The City of Palo Alto’s NEM 1 program meets the requirements of California state legislation. Customers who installed rooftop solar before November 2016 or who applied and were approved for the City of Palo Alto Utilities (CPAU) NEM 1 Reservation program prior to January 1, 2018 are served by the NEM 1 program. NEM 1 customers are compensated at retail rates for electricity they export to the grid for a term of 20 years from the date of system interconnection, as described in this City Staff Report.

After a customer's NEM 1 term is up, the customer is served by Palo Alto's NEM 2 program. Also, customers who install rooftop solar after January 1, 2018, and who did not apply and receive approval for a NEM 1 Reservation, are served by the City's NEM 2 program.

How do I know if I am a NEM 1 solar customer?

If you currently have solar installed at your home and you are being served by CPAU’s NEM 1 program, you will see “E1N” next to the word “COMMODITY” in the “ELECTRIC” section of your utility bill on page 2. If you are not sure and would like to confirm, you can contact us by calling (650) 329-2241 or emailing

How NEM 1 works

NEM 1 customers have single-register meters, meaning that the meters measure one quantity: electricity flow between a customer’s property and the grid. These single-register meters can run forward and backward. When a customer is consuming less electricity than the solar system is generating, the meter runs backward and the customer exports electricity to the grid. When a customer is consuming more electricity than the solar system is generating, the meter runs forward and the customer imports electricity from the grid.

NEM1 Utility Billing and Statements

As a NEM 1 customer, your utility bill will look different in a given month depending on whether you are a net generator or net consumer. Note that CPAU's utility bills only show your net import of electricity. 

Net Generation

Meters are read monthly. When monthly electricity consumption is less than the amount generated, NEM 1 customers receive a credit based on retail rates. The excess electricity that they receive a credit for is called "net generation."

Your net consumption is zero, so the electric usage line item will show "0 kWh" and the electric usage graph will show no bar for that billing period.  View a sample NEM 1 Net Generation utility bill

Net Consumption

When monthly electric consumption exceeds the amount generated, NEM 1 customers pay for electricity at the standard CPAU retail rates (E-1 for residential, E-2 for small commercial, etc.). The excess electricity they are charged for is called "net consumption".

The electric usage line item and bar chart will display the net electricity you consumed. View a sample NEM 1 Net consumption utility bill.

What is a NEM statement?

If NEM 1 customers have net generation for any of the previous 12 billing periods, they receive a NEM statement in addition to their utility bill. NEM statements are mailed separate from utility bills, and they show customers' net generation as well as net metering credit balance and other information not shown on a utility bill.  View a sample NEM statement

NEM Aggregation

NEM Aggregation is available for a single CPAU NEM 1 account holder with multiple electric accounts for the same parcel or adjacent parcels. NEM Aggregation means sharing the NEM 1 bill credits from a single solar installation across eligible accounts. Additional monthly charges apply for NEM Aggregation. Please see the NEM Aggregation Rate, NEM Aggregation Agreement and Rule 29 for terms and conditions.

Choosing NEM 1 Election A or B

Settlement: Election A and Election B

If you generate more electricity than you consume over a 12-month period, the surplus electricity is called "net surplus electricity" (NSE). You can choose between two methods of compensation for your NSE – Election A or Election B. Both methods of compensation occur on your annual settlement date. The annual settlement date is the anniversary of your solar system’s interconnection date or, if you moved into a house with an existing solar system, the date you opened your new electric account for that house.

Generally speaking, Election A is preferable for customers whose rooftop solar systems are oversized relative to their electricity consumption – customers who tend to generate NSE every year. If your rooftop solar system is sized to generate an amount of energy less than or equal to your annual energy consumption, or if your electricity consumption may increase in the future, you are likely to be better served by Election B. Customers who generate NSE may submit a Net Surplus Electricity election form to change their election once a year, as long as their election form is submitted at least 60 days before their annual settlement date. Customers who do not make an election are automatically enrolled in Election B.

Option A: Cash Out

Your NSE (in kWh) over the last 12 months is multiplied by the NSE compensation rate (in dollars) to produce a cash credit. This cash credit is applied to your next utility bill for any utility charges (including other utility services like water, gas and waste).  If your system is oversized but you don't expect to increase electricity demand in the future, this option may be the only way to receive compensation for your NSE. 

Option B: Roll Forward

You roll forward your NSE (kWh) so you can offset electricity you import from CPAU in the future (in kWh) at the retail rate.  If your system is oversized but you expect an increase in household electricity demand in the future, this option will compensate you at a higher rate.  If you consistently do not consume as much electricity as you generate, your NSE will keep rolling forward.  If you later decide to switch to Election A, you can only cash out the last 12 months of NSE.