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Guide to Net Metering and Net Billing - Osceola Energy

Guide to Net Metering and Net Billing

Net Billing is not the same as Net Metering.

Under ‘Net Metering’ the solar energy which a customer generates for themselves is metered (or measured), so that any excess electricity which is generated can be banked (think "rollover minutes") to the customer’s account for future consumption.

'Net Billing', on the other hand, allows solar customers to generate electricity for personal use, and sell any excess energy to the utility company at wholesale or “avoided cost” prices, while purchasing power at the retail rate.

To better explain how Net Metering and Net Billing differences effect your utility bill with solar, let's look at an example. Using PV Watts, a typical 2.5 kW solar system will produce the following amount of AC Energy throughout the year:


Net Metering

Month Customer Generation (kwh) Customer Usage (kwh) Net Usage for Month (kwh) Cumulative Bank (kwh) Billing ($5 Base + $.09/kwh)
January 249 300 51 0 $5 + $4.59
February 275 300 25 0 $5 + $2.25
March 364 300 (64) 64 $5 + $0
April 417 300 (117) 181 $5 + $0
May 468 649 0 0 $5 + $0

Under Net Metering principles, January and February show that the customer used slightly more power than they produced, resulting in a minimal bill. In March and April, they produced MORE power than they consumed, allowing them to bank this energy for May when they really needed it. Over time, they would continue to bank excess energy throughout the year, allowing it to be used on high usage months during the summer. As you can see, the total billing costs would amount to $31.84.

Net Billing

Let's take a look at the exact same numbers, under Net Billing principles that payout each month for the excess energy. We'll use the 'avoided cost' of $.03/kwh.

Month Customer Generation (kwh) Customer Usage (kwh) Net Usage for Month (kwh) Billing ($5 Base + $.09/kwh or -$.03/kwh excess)
January 249 300 51 $5 + $4.59
February 275 300 25 $5 + $2.25
March 364 300 (64) $5 - $1.92
April 417 300 (117) $5 - $3.51
May 468 649 181 $5 + $16.29

Because the customer has to pay the full retail rate of $.09/kwh when they pull from the grid, and are only paid out at $.03/kwh when they generate, you can see that the total billing costs would amount to $42.70.


While the above example is just a small illustration of the differences in Net Metering and Net Billing, we can see that even in this scenario, there is almost an $11 difference for the EXACT SAME AMOUNT OF ENERGY PRODUCED AND CONSUMED. On a yearly basis, and with larger (or greater fluctuating) usage patterns, the differences in net billing can become even more drastic.

How Does The Utility Company Determine Which to Use?

Most utility companies and co-ops are regulated by some state entity. In New Mexico, the Public Regulation Commission determines the guidelines for what a power company can and cant do. PNM uses both Net Metering and Net Billing for solar energy systems depending on which class the solar system falls into.

For any solar system under 10 kW in size, PNM follows the Net Metering structure

For systems 10kW and larger, PNM follows the Net Billing structure.

This is why it is so important to go with a solar installer who understands the utility companies rate structures and solar incentives. To find out more about Net Metering, Net Billing, and installing solar in Albuquerque, New Mexico