Net Metering With Co-ops and Municipal Utilities in Minnesota
Dakota Electric, Connexus and city-owned utilities follow the same state law as Xcel, but with more leeway on fees and credits. Here's what changes and how to size around it.
Reviewed by John Ihle, MN Master Electrician (AM005101) · NABCEP-credentialed · iSolar, Saint Paul Park, MN · Last reviewed October 2026
The short answer: Under Minn. Stat. 216B.164, co-ops and municipal utilities must net meter systems under 40 kW, but they can choose how surplus is valued (avoided cost, average retail energy rate, or kWh credits that cancel at year end) and can charge a fixed-cost fee backed by a cost-of-service study. Always check your utility's tariff before sizing.
Why your utility matters as much as your roof
Most solar advice in Minnesota assumes you're an Xcel customer. Plenty of homeowners aren't. Large parts of the south and north metro are served by electric cooperatives like Dakota Electric and Connexus Energy, both members of the Great River Energy wholesale cooperative. Cities like Rochester, Shakopee, Anoka and Elk River run their own municipal utilities. Greater Minnesota is a patchwork of co-ops and munis, which is why so many lake cabin solar projects end up on co-op tariffs even when the owner’s home in the metro is on Xcel.
The same state law covers all of them, but it gives co-ops and municipal utilities more room to set their own terms. Two houses with identical roofs and identical systems can get noticeably different value from solar depending on which side of a service-territory line they sit on.
What Minnesota law says: Minn. Stat. 216B.164 basics
Minnesota's net metering law is Minn. Stat. 216B.164. For residential-size systems, the key threshold is under 40 kW. Here's how it splits:
| Rule | Xcel (public utility) | Co-ops and municipal utilities |
|---|---|---|
| How you're billed | On net energy, under your normal rate schedule | On net energy, under your normal rate schedule |
| Value of surplus energy (under 40 kW) | Average retail utility energy rate (customer may elect it) | One of: avoided-cost rate, average retail energy rate, or a kWh credit carried forward |
| Unused credits at year end | Rolls forward; Xcel pays by check above a tariff threshold | Under the kWh-credit option, credits cancel at the end of the calendar year with no additional payment |
| Extra fee for solar customers | Not a separate solar fee on residential bills | Allowed: a fee to recover fixed costs not already paid, if reasonable and based on the most recent cost-of-service study |
| Size limit tied to usage | 120% of annual usage applies through Solar*Rewards; statutory cap applies at 40 kW and up | Set by the utility's tariff for 40 kW and up; some co-ops don't limit systems under 40 kW by usage |
The statute also says that if a co-op or muni charges that extra fee, the cost-of-service study behind it must be available for review by a customer on request. If your utility has a distributed generation charge, you're entitled to ask how it was calculated.
Monthly netting vs. annual credits
This is where co-op and muni solar gets interesting, because the choice of compensation option changes the math.
Monthly netting at a retail-based rate
Your usage and exports are netted each month. If you export more than you use, the surplus is bought at a set rate, often close to the average retail energy rate. It's simple and it pays you in summer. The trade-off is that many co-ops pair this option with a monthly grid-access or distributed generation charge.
kWh credits carried forward
Surplus kWh bank as credits and get used in later months. This works well if your system is sized close to your annual usage, because summer credits cover winter shortfalls. But under the statute, credits left at the end of the calendar year cancel with no additional compensation. Oversize the system and you're giving energy away every December.
Avoided-cost or "buy-all, sell-all" options
Some utilities offer a simultaneous purchase-and-sale arrangement, where you buy everything at retail and sell everything at a much lower rate tied to the utility's avoided cost. It's rarely the best choice for a home, but it's worth knowing it exists.
Real example: Connexus Energy's four options
Connexus publishes its options on its generate your own energy page. As listed there, members with systems under 40 kW AC choose one of:
- Average retail cooperative energy rate: excess bought at $0.124/kWh, plus a Distributed Generation Grid Access charge based on system size.
- Simultaneous purchase and sale: about $0.046 to $0.051/kWh for energy sold.
- Roll-over credits: kWh credits carried forward, with any credits left at year end canceled.
- Time-of-Day purchase service: about $0.035 to $0.059/kWh depending on the period.
Connexus also notes that systems under 40 kW aren't limited by the member's usage, and that net metering members can't stay on certain programs like Peak-Time Rebate, whole-house Time-of-Day or budget billing. Those are exactly the details you need before you size a system. Rates change, so confirm the current tariff before you sign.
Dakota Electric handles qualifying facilities under 40 kW through its own net metering tariff and an online interconnection application, and it lists a one-time $500 residential solar rebate per premise after installation and commissioning on its connect your own system page. Check its current tariff sheet for how excess is valued.
How to size solar for a co-op or muni
On Xcel, slightly oversizing within Solar*Rewards' 120% limit isn't a big penalty because surplus is valued near retail and doesn't expire. On a co-op or muni, the rules reward tighter sizing:
- Size to roughly 90 to 100% of annual usage if your credits expire at year end or surplus is bought at a low rate.
- Factor in the fixed monthly DG charge. On a small system, a grid-access charge can eat a meaningful share of the savings. Run the math on 12 months of bills, not one.
- Consider self-consumption. Energy you use the moment it's made is worth full retail regardless of the export rate. Shifting dishwashers, laundry and EV charging into daytime helps more on a low-export-rate utility than it does on Xcel.
- Batteries can matter more. When exports are bought at a low rate, storing midday solar for evening use has real value. Our battery sizing guide covers how to size one.
Our free system size estimator gives a starting point; then adjust for your utility's tariff.
Questions to ask your co-op or municipal utility
- Which net metering compensation options do you offer for systems under 40 kW, and what is each one's current rate?
- Is there a distributed generation, grid-access or fixed-cost charge for solar members? How much, and how is it calculated?
- Do unused kWh credits cancel at year end, and when does your credit year reset?
- Can I stay on my current rate plan or programs (time-of-day, peak rebate, budget billing) after interconnection?
- What's the interconnection application fee and process, and do you require an external disconnect?
- Do you offer any solar or battery rebates right now?
Get the answers in writing or from the published tariff. A salesperson's summary isn't good enough, especially from an out-of-state company that sells the same pitch in every territory.
Interconnection works a little differently too
Xcel follows the Minnesota PUC's statewide interconnection process. Many municipal utilities use a parallel municipal process with a simplified track for inverter-based systems up to 20 kW AC, including set timelines for application review, a signed agreement, an inspection certificate and permission to operate. Co-ops have their own applications, like Dakota Electric's member portal. The steps are similar, but forms, fees and wait times vary. See our guide to Minnesota permits and interconnection for the overall sequence.
Get a quote built on your utility's rules
We install across Xcel, co-op and municipal territories in the Twin Cities, greater Minnesota and western Wisconsin, and we size every system to the utility that will actually serve it. Request a quote and include a recent bill so we can read your tariff before we design anything.
Sources
- Minnesota Revisor of Statutes — Minn. Stat. 216B.164, Cogeneration and Small Power Production
- Connexus Energy — Generate Your Own Energy (net metering options)
- Dakota Electric Association — Connect Your Own System
- Minnesota Municipal Utilities Association — M-MIP Simplified Process booklet (up to 20 kW)
Frequently asked.
Do Minnesota electric co-ops have to offer net metering?
Yes, for qualifying systems under 40 kW. Minn. Stat. 216B.164 requires co-ops and municipal utilities to bill on net energy and compensate net input, but it lets them choose among compensation methods and add a reasonable fixed-cost fee.
Can my co-op charge me a fee for having solar?
State law allows co-ops and municipal utilities to charge an additional fee to recover fixed costs not already covered by your bill. The charge must be reasonable for your customer class and based on the most recent cost-of-service study, which you can request to review.
What happens to unused solar credits at the end of the year with a co-op?
If you choose the kWh-credit carry-forward option, the statute says credits left at the end of the calendar year cancel with no additional payment. Other options buy surplus monthly instead, so check which one you're on.
How much does Connexus pay for excess solar?
Connexus lists $0.124/kWh under its average retail cooperative energy rate option, paired with a Distributed Generation Grid Access charge, plus lower-rate alternatives. Rates change, so confirm the current figures on its tariff before signing.
Should I size my solar system differently on a co-op?
Usually yes. When surplus is valued low or credits expire at year end, sizing close to 90 to 100% of annual usage and maximizing daytime self-consumption tends to give better value than oversizing.
Does Dakota Electric offer a solar rebate?
Dakota Electric lists a one-time $500 residential solar rebate per premise after installation and commissioning. Program funding and terms can change, so check its website before you count on it.
Have a question we haven't covered?
Talk to a local iSolar expert — free, no pressure. Call (651) 565-1140.