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Net metering and cost savings: How net metering can save you money

In the world of solar energy, net metering is a fundamental concept that has gained relevance in recent years.

If you are considering installing solar panels in your home or business, it is important to understand what net metering is and how it can benefit you.

The first thing we need to know is that one of the main advantages of net metering is its ability to save you money on your electricity bill.

If your solar panels produce more energy than you consume, the excess is sent back to the electric grid and you receive a credit that is applied directly to your monthly bill.

This credit offsets the electricity you consume from the grid during times when your panels are not generating enough energy, thereby reducing the total cost of your electricity bill.

cost saving on solar energy thanks to net metering

Understanding net metering: The equation behind the net metering bill

To better understand what net metering is, it is important to understand the formula that underlies it. Let’s break down a simple equation to better understand net metering:

Energy consumed from the grid – Energy produced and transferred to the grid


Net energy consumption.

Let’s imagine that your home uses 1,000 kilowatt-hours (kWh) of electricity during a given month, but your solar panels produce 850 kWh. On the electricity bill, you will only be charged for the 150 kWh that your home drew from the electric grid, as the surplus of 850 kWh was generated by your solar panels and sent back to the grid.

For example, with LADWP (Los Angeles Department of Water and Power), if your home only consumes 700 kWh of electricity in a month, but your solar panels produce 850 kWh, the additional 150 kWh will be credited on your next bill.

This positive balance accumulates and can be used to offset electricity consumption in the following months, resulting in negative electricity bills.

How do credits and bills work in net metering?

In net metering, the accumulation of credits is subject to the policies of your utility company.

In most net metering programs, credits are transferred from one month to another, allowing you to take advantage of the surplus electricity generated during periods of high production, such as summer, to offset your consumption during periods of lower generation, such as winter.

This flexibility provides you with the opportunity to maximize your electricity savings and, in some cases, even obtain negative electricity bills, which means that the utility company will reimburse you for the excess electricity generated.

The production of electricity through solar panels varies throughout the year.

During the summer months, it is common to generate an excess of electricity, while during the winter months, you may consume more electricity from the grid.

To avoid sending monthly checks for the excess electricity generated, net metering allows you to accumulate credits during high production months for later use.

This means that your solar panels can balance your annual electricity consumption, even if you generate more than you need in certain months and less in others.

In summary, with net metering, you can make the most of your accumulated credits, allowing for a balance between electricity production and consumption throughout the year. This provides you with greater flexibility in the use of solar energy and the possibility of significant savings on your electricity bill.

What is NEM 3.0 and how does it differ from LADWP? Which option benefits you?

NEM 3.0 is the latest update to California’s net energy metering (NEM) policy, and it has significant differences compared to the Los Angeles Department of Water and Power (LADWP).

Solar billing under NEM 3.0 came into effect on April 15, 2023, for customers of California’s three major utility companies: Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E).

One of the main differences between NEM 3.0 and LADWP is the approximately 75% reduction in export rates in NEM 3.0.

This means that solar system owners will receive less value for the excess electricity they send to the grid, reducing overall savings and prolonging the payback period for residential solar energy investments. This new policy aims to encourage homeowners to combine battery storage with solar panels to become more self-sufficient and contribute to a more resilient electrical grid.

Although NEM 3.0 may be less favorable for customers who solely rely on solar energy compared to previous net metering policies, it is important to note that solar systems in California will still generate significant savings compared to other states.

It’s important to note that NEM 3.0 does not apply to LADWP customers, City of Glendale Water and Power, and City of Pasadena Water and Power.

Starting from April 2023, NEM 3.0 solar billing only affects PG&E, SCE, SDG&E customers, and other investor-owned utility companies.

As for LADWP, their net metering rates and prices vary throughout the year and depend on the amount of electricity used in a month. In addition to the net metering credit, LADWP customers also pay a minimum charge and certain adjustment factors.

LADWP does not have a net metering cap within its service territory, but individual customers cannot apply for net metering with a system larger than 1 megawatt.

In summary, NEM 3.0 is the new net metering policy in California that affects PG&E, SCE, and SDG&E customers, while LADWP has its own net metering system with variable rates and prices.

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