Utilities concerned about lost revenues have begun urging state legislatures and public service commissions to impose fixed charges for net metering customers and to decrease the rate of compensation those customers receive for the energy they generate. Environmentalists and individuals seeking to generate their own electricity for financial or libertarian reasons have argued opposite positions. One goal of this Article is to evaluate the respective arguments. An ideal pricing mechanism would take into account the potential environmental and health benefits of cleaner energy and the grid-related costs resulting from distributed generation. Our second goal is to provide an alternative compensation structure for distributed solar generation that can also be used consistently and fairly for all types of energy sources. Our final goal is to highlight the need to analyze net metering in the context of more comprehensive energy policies, such as much-needed reform in electricity pricing policy.