The Definition
Net metering is a billing arrangement between you and your utility that credits you for excess solar electricity your system sends to the grid. Produce more than you use, and the surplus flows out through your meter and earns a credit. Use more than you produce, and the credits cover the difference. At the end of each billing period, you owe only the net.
It is the single most important policy behind residential solar economics, and in Pennsylvania, New Jersey, and Delaware, it works at the full retail rate, which is the most favorable version of the arrangement that exists.
The Problem Net Metering Solves
Solar panels and households run on different schedules. Your system produces its peak power around midday. Your home uses its peak power in the evening, when everyone is back, dinner is cooking, and the panels are winding down. Without some mechanism to bridge that gap, midday surplus would be wasted and evening demand would be bought at full price.
Net metering is that mechanism. It lets the grid absorb your surplus when you have it and supply your shortfall when you need it, with the accounting handled automatically through your meter. People sometimes describe it as using the grid as a battery, and the analogy holds: you deposit energy when production exceeds demand and withdraw it when demand exceeds production.
How It Works, Step by Step
Step 1: Your meter starts counting in both directions
When your solar system is activated, your utility installs (or reprograms) a bidirectional meter. From that point on, it tracks two separate numbers: kilowatt-hours delivered to your home from the grid, and kilowatt-hours received by the grid from your system.
Step 2: Daytime surplus flows out
On a clear afternoon, your panels routinely produce more than your house is consuming in that moment. The surplus does not get stored on site (unless you have a battery) and it does not disappear. It flows backward through the meter onto the grid, where it powers your neighbors’ homes, and the meter logs every kWh of it.
Step 3: Evening and nighttime draw flows in
After sundown, your home runs on grid power like any other house. The meter logs that too.
Step 4: The bill settles the difference
At the end of the billing period, the utility nets the two numbers. Exported 600 kWh, imported 750 kWh? You are billed for 150. Exported 800, imported 700? You owe nothing for usage, and 100 kWh goes into your credit bank for the months ahead.
Step 5: The annual true-up
Credit banks reconcile on a 12-month cycle. Surplus credits at year end are handled per your state’s rules: paid out, carried forward, or compensated at a defined rate. The state-specific details matter, and we cover them in the dedicated guides below.
Review how net metering credits appear on your electric bill to better understand the annual true-up process.
Why Retail-Rate Crediting Is the Whole Game
Not all net metering is equal, and the difference comes down to the rate at which exports are credited.
Under true net metering, the kind PA, NJ, and DE all maintain, a kWh you export is worth exactly what a kWh you import costs. One to one. With all-in rates in our region running from roughly 20 cents (PECO, Delmarva) to 26 cents and up (PSE&G, ACE), every exported kilowatt-hour carries serious value.
Under net billing, the structure some states have shifted toward, exports are credited at a lower rate, often tied to wholesale prices, while imports still cost full retail. California’s 2023 move to this model cut export values dramatically and reshaped solar economics there overnight.
The distinction matters for two reasons. First, it explains why solar math in our region is stronger than the national headlines sometimes suggest: we still have the good version. Second, it explains why timing has a policy dimension, which brings us to the question everyone eventually asks.
Is Net Metering Going Away?
In Pennsylvania, New Jersey, and Delaware, retail-rate net metering remains the rule in 2026, backed by statute and regulation rather than utility goodwill. But the honest, current answer has gained some nuance, and it is worth getting right.
The anxiety behind this search traces mostly to California, where the shift to a net billing structure generated national coverage that made plenty of East Coast homeowners nervous about a policy that was never theirs to begin with. Closer to home, the picture splits by utility. In Pennsylvania, PECO, the FirstEnergy companies, and Duquesne Light all hold 1:1 retail net metering with nothing filed to change it, but PPL and UGI are moving their customer-generators toward lower hourly-wholesale export credits through utility rate cases (PPL’s change is expected in mid-to-late 2026). New Jersey is studying a successor structure but has enacted nothing, and its 1:1 retail net metering remains in place. Delaware is moving the other direction, with legislation advancing to expand net metering by lifting its cap.
The thread that runs through all of it: net metering is set at the state and utility level, it does evolve, and when it changes, existing interconnected customers are typically grandfathered under the rules in place when their system went live. That grandfathering pattern is the practical reason “waiting to see what happens” tends to cut against the person waiting. Locking in today’s rules is itself a form of protection, and in the territories where a change is already filed, the timing is not hypothetical.
For the current policy detail in your state, including system size limits, eligible utilities, and how annual reconciliation works, see the state guides:
Net Metering and System Sizing
Net metering shapes how systems should be sized, and the logic surprises people.
Because annual surplus is typically compensated at less than retail value at true-up, the economic sweet spot is a system sized close to your annual consumption, not dramatically above it. Oversizing to “sell power to the utility” sounds appealing and almost never pencils. The grid pays you like a customer when you are offsetting your own use and like a wholesale supplier when you are dumping surplus, and the second rate is much worse.
This is why a real system design starts with 12 months of your usage data. The target is annual balance: enough summer surplus in the bank to carry the winter draw, landing near zero at true-up.
Before finalizing a system design, learn How Many Solar Panels Do I Need? A Realistic Answer
Net Metering With and Without a Battery
A common misconception: that battery storage replaces net metering, or that net metering makes batteries pointless. They solve different problems.
Net metering handles the economics of surplus energy. A battery handles the physics of an outage. Grid-tied systems, with or without net metering, shut down when the grid goes down, for line-worker safety. Only a battery keeps your home powered through an outage.
In a region with retail-rate net metering, the financial case for a battery rests mainly on backup value and, for some rate structures, peak-hour arbitrage, not on storing energy you could otherwise export at full credit. Plenty of homeowners in PA, NJ, and DE rationally choose solar without storage. Plenty add a battery for resilience. Both are coherent choices once you understand what each piece does.
See What Net Metering Does to Your Bill
The mechanics are universal. The numbers are yours. A Sunwise consultation models a system against your actual 12-month usage and shows you the monthly flow: production, export, import, credits banked, credits drawn, and where the annual total lands.
Net Metering FAQs
What is net metering in simple terms?
Net metering is a billing arrangement that credits solar homeowners for excess electricity their panels send to the grid. When your system produces more than your home is using, the surplus flows out through your meter and you earn a credit. When you draw power from the grid at night or on cloudy days, the credits offset what you owe. You are billed only on the net difference.
How do net metering credits work?
A bidirectional meter tracks electricity flowing in both directions. Exports earn credits, typically at the full retail rate in PA, NJ, and DE. Credits accumulate in a bank and automatically apply against future consumption, so summer overproduction can cover winter usage. Accounts reconcile on an annual cycle called a true-up.
Is net metering going away?
It depends on your utility, and the honest 2026 answer has nuance. In Pennsylvania, PECO, the FirstEnergy companies, and Duquesne Light keep 1:1 retail net metering, but PPL and UGI are moving customer-generators to lower hourly-wholesale export credits through rate cases (PPL’s is expected mid-to-late 2026). New Jersey is studying a successor structure but has enacted nothing and retains 1:1 retail. Delaware is expanding net metering. Across all of them, systems already interconnected are typically grandfathered under the rules in place at activation, which is the practical argument for not waiting in territories where a change is filed.
What is the difference between net metering and net billing?
Under net metering, exported electricity is credited at the same retail rate you pay for imports, a one-to-one exchange. Under net billing, exports are credited at a lower rate, often based on wholesale or avoided cost, while imports are still billed at retail. Net metering is significantly more valuable to the homeowner. PA, NJ, and DE all use retail-rate net metering.
Do net metering credits expire?
Credits roll over month to month within your annual cycle. At the end of the cycle, the utility reconciles the account. Depending on the state and utility, remaining surplus may be paid out, carried forward, or reset. In Delaware, credits are tracked in kilowatt-hours with a customer-selected true-up month, and any balance still banked at true-up is zeroed out under a 2022 state law.
