Enter to open, tab to navigate, enter to select
Net Metering
Practical Law Glossary Item 8-517-5378 (Approx. 3 pages)
Glossary
Net Metering
A metering and payment arrangement used in distributed generation transactions. Under these arrangements, a customer:
- Uses the electricity it produces on site (for example, a rooftop solar photovoltaic installation) to reduce the amount of electricity it may have otherwise needed to purchase from a utility.
- Sells to the utility any electricity it produces in excess of its requirements.
Typically, the utility installs a meter at the customer's location to determine the amount of electricity sold to and bought by the utility from the customer over a specified period (the netting period).
Net metering is regulated by state law, but a net metering arrangement may be subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) if the customer sells more electricity to the utility than it uses over the applicable netting period.
Generally, state law sets out the criteria for (and the process by which) an entity may become a net metering customer. This includes:
- The type of customer. Some states may limit this arrangement to residential customers.
- The size of the distributed generation facility that can be used.
- The safety requirements with which the facility must comply.
Net metering can be done by rolling back the meter installed on the customer's property if electricity is being sold back to the utility. Alternatively, two meters are installed on the property, one to measure the customer's use of electricity from the utility's system and the other to measure the excess energy the customer sells to the utility.
Net metering recognizes the right of customers to produce their own electricity. However, it is not welcome by all utilities, some of which view it as a lost revenue opportunity.
For more information on net metering, see Practice Note, Understanding Renewable Energy: Solar.