.
• Batteries help. The CPUC says customers can increase bill savings by installing battery storage with their solar, since stored energy can be used or exported during high-value hours.

Other states have taken different paths, so don’t assume California’s rules apply where you live.

Why batteries matter more under new export rates

Under classic net metering, a battery mostly provides backup power. The grid already “stores” your extra solar at full value, so a battery adds little financial benefit.

Under net billing, the math changes:

1. Midday exports earn less, so storing extra solar in a battery is often worth more than exporting it.
2. Evening power costs more under time-of-use rates, so using stored solar at 6 p.m. saves more than it would at noon.
3. Some programs pay batteries extra to discharge during grid peaks. See our explainer on virtual power plants.

That’s why solar quotes in net billing states increasingly include batteries. A battery still adds significant cost, so make sure the quote shows how much extra savings it creates. Our guide on how home battery backup works covers sizing and backup.

Other ways to adapt

• Size the system to your usage, not to the biggest system that fits the roof. Oversized systems export more power at low rates.
• Shift flexible loads to midday, such as EV charging, dishwashers, laundry and pre-cooling with a smart thermostat.
• Consider west-facing panels, which produce more late in the day when power is often more valuable. Your installer can model this.

What net metering changes mean if you already have solar

If you already have solar, you’re usually protected for a while. Many states and utilities grandfather existing customers on their current terms for a set number of years. The length and details vary, so check your interconnection agreement and your utility’s tariff.

Watch for: - The end date of your grandfathering period. - Rate design changes such as new fixed monthly charges or time-of-use rates, which can affect savings even if your export rules don’t change. - Rules about adding panels or a battery, which may move you to a newer tariff.

Where to start if you’re considering solar

1. Find your utility’s current solar tariff. Search your utility’s website for “net metering,” “net billing” or “solar export.” Your state utility commission also publishes tariffs.
2. Ask installers to model savings under your actual tariff, including time-of-use rates and export credits, not a generic net metering assumption.
3. Get a quote with and without a battery, so you can see what the battery adds.
4. Check the federal tax situation. The IRS says the residential clean energy credit (Section 25D) isn’t allowed for expenditures made after December 31, 2025. Our guide on whether solar is still worth it after the tax credit changes runs the payback math.
5. Compare financing options. See solar lease vs loan vs cash and how much solar panels cost.
6. Be skeptical of savings promises. Our checklist of solar sales red flags covers common misleading claims about net metering.

If rooftop solar doesn’t make sense under your utility’s rules, community solar may be an alternative.

This is general information, not legal or tax advice.

The bottom line

Net metering credited solar exports at full retail value, which made rooftop solar easy to justify. Many utilities are now moving to net billing, which pays less for exports and rewards using your own solar power. That doesn’t mean solar is a bad deal, but it changes how you should size a system, whether you add a battery and how you judge a salesperson’s savings estimate. Start with your utility’s current tariff, and make every quote prove its numbers under those rules.

Sources

• California Public Utilities Commission: Net energy metering and net billing — Net Billing Tariff start date, export credit valuation, 9-year legacy period, battery pairing
• NC Clean Energy Technology Center: The 50 States of Solar, Q3 2025 — count of distributed solar policy actions, net billing transitions and state examples
• IRS: FAQs on modifications to sections 25C, 25D and other energy credits under Public Law 119-21 — end of the residential clean energy credit after December 31, 2025