Embodiments of the virtual machine power metering system and method measure the power consumption of individual virtual machines. Power meter measurements for a physical host server are converted into individual virtual machine power meters that measure the power consumption of each individual virtual machine residing on the host server. The virtual machine power consumption is computed by generating a power model using the total power consumption of the host server and resource utilization for a virtual machine. Optimal power model coefficients are computed using the power model. The energy used by the virtual machine is computed using one of two embodiments. Embodiments of the system and method also can be used to obtain the power consumption for a specific activity (such as a service, request, or search query). In addition, the virtual machine power metering can be used for virtual machine power capping to allow power oversubscription in virtualized environments.