When I got solar panels installed on the roof of our house last fall, friends immediately started asking how well they were working out, and my answer had to be that while they’re generating a nice amount of power, I wouldn’t know how well they were doing on the actual goal of zeroing our electric bill until a year had passed. That year has now passed, and it’s time to answer the question.

If you add solar power to your grid energy, at least the way it’s done in California, two things will happen:

1. Your electric bills will be lower, but
2. You won’t understand them.

The problem:

California electric rates are confusing because they’re complicated and variable. You pay a different rate depending on how much you use (tiering)¹. You can opt into time-of-use (TOU) billing², which makes electricity more expensive at peak times and cheaper the rest of the time to encourage you to shift usage away from peak times. The normal residential billing schedule is called E-1 (“residential services”) and shows 5 different rates according to tier; the TOU residential schedule is called E-6 (“residential time-of-use service”) and shows 25 different rates according to tier and time.

Once you introduce solar (or other generation capabilities) into the mix, there’s another wrinkle. Assuming you stay connected to the grid, PG&E will convert your billing to what they call NEM (Net Energy Metering), which means your electric meter will measure the flow of power in both directions — from the grid into your house when you’re using more than you’re generating, and from your house back to the grid when you’re generating more than you’re using. But solar panel output varies by season and with weather, in addition to the obvious day/night cycle. To account for this seasonal variation, PG&E bills NEM customers on a yearly cycle called the true-up period. Your monthly bills are only an approximation, and at the end of the year they calculate the actual balance owed compared to what you already paid, and have you “true up” to that amount, hence the name.

For NEM customers, that’s 3 different axes of variation³: tiered rates based on total consumption, variable rates due to time-of-use, and true-up billing to account for seasonal variation of generated output.

Before adding solar generation

You have to calculate how much electricity you want to generate to produce the desired effect (economically or ecologically or both⁴), and then you need to calculate the size of a PV solar array that will produce that effect.

Both of these calculations actually turn out to involve a fair amount of prediction. Companies that specialize in solar installations (for example, Luminalt, who installed ours) can help you with these predictions and calculations.

But even after you’ve done the calculations, decided to go solar, and had the array installed and it’s live, you still won’t know if you were right, at least for a while. That’s what this post is about. I wanted to know if we’d predicted correctly, and I also wanted to know if PG&E’s billing methods fairly account for the seasonal variation. (If I have a large surplus in summer on-peak in July, and a big deficit in winter off-peak in January, do these cancel out, and how?)

After adding solar generation

I said that after activating a solar array and switching over to PG&E’s NEM program, you’ll get lower bills that you won’t understand. Here’s what I mean. Each month with my electric bill⁵, I get a separate “Net energy metering electric statement”. It includes three amounts:

1. “total current month’s billed amount”, which is always in the neighborhood of $12.
2. “current month energy charge or credit”, which is the actual charge for electricity I used, or credit for electricity I produced, after accounting for tiered TOU rates.
3. “cumulative energy charges or credits for the current true-up period”, which is the sum of the #2 values.

This is hard to interpret month by month, partly because there’s no relationship between what I’m asked to pay (#1) and what I used (#2), and #3 will swing wildly one direction⁶ and then correct over the course of the year. All of this evens out at the end of the year, which is the reason for the 1-year true-up method of billing.

But when the 1-year anniversary arrives, and with it the final true-up payment, there’s a new confusing quantity: “total current month’s billed amount” is replaced with “total true-up billed amount”. This amount, which is your actual bill for the 12th month, is not the usual $12, bears no obvious relationship to the cumulative energy charge, and isn’t explained or derived by PG&E on the bill or elsewhere that I could find⁷. (In my case: my cumulative energy charge after 12 months was $60.22, and the “total true-up billed amount” was $22.02.) Why?

There’s a method to their madness, but I had to dig deep into PG&E’s rate documentation and then spend a few hours messing with a spreadsheet to try to derive the calculations that would map my usage to my bills.

Understanding true-up billing

First, the monthly bill. Where does this $12 come from? It turns out PG&E charges E-6 (TOU) customers a “meter charge” of approximately $0.25 per day. E6 and E-1 both also have a “minimum charge” of approximately $0.15 per day; they don’t explain what this means, but if my reverse engineering of my bills is correct, for NEM customers it’s essentially a placeholder for your usage before they know what your usage is. These fees added together and multiplied by the number of days in a billing cycle yield the approximately $12 amount that I was billed for each month (billing cycles ranged from 28 to 32 days, so the monthly bill ranged from $11.22 to $12.83, with the most common bill being $12.02 for a 30-day billing cycle).

Second, the usage charges. These are not simple (since they involve both the tiering and TOU calculations), but they are actually decently explained on the monthly NEM statement itself, and with one nitpicky exception⁸, they’re the same as what you had before you added NEM, and the true-up calculation doesn’t affect them.

Third, the cumulative usage charge. This one is completely straightforward: add the usage charges for the current true-up period, to date. Each NEM statement shows the current cumulative charge (this amount) and the amount by which it changed (the month’s usage charge), and you can verify that the current cumulative balance is equal to the previous month’s balance plus/minus the current month’s usage charge/credit. However, as mentioned above, this amount will swing one direction and then correct due to seasonal variation,

Fourth, the true-up amount. This is a simple calculation if you know where it comes from, but PG&E doesn’t explain it, so I had to reverse engineer it, learning to understand the daily meter and minimum charges. What it boils down to is that the $0.15 “minimum charge” is not a real charge once the true-up period is over, but a provisional placeholder: you pay this with each month’s $12 bill, but at the end of the year, when your real usage is known, you get back the provisional amount and pay the real amount. At the end of the year, you take your usage charge/credit, and add the meter charge ($0.25 per day or about $7.50 per monthly bill or $92.33 in a full year⁹), and that’s what you owe for the year. Except you’ve already paid that meter charge, plus you’ve paid the “minimum” usage charge as a provisional placeholder. So subtract the provisional usage charge ($0.15 per day or about $4.50 per monthly bill or $53.96 in a full year), and you have the amount that’s unpaid, that you must still pay in order to True Up. So, your first 11 bills are for 30-ish days of meter charges and minimum charges, totaling about $12; your 12th bill is for 30-ish days of meter charges, minus 335-ish days of minimum charges, plus your cumulative usage charge for the whole year. In my case, actual usage at the end of the year was $60.22, of which $46.27 had already been paid monthly as that “minimum” charge, so what I’d call the actual true-up component was $13.95; add in $8.07 in meter fees (32 days at $0.25/day) for the final billing period and we have what PG&E calls my true-up bill of $22.02.

Cancelation across TOU periods

I was curious whether a surplus in one TOU period (for example, summer on- peak, which is likely the best case for residential solar customers) can partially or wholly cancel a deficit in another TOU period (for example, winter off-peak, which is pretty much entirely dark, and thus worst-case for solar customers). As it turns out, PG&E doesn’t directly add and subtract usage across TOU periods; they convert usage to a dollar amount every month (based on TOU periods and tiering), then add and subtract the monthly dollar amounts. This is a clever way of accounting, since it’s pretty easy to understand, and does a pretty fair job of reconciling the amounts from different TOU periods. (In fact, it works out pretty well for residential solar customers, since your summer on-peak surplus is credited at a higher rate than that winter off-peak deficit.) My only complaint here is again that the tiering calculations are done per month and only affect you on the downside.

Raw facts

Here are the actual numbers from my house over the last year, which may be helpful in understanding the derivations here, making the descriptions more concrete, and/or planning your own PV solar system.

• Generated by solar: 7195 KWh
• Bought from PG&E: 1601 KWh
• Total consumed: 8796 KWh
• Months with positive grid usage, resulting in PGE charge: 6 (Oct-Mar)
• Months with negative grid usage, resulting in PG&E credit: 6 (Apr-Sept)
• Whole-year usage charge: $60.22
• Value of electricity consumed if I had to buy it all from PG&E: $2052.34 (assuming E-1 and not E-6 billing, since I don’t have the generated KWh broken out by TOU period)
• Prior-year electric bill: $1403.77
• Granular usage (from PG&E’s point of view), broken down by month and TOU billing period:

Sum-up

The true-up billing method mostly but not entirely allows you to smooth out the seasonal variation, canceling bad performance one month against good performance in another month.

You can understand your monthly bills if you think of them like this: $12 a month, $7.50 of which is just for the privilege of being connected to the grid, and $4.50 of which is a deposit against your actual usage. Meanwhile, the actual usage bill accrues in the background, and at the end of the year, you pay this balance minus a $49.50 refund for those eleven $4.50 deposits.

Due to the low NCS reimbursement it still seems to me that the optimal array size is what brings you very close to even for the year, offsetting your usage without generating much of a surplus. However, due to the way usage tiers are finalized each month instead of across the true-up period, sizing your array slightly larger than this may pay off by reducing higher-tier winter bills, even though the net surplus KWh aren’t themselves valuable in the NCS calculation.