This project focused on how state-level regulators might best react to the growing share of electricity coming from small-scale solar energy and potentially other forms of distributed generation. Electric utilities are concerned that current policies such as net metering compensating the owners of distributed generation will raise the rates for the other ratepayers and eventually threaten the recovery of fixed costs for utilities. Proponents of distributed generation on the other hand criticize that the owners of distributed generation are insufficiently compensated for the societal benefits they provide. This issue has led to fierce debates over future net metering regulations in states such as Arizona or California. Our study explores the problem and offers solutions to balance the interest of electric utilities, owners of distributed generation, and ratepayers.