NEM2 Program Introduction

NEM allows residential, commercial, and agricultural customers to install and interconnect a renewable generator, most often solar/photovoltaic (PV), sized to meet their annual load, and receive credits to offset the costs of their energy usage.

On January 28, 2016, the California Public Utilities Commission (CPUC) issued Decision D. 16-01-044 providing direction on the state’s Net Energy Metering Successor Program. The decision stated that once the 2,409 MW Cap for the original NEM (NEM1) program is reached, a NEM Successor (NEM2) program would take its place. Now that the cap has been reached, all new NEM customers must take service under the NEM2 program. Existing NEM1 customers who want to switch may also take service under the NEM2 program.

NEM1 programs affected by the NEM1 cap include:

• NEMS – standard Net Energy Metering for solar and/or wind 30kw  or less – replaced by NEM2S in schedule NEM2
• NEMEXP – all other Net Energy Metering not covered by NEMS – replaced by NEM2EXP in schedule NEM2
• NEMV – Virtual Net Energy Metering – replaced by schedule NEM2V, with new eligibility
• NEMA – Net Energy Metering Aggregation – replaced by NEM2A, in schedule NEM2
• NEMVMASH – Multifamily Affordable Solar Housing Virtual Net Energy Metering – replaced by schedule NEM2VMSH
• NEMMT – Net Energy Metering for multiple generating facilities subject to different tariffs – replaced by NEM2MT in schedule NEM.

These are collectively referred to as the "NEM2 Program."

PLEASE NOTE: Projects taking service on NEMFC and RES-BCT are not subject to the NEM Program Cap and are not part of the NEM2 program.

• The generator size is no longer limited to 1 MW or under. The generator can be sized to generate up to the customer’s annual load.
• Customers with generators sized 1 MW or less will pay a standard $145 interconnection fee based on costs associated with interconnecting their solar system.  (See next FAQ on how to pay the fee.)
• Customers with generators sized greater than 1 MW will pay all interconnection costs.
• Billing calculation for State Mandated Non-Bypassable Charges (NBCs) based on each kWh of electricity consumed from the grid are reviewed at the smallest interval time periods rather than at the end of each month. Note: the smallest interval is every 60 minutes for residential services and every 15 minutes for all other services. In the event that a customer consumes more energy from the grid than their renewable system produces, within the smallest interval, they will pay NBCs on the net consumption. These NBC charges include:
  • Public Purpose Program (PPP)
  • Nuclear Decommissioning (ND)
  • DWR Bond Charge (DWR Bond)
  • Competition Transition Charge (CTC)
• The current restriction on Virtual Net Energy Metering (NEMV) to a “single service delivery point” is eliminated in its Successor tariff. The requirements regarding when a customer can take service on the NEMV Successor (NEM2V) tariff is currently pending at the CPUC and limits will be spelled out in the NEM2V tariff once it has been approved.
• All NEM2 customers must take service on time-of-use (TOU) rates.
• Customers will remain on the NEM2 tariff for 20 years from the year of the original approval from PG&E to interconnect and operate their system. Any customer that switches from the existing NEM1 tariff to the NEM2 tariff will be able to use the NEM2 tariff until the expiration of 20 years from the original year of the approval from PG&E to interconnect and operate their system.
• The NEM2 interconnection forms are being revised to reflect the new programs' requirements.
• A warranty of at least 10 years must be provided on all equipment and its installation. In applicable circumstances, the interconnection request may rely on manufacturers' warranties for equipment and separate contractors' warranties for the installation.

*Interconnection requests for modifying systems that have previously received Permission to Operate or for Standard NEM Aggregation fall under the “All Other NEM” process.

How to use PayPal to pay the application fee:

1. Securely link your PayPal account to your bank account, debit or credit card.
2. You have the option to set up a company PayPal account with multiple user logins.

PLEASE NOTE: Single Family Affordable Solar Housing (SASH) customers who interconnect under the NEM successor tariff will not be required to pay the standard interconnection fee.

NEM2 applicants installing generating facilities larger than one megawatt:

• Must pay $800 to apply (See Table E-1 in Electric Rule 21 for costs).
• Are responsible for all interconnection costs including distribution upgrade related costs.
• Must satisfy any California Independent System Operator (CAISO) interconnection requirements.
• May Interconnect under the Fast Track or in the Queue.

Periodically, PG&E will host workshops or webinars to both address various interconnection topics and provide additional clarity to the submittal process for Applicants. Below are slide decks that were used during the recent presentations. If you would like to be notified of future interconnection events, please email NEMUpdates@pge.com. Note: this mailbox should not be used for interconnection project-specific questions.

On April 10, 2017, the California Public Utilities Commission (CPUC) approved Advice Letter 4983-E (PDF, 227 KB), updating the Rule 21 Tariff to include new requirements concerning inverter-based technologies seeking to interconnect to PG&E's grid. Based on the approved Advice Letter and in accordance with Section H.3.d. (Sheet 164) of the Rule 21 Tariff (PDF, 27.5 MB), all first-time interconnection applications received after September 8, 2017 must install "Smart Inverters."

"Smart Inverters" are inverters that are UL-1741 Supplement SA (UL-1741 SA) certified. A list of UL-1741 SA inverters are maintained on the California Energy Commission (CEC) website. For questions regarding certification of inverters as "Smart Inverters," the Solar Community is advised to work directly with the inverter manufacturers.

New Provisions for non-Smart Inverters (Effective 11/17/17)

In an effort to assist Customers who were not able to submit interconnection applications prior to September 9, 2017, PG&E has filed a Tier 1 Advice Letter 5185-E (PDF, 8.0 MB) that grants additional provisions for non-Smart Inverter installation. Effective November 17, 2017, Applicants with non-Smart Inverter equipment may apply for interconnection as long as they meet one or more of the criteria below:

1. The non-Smart Inverter is already approved by PG&E for interconnection prior to September 9, 2017 (Permission to Operate was issued prior to 9/9/17),
2. The Customer submitted the interconnection application prior to September 9, 2017,
3. The Customer provides evidence of a final inspection clearance for the Generating Facility from the governmental authority having jurisdiction over the Generating Facility prior to September 9, 2017, or
4. The Customer provides evidence of having applied for an electrical permit for the Generating Facility installation that is dated prior to September 9, 2017 and submitted a complete interconnection application no later than March 31, 2018.
   
   • A complete application consists of all of the following (without deficiencies):
     • A completed Interconnection Application including all supporting documents and required payments
     • A completed signed Interconnection Agreement
     • Evidence of the Customer's final inspection clearance from the governmental authority having jurisdiction over the generating system
   • NOTE: The ability to submit only an electrical permit dated prior to 9/9/17 will end beginning April 1, 2018.

If a Customer's project meets either provision 3 or 4 above, the non-Smart Inverter details must be submitted via the appropriate interconnection portals as "Unlisted," and include either the electrical permit or the final signed-off permit dated prior to September 9, 2017. The project will not be able to advance into Engineering review until either the electrical permit or final signed-of permit is provided. NOTE: All non-Smart Inverter equipment must still be UL1741-certified. In addition, for Net Energy Metering (NEM) projects (including Virtual NEM and MASH), the non-Smart Inverter must still be listed on the CEC website in order to be eligible for a NEM program.

Key Facts

1. Beginning September 9, 2017, all first-time interconnection applications must install "Smart Inverters."
2. Applications with inverters not classified as "Smart Inverters" must meet one of the criteria above to be accepted and must submit the appropriate documentation via the appropriate interconnection portal.
3. "Smart Inverters" are inverters that are UL-1741 Supplement SA-certified.
4. A list of "Smart Inverters" is maintained on the CEC website, in addition to other inverters that are only UL1741-certified.
5. Replacement of existing non-Smart Inverters
   
   • An "existing inverter" is defined as an inverter that is a component of an existing Generating Facility that meets the application submittal requirements set out above
   • Replacing with equivalent-sized “Smart Inverter(s)” is preferable. However, existing non-Smart Inverters may be replaced with equivalent non-Smart Inverters of the same total size or less, consistent with Rule 21.

Starting July 26, 2018, the CPUC requires that PG&E only accept applications with UL 1741 SA compliant smart inverters with the default setting for Volt Var set to "reactive power priority" for interconnection requests utilizing inverter technology. To qualify, the inverters must be:

1. Listed on the CEC inverter website (this applies to Net Energy Metering/NEM applications only)
2. Capable of being set to reactive power priority per UL-1741 SA certification, AND
3. Set with default to operate in "reactive power priority" mode

Clarification of Net Energy Metering (NEM) Applications

Although the inverter system is typically installed prior to submitting the interconnection application for NEM projects, new applications received starting July 26 must still include a qualifying inverter set for reactive power priority. Otherwise, the application will be rejected.

This Helps Everyone Win —Increased Safety and Reliability

When solar and other inverters export power to the grid, they need to raise the voltage at the inverter terminals to export power. With many generators on the same distribution line, the voltage during peak solar hours can be pushed above normal limits although this situation is not common. It is expected that smart inverters set to “reactive power priority” will help reduce the problem of inverters causing high voltage issues on PG&E’s distribution system for themselves and other nearby PG&E customers.

Work With Your Inverter Supplier

Most inverters are already capable or will be capable of setting Volt Var default to reactive power priority. Some Manufacturers may be making tools (for example "country codes" or profiles) available to set your project's inverter in the reactive power priority default mode. PG&E recommends that Developers work with their suppliers to plan for this upcoming deadline as soon as possible.

PG&E Support

PG&E is compiling a list of inverters jointly with the other IOUs (SCE and SDG&E) capable of being set to "reactive power priority" as shown in the following spreadsheet (XLSX, 36 KB). This list will be maintained to assist Developers and Installers in knowing which inverters will be accepted beginning July 26, 2018. As an Installer, please contact manufacturers you source from to ensure they are complying with the instructions that PG&E and SDG&E provided so that your selected inverters are listed. Expect that for applications received on or after July 26, PG&E will verify the installed inverters are set with "reactive power priority" as the default setting.

PG&E anticipates that the California Energy Commission (CEC) will take over and continue maintaining this list at some point in the future. Until then, if there are questions about the inverters shown on the spreadsheet, please email NEMUpdates@pge.com.

About Reactive Power Priority

This new requirement comes after years of discussion at the Smart Inverter Working Group (SIWG) and the CPUC. Currently most inverters come with default settings for "real or active power priority." CPUC Resolution E-4920 and approved PG&E advice letter AL 5210-E modifying PG&E Electric Rule 21 establish the July 26, 2018 starting date, switching the default setting requirement to "reactive power priority".

Beginning February 22, 2019, all applicants with inverter-based technologies submitting new interconnection requests under PG&E's Rule 21 tariff will be required to comply with Smart Inverter Phase III Function 5 (Frequency Watt Mode –see Rule 21 Hh.2.l) and 6 (Volt Watt Mode - see Rule 21 Hh.2.m) functionality. Please review the Electric Rule 21 tariff for more specific information on this requirement.

Changes to the Interconnection Portals

The equipment list will be updated to only reflect currently compliant inverters, as listed on the California Energy Commission (CEC) website. If you believe that your inverter should be on this list, please work directly with the CEC to have it added. Note: Applications submitted to replace existing inverters may not be subject to this requirement, consistent with Rule 21 Section H.3.d.ii (unless further guidance on replacements is received from the California Public Utilities Commission).

Compliance

Please note that PG&E reserves the right to inspect or assess your generating facility to ascertain compliance with these requirements. Non-compliant generating facilities may be removed from net energy metering, approval to operate (PTO) may be revoked and/or other actions undertaken as necessary to ensure the generating facility is compliant.

Download PG&E Info on Solar NEM Consumer Protection Requirements (PDF, 142 KB)

Download ACEIT User Guide of Changes (PDF, 652 KB)

Download SNEM User Guide of Changes (PDF, 553 KB)

Beginning June 22, 2020, all applicants with inverter-based technologies submitting new interconnection requests under PG&E's Rule 21 tariff will be required to comply with Smart Inverter Phase II communications, and Phase III Function 1 - Monitor Key DER Data, Function 2 - DER Disconnect & Reconnect Command, Function 3 - Limit Maximum Power, and Function 8 - Scheduling Power Value & Modes functionality. Please review the Electric Rule 21 tariff for more specific information on this requirement.

Changes to the Interconnection Portals

The equipment list will be updated to only reflect currently compliant inverters, as listed on the California Energy Commission (CEC) website. If you believe that your inverter should be on this list, please work directly with the CEC to have it added. Note: Applications submitted to replace existing inverters may not be subject to this requirement, consistent with Rule 21 Section H.3.d.ii (unless further guidance on replacements is received from the California Public Utilities Commission).

Compliance

Please note that PG&E reserves the right to inspect or assess your generating facility to ascertain compliance with these requirements. Non-compliant generating facilities may be removed from net energy metering, approval to operate (PTO) may be revoked and/or other actions undertaken as necessary to ensure the generating facility is compliant.

To be eligible for any of the NEM1 programs, PG&E must have received all of the following before or on the day the NEM1 cap was reached:

1. A completed Net Energy Metering Application including all supporting documents and required payments
2. A completed signed NEM Interconnection Agreement
3. Evidence of the applicant’s final inspection clearance from the governmental authority having jurisdiction over the generating system.

IMPORTANT NOTE: NEM1 eligibility is based on PG&E's receipt of the projects final inspection clearance as well as the other two items described above. Applicants who have not provided PG&E with the three items above, even if they have signed an agreement with a contractor or third party provider for solar installation, do not meet the eligibility requirements for NEM1.

When PG&E receives a completed application package with the required documentation referenced above, PG&E will review each application and deem it complete and ready for interconnection. Applicants will be notified of their completion status once their application is deemed complete. Notification will also include information on eligibility for either the NEM1 program or the NEM2 program.

Current eligible participants in the NEM1 program are “grandfathered” as follows: Customers may remain on their current NEM1 program from the date of the issuance of the “Permission to Operate” (PTO) letter from PG&E until the date of the customer’s first Energy True-Up in the twenty first (21st) year. For example, if a customer had a NEM1 PTO date in July of 2010, they would be eligible to stay on their current NEM1 program through their annual True-up in 2031.

If the renewable generator is modified or repaired during the "grandfathering" period, the customer will remain eligible only if the NEM1 system does not increase in size more than 10 percent of the generating capacity in the original PTO letter, or 1 kW, whichever is greater.

However, if the capacity increase is greater than 1 kW or 10% of the original approved generator capacity, whichever is larger, the customer cannot utilize the NEM1 program for the entire system. The customer would have the following two options:

1. Separately meter* the added capacity  with NEMMT to take service under the NEM2 program, or
2. Elect for the entire system to take service under the NEM2 program.

The separately metered system is eligible to be grandfathered under the NEM2 program for the full 20 years. However, if the entire system takes service under the NEM2 program, it will be grandfathered under the NEM2 program beginning from the date of the issuance of the NEM1 PTO.

*This option is only available if the solar arrangement allows the added capacity to be separately metered.

If the renewable generator is transferred to a new owner, operator, or PG&E account at the original location, it will not lose eligibility for the original 20-year "grandfathering" period unless the previous customer either requested to be removed from NEM1 or elected to transition to the NEM2 program.