How Net Metering Works

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Which States Allow Net Metering?

Under a federal law called the Public Utility Regulatory Policies Act (PURPA), utilities must allow homes that produce their own energy to connect to the energy grid; the companies must buy any excess power homes or businesses produce.

Forty-two states and the District of Columbia have gone beyond that to allow net metering. In 2007, the number of people in net metering programs increased by 45 percent, to 48,820. California has the largest number of net metering customers, with 72 percent of the national total [source: Energy Information Administration].

Although most states allow net metering, policies and requirements vary from state to state. An organization called Network for New Energy Choices has graded states on their net metering policies. They awarded top grades to states that provide incentives to homes and businesses that install renewable energy systems, provide credit for sending excess energy into the grid, and reduce bureaucracy (red tape and fees).

In their 2007 report, "Freeing the Grid," the organization gave top marks to states like Arizona, Illinois, Florida, Massachusetts, Oregon, Utah and Vermont. Massachusetts has one of the most progressive policies in the country, thanks to its 2008 Green Communities Act, which gives consumers incentives for installing solar and other renewable energy systems. However, 28 states earned Ds or Fs because their rules were so restrictive that they make it almost impossible for the average homeowner to participate.

Often legislation gets stalled because of resistance from the utility companies. In June 2007, Texas signed a bill into law that called for net metering to go into effect "as rapidly as possible" [source: Fast Company]. But when the utilities protested, legislators gave in and the law was compromised.

Do you know if your state allows net metering? Check out this map of net metering programs by state, or go to the next page and learn more.