Net Billing

March 24, 2023


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. 

The current export compensation rates are 10.45 cents per kWh (Arizona Public Service), 8.68 cents per kWh (Tucson Electric Power), and 10.35 cents per kWh (UNS Electric). Revised rates of 9.405 cents per kWh (Arizona Public Service), 7.81 cents per kWh (Tucson Electric Power), and 9.32 cents per kWh (UNS Electric) will take effect in October 2021.

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.


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.


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 are 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.

Program Overview

Implementing Sector: State
Category: Regulatory Policy
State: Arizona
Incentive Type: Net Metering
Web Site:
Start Date:
Eligible Renewable/Other Technologies:
  • Geothermal Electric
  • Solar Thermal Electric
  • Solar Photovoltaics
  • Wind (All)
  • Biomass
  • Hydroelectric
  • Hydrogen
  • Municipal Solid Waste
  • Combined Heat & Power
  • Landfill Gas
  • Wind (Small)
  • Hydroelectric (Small)
  • Anaerobic Digestion
  • Fuel Cells using Renewable Fuels
Applicable Utilities: Investor-owned utilities, electric cooperatives
System Capacity Limit: No capacity limit specified, but system must be sized to meet part or all of customer's electric load and may not exceed 125% of customer's total connected load
Aggregate Capacity Limit: No limit specified
Net Excess Generation: Residential (APS, TEP,UNS) & Small Commercial (TEP, UNS): Excess generation credited at an ACC-approved rate, phasing down to an avoided cost rate. Current export compensation rates are 10.45 cents/kWh (APS), 8.68 cents/kWh (TEP), and 10.35 cents/kWh (UNS).NEG is carried forward and paid out at the end of the annual period if the credit balance exceeds a certain amount.

Non-Residential: Retail rate export compensation. NEG is carried forward and paid out to the customer at the end of the annual period at the avoided cost rate.
Ownership of Renewable Energy Credits: Not addressed in rules; customer owns RECs unless participating in a utility incentive
Meter Aggregation: Not addressed


Name: A.A.C. R14-2-2301 et seq.
Date Enacted: 10/16/2008
Effective Date: 5/1/2009
Name: A.C.C. Decision No. 74202
Date Enacted: 12/03/2013
Effective Date: 01/01/2014
Name: A.C.C. Decision No. 75859
Date Enacted: 01/03/2017
Effective Date: 01/03/2017


Name: Barbara Keene
Organization: Arizona Corporation Commission
Address: 1200 W. Washington St.
Phoenix AZ 85007
Phone: (602) 542-0853

This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.