Net Surplus Compensation (NSC) Explained: Why Utilities Pay 3¢/kWh for Excess Annual Solar
One of the biggest shocks at Month 12 True-Up happens to homeowners who generated MORE electricity than they used all year (-2,500 kWh net surplus): instead of paying you the $0.45/kWh retail rate ($1,125), the utility pays you the wholesale Net Surplus Compensation (NSC) rate of $0.03/kWh ($75)—and still bills you $190 for Non-Bypassable Charges!
Key Forensic Statement Takeaways
- ✓Within-Year Retail Credits vs. End-of-Year Wholesale NSC: During your 12-month cycle under NEM 2.0, every kWh you export offsets a kWh you import at full retail TOU value ($0.38–$0.60/kWh). But at midnight on the final day of Month 12, any LEFTOVER net kWh surplus over 100% of your annual consumption is cashed out at the AB 920 wholesale Net Surplus Compensation rate (~$0.026 to $0.044/kWh)!
- ✓Why You Can Have a -2,000 kWh Surplus and STILL Owe Money at True-Up: Because a -2,000 kWh surplus only earns ~$65 in NSC credit, whereas the 5,000 kWh you imported at night accrued $160 in Non-Bypassable Charges (NBCs) plus a 4–9 PM TOU peak rate differential!
- ✓Never Let Excess Solar Credits Go to Waste at 3¢/kWh: If you reach Month 10 of your True-Up cycle with a large negative kWh/dollar credit balance, USE THAT POWER BEFORE MONTH 12 ENDS! Run electric space heaters, super-heat your heat pump water heater, or plug in an EV rather than handing the utility 45¢ power for 3¢!
Line-by-Line Utility Statement Decoder & Elimination Strategy
| Statement Line Item | What It Actually Means | Typical Cost / Rate | How to Slash or Zero It |
|---|---|---|---|
| Net kWh Exported Over 12 Months (-2,500 kWh) | Your solar panels produced 2,500 kWh more than your home consumed over the full year | Valued at AB 920 NSC Rate (~$0.032/kWh = $80 credit) | Electrify a gas appliance (Heat Pump Water Heater / Heat Pump HVAC / Induction / EV) to use those kWh at $0.45+ value! |
| Unused NEM Dollar Tracked Credit (-$650) | Leftover retail TOU dollar credit in excess of annual charges | FORFEITED TO $0 AT MONTH 12! | Switch winter heating from natural gas ($2.20/therm) to electric heat pumps/heaters during Months 10–12! |
4-Step Action Plan to Eliminate Next Year's True-Up Bill
Solar system was oversized for future EV/family growth, or kids moved out to college, leaving a 2,000–4,000 kWh annual surplus.
Elect 'NSC Rollover Credit' on your utility account so the $70–$120 NSC credit automatically applies against next year's Non-Bypassable Charges and fixed delivery fees.
Replace your natural gas water heater with a Rheem ProTerra Heat Pump Water Heater (~900 kWh/yr) or add a Level 2 EV charger (~3,000 kWh/yr = 10,000 free driving miles!).
Electrifying gas appliances inside your home uses up your 3¢ surplus kWh to save $1,200+/yr in SoCalGas / PG&E gas bills!
Optimization Wins
- +Converting 3,000 kWh of 3¢ NSC surplus into EV charging replaces $1,350/year of $4.50/gal gasoline!
- +Converting 1,500 kWh of surplus solar into heat pump heating slashes winter natural gas bills by $600+
- +Choosing 'Bill Credit Rollover' instead of 'Cash Check' applies NSC directly to fixed delivery fees
Tariff Traps to Avoid
- −AB 920 statutory formula ties NSC to wholesale DLAP market prices, which have dropped due to midday utility-scale solar abundance
Frequently Asked Questions
Why does PG&E/SCE charge me 48 cents per kWh when I buy electricity, but only pay me 3 cents per kWh when I have excess solar at the end of the year?
Under California Assembly Bill 920 (AB 920), utilities are required to credit your solar exports at full retail value ONLY up to 100% of your own annual electricity usage. Once you cross 100% and become a net power generator for the year, state law sets the payout for the excess surplus at the utility's wholesale Default Load Aggregation Point (DLAP) avoided cost (~3¢–4¢/kWh).
What is the smartest way to use up 2,500 kWh of excess annual solar production?
Stop burning expensive natural gas or gasoline! 2,500 kWh of excess solar powers an electric vehicle for 8,500 miles a year (saving ~$1,400 in gas) OR runs a heat pump water heater and two mini-split heat pumps all winter (saving ~$900 in gas bills)—turning $75 of NSC pennies into $1,000+ of real tax-free savings!
Was Your True-Up Bill Caused by Under-Producing Solar Panels?
Run your contract guaranteed kWh vs. actual produced kWh through our Production Guarantee Auditor to claim cash reimbursement.