Net Billing

Summary

Note: In December 2016, the Arizona Corporation Commission (ACC) voted to replace net metering with "net billing", where new customer-generators will be credited at an avoided cost rate for energy exported to the grid. Although this entry is categorized as net metering, the policy adopted by the ACC does not meet DSIRE's definition of net metering, as excess generation will no longer be netted one-to-one against consumption over the billing period.

Eligibility and Availability

Net billing is available to investor-owned utility and electric cooperative customers who generate electricity using solar, wind, hydroelectric, geothermal, biomass, biogas, combined heat and power, or fuel cell technologies.* A net billing facility must be located on the customer's premises.

System Capacity Limit

The Arizona Corporation Commission (ACC) has not set a firm kilowatt (kW)-based limit on system size capacity; instead, systems must be sized to not exceed 125% of the customer’s total connected load. If there is no available load data for the customer, the generating system may not exceed the customer’s electric service drop capacity. 

Aggregate Capacity Limit

The ACC has not set an aggregate capacity limit for all net-billed or net-metered systems in a utility’s territory. The utility must instead demonstrate to the ACC why such a cap should be allowed. Under the ACC rules, each utility must file an annual report listing the net metered facilities and their installed capacity for the previous calendar year. 

Export Compensation Rate

Under a net billing policy, customers may self-consume energy from their systems, effectively receiving a retail rate credit for this energy consumed directly on-site, behind the meter. Any energy not consumed directly on-site is exported to the electric grid and credited at a non-retail rate. The ACC ordered in Decision No. 75859 that new customer-generators will receive an avoided cost rate for energy exported on an instantaneous basis to the grid. 

The specific avoided cost rates for exported energy differ by utility, but are based on the ACC's adopted avoided cost methodology. The avoided cost rate will at first be calculated using the Resource Comparison Proxy methodology and not reduce the compensation rate by more than 10% annually. After stakeholders have taken the necessary time to further develop implementation parameters for the ACC Staff's 5-year avoided cost methodology, the ACC will be able to utilize either this methodology or the Resource Comparison Proxy methodology in setting export compensation rates in utility rate cases. 

As of August 2024, the current export compensation rates are 7.619 cents per kWh (Arizona Public Service), 6.33 cents per kWh (Tucson Electric Power), and 7.55 cents per kWh (UNS Electric).

Non-residential customer-generators in Arizona Public Service territory, as well as medium and large commercial customer-generators in Tucson Electric Power and UNS Electric territory may still participate in retail rate net metering.

Net Excess Generation

For net billing customers, monthly net excess generation is carried forward indefinitely, with the utility paying the customer for remaining credits at the end of the annual period if the credit amounts exceeds a certain balance. For Arizona Public Service, this credit balance is $25, and for Tucson Electric Power and UNS Electric the credit balance is $10.

For non-residential customers eligible for retail rate net metering, net excess generation is carried forward and credited to the customer at the utility's avoided cost rate at the end of the annual period.

Cooperatives

Electric cooperatives are permitted to use methodologies other than the Resource Comparison Proxy methodology and the Five-Year Avoided Cost methodology to determine export compensation rates. 

Rate Design

The ACC previously required that net metering charges be assessed on a non-discriminatory basis. Any new or additional charges that would increase an eligible customer-generator's costs beyond those of other customers in the rate class to which the eligible customer-generator would otherwise be assigned must be proposed to the ACC for consideration and approval. However, in Decision No. 75859, the ACC determined that rooftop solar customers are partial requirements customers who export power to the grid, and may be separated into their own rate class. 

Arizona Public Service requires residential customer-generators to participate in one of its time-of-use rates. There are four time-of-use options available to customer-generators. Two of these tariffs include on-peak demand charges, and one tariff does not include a demand charge, but requires customer-generators to pay a grid access charge of $0.93 per kW-DC of on-site generation. The fourth option is available to customers with at least two eligible on-site technologies, such as solar and battery storage or solar and an electric vehicle. This option includes both on-peak and off-peak demand charges.

Tucson Electric Power and UNS Electric also require residential and small commercial customer-generators to participate in a time-of-use rate. The utilities offer time-of-use options with and without a demand charge.

Grandfathering

Customers interconnecting to the utility's distribution system prior to the effective date of the decision implementing the new export compensation rate in each utility's rate case will be grandfathered under the former net metering rules for a period of 20 years. The provisions described below apply only to grandfathered customers:

Net metering is accomplished using a single bi-directional meter, whereby production and consumption are netted at a one-to-one ratio over the billing period, providing customers with a retail rate credit for system production. 

Any customer net excess generation (NEG) (kilowatt-hours (kWh) produced in excess of kWhs consumed over the entire the billing period) will be carried over to the customer's next bill at the utility's retail rate, as a kWh credit. Any NEG remaining at the customer’s last monthly bill in the annual true-up period will be paid to the customer, via check or billing credit, at the utility’s avoided cost payment.

For customers taking service under a time-of-use rate, off-peak generation will be credited against off-peak consumption, and on-peak generation will be credited against on-peak consumption. The customer’s monthly bill is based on the net on-peak kWh and net off-peak kWh amounts. Any monthly customer NEG will be carried over to the customer's next bill as an off-peak or on-peak kWh credit.

*Salt River Project and municipal utilities do not fall under the jurisdiction of the Arizona Corporation Commission, and are therefore not subject to the state rules for distributed generation compensation.