SOLAR 101 – THE TRUTH ABOUT THE TRUE-UP
You’ve just gone solar. Your $500 a month electric bill has been slashed to $300 and you couldn’t be happier. Everything is fine and dandy until – BAM! One year after you go solar you get a bill for $1,000 from your electric company. What happened? You went solar. Why do you have to pay your greedy electric company?
You have just received your first “true-up” bill. This is the bill that you have to pay your electric company when you, a customer with solar, use more power than you generate. Every situation is unique, and not everyone receives this bill. But everyone who has solar, or is thinking about going solar, should understand what it is, how to predict if they will receive it, and how to prepare for it if you expect that it is coming.
When you go solar, you are essentially contracting with a solar installer to install a system that will produce a certain amount of power. It is an estimated amount of power, but it is not unlimited. The contract that you sign will NEVER guarantee that your solar system will produce all of the power you need. That is impossible to guarantee. While the system is usually designed using the amount of power you used the previous 12 months, it is only an estimate. Lifestyles change. Weather is different from year to year. You cannot know how much power you are going to use every year going forward.
That is why you still have to be connected to the grid.
When you sign an agreement with a solar company, you will also sign an agreement with your electricity provider. This agreement is called a NEM, or Net Energy Metering agreement. The Net Metering agreement sets the terms between you and your power provider regarding the exchange of power between your home and the grid. Your solar system will typically produce more power during the day than you will actually use. Unless you have a battery, the excess power that you generate will go back into the grid, and your electric provider will credit you for that power. At night, when the sun isn’t shining, you still need electricity. That is when you pull that power that you sent them back out of the grid. At the end of the year, they add it all up. If you generated more power than you used, they will send you a check. If you used more than you generated, they will send you a true-up bill. Here’s where they get you. They will still send you a monthly bill for minimal charges, but it will not represent what you owe or may be owed for power – at least not on the front page. Usually, as you get deeper into the bill, you will see the amount of power your solar generated versus the amount of power you pulled out of the grid. Most people just look at what they owe on the front page and figure that they are in the clear. If they are not keeping track of those numbers deeper in the bill, they could be in for an unpleasant surprise.
Even if your usage varies slightly from year to year, your trueup bill shouldn’t be too much. Why do some people report trueup bills of $500, $1,000, $2,000, or more? If the system is designed to cover your historical usage, why could your bill be so high?
The answer is likely one of two things.
The first possible answer is that your solar system might not have been designed to cover all of your usage. A few years ago, when solar was more expensive, many systems were designed to “tier-shave,” or to just cover the most expensive power. This practice would leave some power to be bought from the utility. Because most of the major utilities use a tier system, meaning the cost of power goes up the more you use, leaving some power in the first tier could actually save the homeowner more money than by covering all of the power with solar. So even with a large true-up bill, the overall cost of power could be less than it was before solar. The problem comes when the homeowner isn’t fully aware that this is what’s going on. Perhaps the salesperson wanted to exaggerate the savings, so they neglected to educate the homeowner that there was some power that they would have to buy from the utility. The flip side is that perhaps the salesperson did explain it, but because the homeowner has to absorb so much information during the solar process, they were unable to retain that key piece of information. When the homeowner is aware that the system won’t cover all of their power needs, then they can work with the salesperson to determine an estimated monthly amount that they should send to their utility. That way they spread the cost out over 12 months and aren’t surprised with a huge bill.
The other likely scenario leading to a large true-up bill is that the homeowner changes their lifestyle after they get solar. Some people go solar and then they think that they can use as much power as they want. Instead of setting their thermostat to 78 in the summer, they set it to 72. Perhaps they aren’t as careful about keeping doors and windows closed, or they leave their televisions, computers, and devices on for long periods of time. Sometimes their increased use of power is due to other circumstances. Perhaps there were more hot days in a given year requiring the homeowner to run their air conditioner more. Maybe they welcomed a new baby or another relative into the home. Maybe somebody’s work situation changed and they were now home more during the day. Whatever the situation may be, a seemingly minor change could have a major impact on how power is used in the home.
That should give you a little more clarity regarding the True Up bill. Remember – no solar installer will guarantee that their system will cover all of your power needs. They only guarantee how many kilowatts the system will produce on an annual basis. Anything else will still be covered by the utility. If you understand how to read your bill, you should have a good idea of whether or not you have a large true-up coming. Once you understand that, you can prepare by sending monthly payments to your utility to alleviate the stress of receiving one large bill at the end of the year. One of the goals of solar is to give you control over how you buy power. Knowing how to manage your true-up bill will help you maintain that control.
As always, feel free to reach out through our contact page if you want us to take a look at your specific situation, whether you are a potential customer or not. We offer this free service in hopes that you will consider referring your friends and family to us in the future.
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