When did NEM 3.0 take effect?

The California Public Utilities Commission approved it in December 2022, and it took effect for new residential applications on April 14, 2023. Systems whose interconnection applications were submitted before that date were grandfathered onto NEM 2.0. If your system predates the cutoff, you keep the older, more generous rules for your legacy period.

How does NEM 3.0 change export credits?

Instead of crediting exports near the retail rate, NEM 3.0 uses avoided-cost rates that vary by hour, season, and day — published in long lookup tables. Most daytime export hours are credited at just a few cents per kWh, far below what you pay to buy power back. The credits spike during the late-afternoon and evening peak (roughly 4–9 PM), which is when solar production is already winding down. In practice this means exporting midday surplus is worth much less than using or storing that energy yourself.

Why do batteries matter under NEM 3.0?

Because the gap between what you earn for exporting power and what you pay to buy it back got much wider. A battery lets you store your cheap midday production and use it during the expensive 4–9 PM peak instead of exporting it for pennies. That self-consumption is where most of the savings come from now — which is why solar+battery payback (roughly 6–9 years) beats solar-only (roughly 10–14 years) for most SoCal homes on the investor-owned utilities. A battery also keeps your home powered during outages and PSPS events.

Who is exempt from NEM 3.0?

NEM 3.0 only governs the investor-owned utilities. Municipal utilities — including LADWP, Pasadena Water & Power, and Riverside Public Utilities — set their own net-metering rules and were not changed by NEM 3.0. Those rules are generally more favorable, so solar-only systems can still pencil out well in muni territory. Existing NEM 2.0 customers are also effectively exempt for their 20-year legacy period.

What is the difference between NEM 2.0 and NEM 3.0?

The export credit. Under NEM 2.0, a kilowatt-hour you sent to the grid was credited at close to the retail rate you pay. Under NEM 3.0 (the Net Billing Tariff), exports are credited at avoided-cost values that are roughly 75% lower on average and change by the hour. NEM 2.0 systems were designed to export surplus; NEM 3.0 systems are designed to store it in a battery and use it during the 4–9 PM peak. Which one you're on depends on when your interconnection application was submitted: by April 14, 2023 for NEM 2.0, on or after April 15, 2023 for NEM 3.0.

Is net metering going away in California?

Not for people who already have it. NEM 1.0 and 2.0 customers keep their legacy terms for 20 years from permission to operate, and that status stays with the system if the home is sold. For new solar on SCE, PG&E, or SDG&E, retail-rate net metering ended on April 14, 2023 and was replaced by net billing (NEM 3.0). Municipal utilities such as LADWP, Pasadena Water & Power, and Riverside Public Utilities run their own net-metering programs and were not changed by the CPUC decision.

How do I know if I'm on NEM 2.0 or NEM 3.0?

Check the date your interconnection application was submitted to your utility — that is what decides it, not the install or turn-on date. Your utility bill or online account names the tariff you're on, and your installer's interconnection approval shows the application date. If you bought a home with existing solar, the previous owner's application date applies because the status transfers with the system.

Is NEM 2.0 or NEM 3.0 better for the homeowner?

NEM 2.0 is more generous, which is why grandfathered systems are worth protecting. But NEM 3.0 doesn't make solar a bad investment — it changes the design. A solar-only system sized to export surplus no longer pencils well; a system sized to your usage and paired with a battery that covers the 4–9 PM peak still cuts bills substantially, with a typical solar+battery payback of about 6–9 years for SoCal homes on the investor-owned utilities.

Can I add panels without losing NEM 2.0?

Within limits. NEM 1.0 and 2.0 customers can increase their generating capacity by up to 10% of the original system size or 1 kW, whichever is greater, and keep their legacy status. Expand beyond that and the whole system moves to NEM 3.0. Adding a battery doesn't count against this limit, because storage isn't generation — so adding storage is usually the better upgrade for a grandfathered system. Have any expansion design reviewed against the rules before work starts.

Will my export rates change for a system connected in 2027?

Export credits under the Net Billing Tariff are built from the CPUC's Avoided Cost Calculator, and the CPUC guarantees a customer the use of the tariff for nine years from interconnection; residential SCE and PG&E customers who apply before the end of 2027 also keep the higher ACC Plus export adder for nine years. On October 8, 2026 the CPUC adopted the 2026 Avoided Cost Calculator (Resolution E-5476). It values avoided costs higher in every hour than the 2024 version, mainly because its greenhouse-gas value is much higher, while its energy value is lower. The resolution covers cost-effectiveness analysis and does not itself set export rates; whether and when SCE, SDG&E and PG&E carry the 2026 values into the export schedule for new interconnections comes through their tariff filings. If you are signing in late 2026 or 2027, ask for the export schedule your system would interconnect under and check it against your utility's Solar Billing Plan page.

Guide

NEM 3.0 explained, without the jargon.

NEM 3.0 is California's net metering 3.0 rule, and it reshaped the economics of rooftop solar in 2023. Here's what it actually is, why it cut export credits by about 75%, and what it means if you're going solar today.

Guides / NEM 3.0 explained

By Taylor Crouse, Founder · Updated October 16, 2026

California home with rooftop solar at dusk near a utility meter and power lines

What NEM 3.0 actually is.

"NEM" stands for net energy metering — the system that credits you for the solar power you send back to the grid. California is on its third major version of those rules, which is why everyone calls it NEM 3.0 (its official name is the Net Billing Tariff). It governs customers of the investor-owned utilities: Southern California Edison, SDG&E, and PG&E.

Under the previous rules, NEM 2.0, a kilowatt-hour you exported was credited at close to the full retail rate — roughly the same as a kilowatt-hour you bought. That made solar-only systems easy to justify. NEM 3.0 changed the credit from retail value to avoided-cost value, which is much lower. The practical effect: the typical credit for exported power dropped by around 75%.

Will NEM 3.0 be overturned in California?

No. The legal challenges to NEM 3.0 are over. On June 10, 2026 the California Supreme Court declined, for the second and final time, to review the appellate decision upholding the Net Billing Tariff. The petition had been brought by the Environmental Working Group, the Center for Biological Diversity, and the Protect Our Communities Foundation.

That makes NEM 3.0 the permanent rule for SCE, PG&E, and SDG&E customers. There is no pending case that could change the export-credit math below. Any future changes would come through CPUC rate proceedings — adjustments to the export-value tables or new subtariffs — not a return to retail-rate net metering. pv magazine, June 10, 2026

The three things to understand.

It took effect in April 2023

Any residential solar system on an investor-owned utility submitted for interconnection after April 14, 2023 is on NEM 3.0. Earlier systems were grandfathered onto the older NEM 2.0 rules.

Export credits fell ~75%

The credit you earn for sending surplus power to the grid dropped sharply. Exported energy is now valued at avoided-cost rates that are a small fraction of the retail rate you pay.

Timing is everything

Export values change hour by hour and are highest during the 4–9 PM peak — exactly when your panels make the least. Storing power to spend during that window is where the value now lives.

Avoided-cost rates and the 4–9 PM peak.

Under NEM 3.0, the value of an exported kilowatt-hour isn't a single number — it changes by the hour, the season, and even the day, and the utilities publish those values in long lookup tables. Most midday hours, when your panels produce the most, are credited at only a few cents per kWh.

The credits climb during the late-afternoon and evening peak, roughly 4–9 PM — which is precisely when the sun is setting and your production is fading. That mismatch is the whole story of NEM 3.0: the power you have the most of is worth the least, and the hours when exports are valuable are hours when you barely have any to export.

This is why the conversation shifted toward storage. If you can keep your midday surplus in a battery and release it during that evening peak — to power your own home, offsetting expensive grid purchases — you capture the value that exporting alone now throws away.

Why NEM 3.0 made batteries the default.

Before NEM 3.0, the grid acted like a near-free battery: export by day, pull power back by night at almost the same value. NEM 3.0 broke that trade. Now self-consumption — using your own solar rather than exporting it — is what drives the return. A real battery fills that role, which is why solar+battery payback (about 6–9 years) outperforms solar-only (about 10–14 years) for most homes on SCE, SDG&E, and PG&E.

How battery storage works Do you need a battery?

Who's exempt: municipal utilities

NEM 3.0 only applies to the investor-owned utilities. If your power comes from a municipal utility — LADWP, Pasadena Water & Power, Riverside Public Utilities and others — you're on their own net-metering program, which the state's NEM 3.0 decision did not touch. Those programs are generally more generous, so solar-only can still make strong financial sense in muni territory.

Grandfathering: pre-2023 NEM 2.0 systems

If your interconnection application was submitted before April 14, 2023, you were grandfathered onto NEM 2.0 and keep those more favorable export credits for a 20-year legacy period from your permission-to-operate date. That status generally stays with the system — worth knowing if you own or are buying a home with existing pre-2023 solar.

NEM 2.0 vs. NEM 3.0: what actually changed.

One thing changed that matters: what an exported kilowatt-hour is worth. Everything else — how a system is sized, whether it needs a battery, why the 4–9 PM window matters — follows from that.

	NEM 2.0	NEM 3.0 (Net Billing Tariff)
Who's on it	Interconnection applications submitted by April 14, 2023	Applications submitted on or after April 15, 2023
Export credit	Close to the retail rate you pay	Avoided-cost values — roughly 75% lower on average
Best strategy	Export surplus by day, net it against night-time usage	Store surplus in a battery and use it during the 4–9 PM peak
Battery	Optional	Where most of the savings now come from
Legacy period	20 years from permission to operate	Not applicable — this is the current tariff

Am I on NEM 2.0 or NEM 3.0?

The date that decides it is when your interconnection application was submitted to your utility — not when the panels were installed or switched on. Applications in by April 14, 2023 locked in NEM 2.0; anything after that is NEM 3.0.

Three ways to check: your utility bill or online account names the tariff you're on; your installer's interconnection approval shows the application date; and if you bought a home with solar already on the roof, the previous owner's paperwork applies, because the status transfers with the system.

One trap for grandfathered customers: you can expand a NEM 2.0 array by up to 10% of its original size or 1 kW, whichever is greater, without losing legacy status. Add more solar than that and the whole system moves to NEM 3.0. Adding a battery is different — storage isn't generation, so it doesn't count against that limit. Read our guides on when NEM 1.0 and 2.0 legacy periods expire and adding a battery to an existing system before you change anything.

What NEM 3.0 means for a new system today.

If you're on SCE, SDG&E, or PG&E and going solar now, you'll be on NEM 3.0 — there's no avoiding it, and no reason to panic about it. It simply means a smart design is built around self-consumption and storage rather than exporting surplus to the grid. Sized and paired correctly, solar still saves most homeowners a great deal of money.

The honest takeaway: NEM 3.0 didn't end residential solar in California. It ended the era of treating the grid as a free battery. We design every system for the NEM 3.0 rules from day one, model both solar-only and solar+battery, and show you the real difference so you can decide.

Common questions about NEM 3.0.

What is NEM 3.0?: NEM 3.0 — formally the Net Billing Tariff — is California's current rules for how rooftop solar owners are credited for the power they send to the grid. It applies to customers of the investor-owned utilities (Southern California Edison, SDG&E, and PG&E). Under the older NEM 2.0, exported power was credited at close to the full retail rate. Under NEM 3.0, exports are credited at much lower avoided-cost values, which cut the typical export credit by roughly 75%.
When did NEM 3.0 take effect?: The California Public Utilities Commission approved it in December 2022, and it took effect for new residential applications on April 14, 2023. Systems whose interconnection applications were submitted before that date were grandfathered onto NEM 2.0. If your system predates the cutoff, you keep the older, more generous rules for your legacy period.
How does NEM 3.0 change export credits?: Instead of crediting exports near the retail rate, NEM 3.0 uses avoided-cost rates that vary by hour, season, and day — published in long lookup tables. Most daytime export hours are credited at just a few cents per kWh, far below what you pay to buy power back. The credits spike during the late-afternoon and evening peak (roughly 4–9 PM), which is when solar production is already winding down. In practice this means exporting midday surplus is worth much less than using or storing that energy yourself.
Why do batteries matter under NEM 3.0?: Because the gap between what you earn for exporting power and what you pay to buy it back got much wider. A battery lets you store your cheap midday production and use it during the expensive 4–9 PM peak instead of exporting it for pennies. That self-consumption is where most of the savings come from now — which is why solar+battery payback (roughly 6–9 years) beats solar-only (roughly 10–14 years) for most SoCal homes on the investor-owned utilities. A battery also keeps your home powered during outages and PSPS events.
Who is exempt from NEM 3.0?: NEM 3.0 only governs the investor-owned utilities. Municipal utilities — including LADWP, Pasadena Water & Power, and Riverside Public Utilities — set their own net-metering rules and were not changed by NEM 3.0. Those rules are generally more favorable, so solar-only systems can still pencil out well in muni territory. Existing NEM 2.0 customers are also effectively exempt for their 20-year legacy period.
Will NEM 3.0 be overturned in California?: No. On June 10, 2026 the California Supreme Court declined, for the second and final time, to review the appellate decision that upheld the Net Billing Tariff. The petition came from the Environmental Working Group, the Center for Biological Diversity, and the Protect Our Communities Foundation. NEM 3.0 is now the permanent rule for SCE, PG&E, and SDG&E customers, and there is no pending case that could change it. Future changes would come through CPUC rate proceedings, not a return to retail-rate net metering.
What is the difference between NEM 2.0 and NEM 3.0?: The export credit. Under NEM 2.0, a kilowatt-hour you sent to the grid was credited at close to the retail rate you pay. Under NEM 3.0 (the Net Billing Tariff), exports are credited at avoided-cost values that are roughly 75% lower on average and change by the hour. NEM 2.0 systems were designed to export surplus; NEM 3.0 systems are designed to store it in a battery and use it during the 4–9 PM peak. Which one you're on depends on when your interconnection application was submitted: by April 14, 2023 for NEM 2.0, on or after April 15, 2023 for NEM 3.0.
Is net metering going away in California?: Not for people who already have it. NEM 1.0 and 2.0 customers keep their legacy terms for 20 years from permission to operate, and that status stays with the system if the home is sold. For new solar on SCE, PG&E, or SDG&E, retail-rate net metering ended on April 14, 2023 and was replaced by net billing (NEM 3.0). Municipal utilities such as LADWP, Pasadena Water & Power, and Riverside Public Utilities run their own net-metering programs and were not changed by the CPUC decision.
How do I know if I'm on NEM 2.0 or NEM 3.0?: Check the date your interconnection application was submitted to your utility — that is what decides it, not the install or turn-on date. Your utility bill or online account names the tariff you're on, and your installer's interconnection approval shows the application date. If you bought a home with existing solar, the previous owner's application date applies because the status transfers with the system.
Is NEM 2.0 or NEM 3.0 better for the homeowner?: NEM 2.0 is more generous, which is why grandfathered systems are worth protecting. But NEM 3.0 doesn't make solar a bad investment — it changes the design. A solar-only system sized to export surplus no longer pencils well; a system sized to your usage and paired with a battery that covers the 4–9 PM peak still cuts bills substantially, with a typical solar+battery payback of about 6–9 years for SoCal homes on the investor-owned utilities.
Can I add panels without losing NEM 2.0?: Within limits. NEM 1.0 and 2.0 customers can increase their generating capacity by up to 10% of the original system size or 1 kW, whichever is greater, and keep their legacy status. Expand beyond that and the whole system moves to NEM 3.0. Adding a battery doesn't count against this limit, because storage isn't generation — so adding storage is usually the better upgrade for a grandfathered system. Have any expansion design reviewed against the rules before work starts.
Will my export rates change for a system connected in 2027?: Export credits under the Net Billing Tariff are built from the CPUC's Avoided Cost Calculator, and the CPUC guarantees a customer the use of the tariff for nine years from interconnection; residential SCE and PG&E customers who apply before the end of 2027 also keep the higher ACC Plus export adder for nine years. On October 8, 2026 the CPUC adopted the 2026 Avoided Cost Calculator (Resolution E-5476). It values avoided costs higher in every hour than the 2024 version, mainly because its greenhouse-gas value is much higher, while its energy value is lower. The resolution covers cost-effectiveness analysis and does not itself set export rates; whether and when SCE, SDG&E and PG&E carry the 2026 values into the export schedule for new interconnections comes through their tariff filings. If you are signing in late 2026 or 2027, ask for the export schedule your system would interconnect under and check it against your utility's Solar Billing Plan page.

Sources

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