In Germany, Spain, Italy and other European countries, the promotion and development of distributed residential photovoltaic (PV) generation markets has been based mainly on the mechanism of regulated premiums by kWh generated-Feed in Tariff. The United States has employed the net metering mechanism. Both mechanisms have determined the price of the electricity injected to the grid energy be equal or higher than the grid electricity tariff. The accelerated cost reduction of PV technology has allowed, in diverse electricity markets, Grid parity. This circumstance has driven the revision and reformulation of the promotion mechanisms for distributed PV generation. This paper is a proposal to evaluate the net billing and selfconsumption mechanism and the impact on the business sustainability of the distribution system operators (DSOs); as well as the economic incentive for the residential user to become prosumer. The mechanism has applied to the electricity retail market of Arequipa, located in southern Peru, with a specific solar potential higher than 2000 kWh/kWp. The results showed that: The subsidized electricity tariff for consumer less than 100 kWh/month, would not reach full grid parity before 2020. For consumer of higher than 100 kWh/month, the net billing and self-consumption mechanism allows the promotion of distributed PV generation. In addition, the under net billing, DSO would maintain their business sustainability. Finally, under the net billing mechanism the user will have the incentive not to oversize the grid-connected PV power.