California leads the nation in the use of renewable energy, especially solar. Starting with the deregulation of the energy system in 1996, state legislation has encouraged the growth of solar energy use by providing tax incentives to consumers and utilities. One incentive rewards consumers whose alternate energy installation generates more power than their home or business uses, increasing energy available for the state’s electric grid.
California Assembly Bill 920
In 2009, California Assembly Bill AB 920 created new incentives to consumers and businesses that install alternative, electric energy-generating systems. The legislation instructed energy suppliers in California -- such as Southern California Edison, Pacific Gas and Electric and San Diego Gas and Electric companies -- to compensate consumers whose homes or businesses are generating more electricity than they use. The utility buys the excess generated energy and feeds it back into the electric grid.
The law, which became effective 2011, exempts only local, publicly owned utilities. However, many publicly owned utility companies -- such as Imperial Irrigation District -- participate in the program.
Net Energy Metering
The process of receiving compensation under AB 920 is called Net Energy Metering. Involvement is optional and customers must enroll with their local utility company. The company installs special revenue-tracking meters that work with the customer’s inverter meter -- the meter that converts the generated energy into the alternating current necessary for home use. The California Public Utilities Commission will determine the rate of compensation per kilowatt hour. The 12-month period starts from the date the customer is approved for enrollment and the meter installed.
Qualifying Alternate Energy Sources
Energy-generating systems that qualify for Net Energy Metering include solar, wind, biogas or fuel cell systems that generate no more than one megawatt and not less than 30 kilowatts of energy. Commercial, agricultural and residential energy users must apply to their local utility company, which determines if their system qualifies. The number of enrollees is limited. State laws mandate that utility companies must only buy energy generated by the NEM participants equal to 5 percent of the peak energy demand the company experiences. Beyond the 5 percent cap, utilities do not have to approve additional NEM applicants.
Special NEM Programs
NEM programs exist for customers who do not qualify for the basic NEM program because their system is too small or too large, or because of the type of energy used. For example, PG&E and SDGE have programs for customers whose system generates less than 30 kilowatts of power. PG&E’s NEMVNMA program offers options to low-income housing and multi-family housing units to participate in net energy metering program. Multi-family units that use one electric meter can share in the credits for excess energy generated. However, the compensation per kilowatt hour of excess energy may be less under these special programs.
- Southern California Edison: AB920
- Leginfo.gov: AB 920 Text
- U.S. Energy Information Administration. "Table 10. Major U.S. Coal Producers, 2018." Accessed July 26, 2020.
- Exxon Mobil. "20019 Summary Annual Report," page 13. Accessed July 26, 2020.
- State Street Global Advisors. "The Energy Select Sector SPDR Fund." Accessed July 26, 2020.
- State Street Global Advisors. "SPDR S&P Oil & Gas Exploration & Production ETF." Accessed July 26, 2020.
- VanEck. "VanEck Vectors Coal ETF." Accessed July 26, 2020.
- Invesco. "Invesco Solar ETF," pages 1-2. Accessed July 26, 2020.
Jane Amar received a Bachelor of Arts in Spanish language and literature from the University of California in Riverside in 1970. After more than 37 years in government service in management and technical positions, she retired and began her writing career. Since 2007 she has written online content in English and Spanish for profit and nonprofit services and individual entrepreneurs.