NEM 3.0 California: Net Billing Rules, Export Rates & 2026 Updates
NEM 3.0 California is the common name for the state's Net Billing Tariff, the policy that replaced NEM 2.0 for most new solar customers of PG&E, SCE, and SDG&E. It applies to interconnection applications submitted on or after April 15, 2023. Solar installers often hear it called NEM3, net energy metering 3.0, or simply the Net Billing Tariff, all referring to the same program.
Under earlier net metering rules, a home's solar exports earned close to the retail electricity rate. NEM 3.0 credits exports using the Avoided Cost Calculator instead, a value that shifts by hour, season, and utility. That single change is why battery storage now plays a bigger role in almost every California solar design.
California NEM 3.0 has also cleared its last legal hurdle. The California Supreme Court declined a final appeal in June 2026, so the tariff remains the law for new PG&E, SCE, and SDG&E interconnections. This guide breaks down what changed, current export rates, and what installers need for a clean interconnection package.
Need accurate interconnection paperwork for a NEM 3.0 project? GreenLancer's engineering team prepares utility interconnection applications for solar installers across California.
NEM 3.0 California Quick Facts
Official name: Net Billing Tariff
Common names: NEM 3.0, NEM3, net energy metering 3.0
Effective date: April 15, 2023
Utilities covered: PG&E, SCE, and SDG&E
LADWP and SMUD: Not covered, both run separate programs
Export rates: Time-varying avoided-cost values, generally below retail rates but higher during peak evening hours
Battery required: No, though storage significantly improves the economics
Legal status: In effect, upheld through California's court system as of June 2026
What Is NEM 3.0 In California?
NEM 3.0 in California describes how the state's three large investor owned utilities pay solar customers for electricity their systems send to the grid. The name stuck even though the CPUC's official term is the Net Billing Tariff. Here is what the policy covers and who it reaches.
What Does NEM Stand For?
NEM stands for net energy metering. It refers to the billing structure that credits solar customers for excess electricity their grid-tied solar interconnection sends back to the utility. Utilities compare how much power a customer's array produces against how much the customer pulls from the grid, often under time-of-use billing that charges more during peak hours.
Who Does NEM 3.0 Apply To?
NEM 3.0 applies to residential and small commercial solar customers who submit an interconnection application to PG&E, SCE, or SDG&E on or after April 15, 2023. It also applies to anyone who expands an existing system enough to trigger a new interconnection review. Customers who submitted a qualifying NEM 2.0 interconnection application by April 14, 2023 keep their legacy terms for 20 years, even if their Permission to Operate came later.
NEM 3.0 covers:
New PG&E, SCE, and SDG&E interconnection applications submitted after April 14, 2023
Systems that trigger a new interconnection due to a capacity increase
Storage-only or storage-paired systems interconnecting under the same tariff
NEM 3.0 does not cover:
LADWP, SMUD, and other municipal utility customers
Homeowners already grandfathered into NEM 1.0 or NEM 2.0
How NEM 3.0 Works
Picture a home solar system producing more electricity than the household needs around midday. Here is how that surplus moves through the system under NEM 3.0:
Solar power serves the home's loads first
Any surplus electricity flows to the grid
The utility credits that export at the current hourly avoided cost rate
Electricity pulled from the grid later, especially during the evening peak, gets billed at the full retail time-of-use rate
A battery can store midday surplus and discharge it during the expensive evening window instead of exporting it for a few cents per kWh
That gap between a low export credit and a high retail rate is the main reason solar-plus-storage systems have become the standard design under net metering 3.0.
NEM 2.0 Vs. NEM 3.0: What Changed
The core difference between NEM 2.0 and NEM 3.0 comes down to how exported electricity gets valued. NEM 2.0 credited exports close to the retail rate. NEM 3.0 uses the Avoided Cost Calculator instead, a time-varying figure that usually runs well below retail.
Feature | NEM 2.0 | NEM 3.0 (Net Billing Tariff) |
New enrollment | Closed since April 14, 2023 | Current tariff for new PG&E, SCE, and SDG&E applications |
Export compensation | Retail-rate based | Avoided cost calculator based, varies hourly |
Export value | Fixed, near-retail credit | Time-varying avoided-cost credit, generally below retail but higher during peak evening hours |
Rate structure | Time-of-use required | Highly differentiated time-of-use required |
Storage's role | Helpful but optional | Central to most system designs |
Grandfathering | N/A, original tariff | 20 years from original interconnection for pre-2023 NEM 2.0 systems |
What Happens To Existing NEM 2.0 Customers?
Customers who submitted a qualifying NEM 2.0 interconnection application by April 14, 2023 could preserve their NEM 2.0 eligibility, even if Permission to Operate came later. Eligible NEM 2.0 customers generally remain on that tariff for 20 years from their original interconnection date. That grandfathering preserves the higher, retail-rate export credit for the full term.
Can You Expand A NEM 2.0 System Without Losing Grandfathering?
Existing NEM 1.0 and NEM 2.0 customers can generally increase aggregate generating capacity by no more than the greater of 1 kW or 10 percent of the original system size and remain on their legacy tariff. A revised interconnection application is still required. Adding battery storage does not automatically end grandfathering, but installers should follow the utility's current expansion and storage interconnection requirements, since the same capacity caps typically apply to storage additions too.
When Did NEM 3.0 Take Effect?
NEM 3.0 California took effect on April 15, 2023, the day the CPUC's Net Billing Tariff began governing new solar interconnection applications. Homeowners who submitted before April 14, 2023 locked into NEM 2.0 instead. The date on the interconnection application decides the tariff, not the date the system was installed or switched on.
Which California Utilities Use NEM 3.0?
Three investor owned utilities operate under California's Net Billing Tariff. Each publishes its own hourly export values and uses a slightly different customer-facing name for the program.
PG&E
PG&E markets its version of NEM 3.0 as the Solar Billing Plan. New residential solar customers are automatically enrolled in PG&E's E-ELEC time-of-use rate, which runs peak pricing from 4 to 9 p.m.
Southern California Edison (SCE)
SCE applies the same Net Billing Tariff structure to new interconnection applications in its territory. SCE's export credits follow the same avoided cost calculator as PG&E, with a comparable declining adder available to early residential adopters. Installers should confirm the current adder value directly with SCE's published tariff, since it steps down each year.
SDG&E
SDG&E also operates under NEM 3.0, but SDG&E residential customers do not receive the ACC Plus adder that PG&E and SCE customers get. SDG&E's retail rates run among the highest in the state, so self-consumption carries even more weight for SDG&E solar-plus-storage projects.
Does NEM 3.0 Apply To LADWP Or SMUD?
No. California's Net Billing Tariff applies only to the state's three large investor owned utilities: PG&E, SCE, and SDG&E. LADWP, SMUD, and other municipal utilities set their own solar compensation rules and have not adopted NEM 3.0.
Working on a project in PG&E, SCE, or SDG&E territory? GreenLancer's interconnection application service helps installers submit accurate Rule 21 paperwork the first time.
How Are NEM 3.0 Export Rates Calculated?
There is no single NEM 3.0 export rate. Export credits under California's Net Billing Tariff shift by utility, hour, season, and weekday versus weekend, so a kWh exported at noon is worth far less than the same kWh exported at 7 p.m.
Avoided Cost Calculator (ACC) Rates
The Avoided Cost Calculator sets the base export value for every hour of the year. It reflects what a utility would otherwise pay to generate or buy that electricity elsewhere. Most PG&E and SCE residential exports fall well below retail rates, though the ACC can climb close to or even above retail during high-demand summer evening hours, which is exactly why installers should pull the current hourly schedule rather than quote a single blended figure.
ACC Plus Adder (Energy Export Bonus Credit)
PG&E and SCE residential customers who interconnect within the program's first five years also receive an ACC Plus adder, which PG&E calls its Energy Export Bonus Credit. The adder steps down each year and locks in for nine years once a system interconnects. SDG&E residential customers do not receive this adder.
2023 interconnections: $0.022 per kWh
2026 interconnections, standard residential: roughly $0.0088 per kWh
2026 interconnections, CARE/FERA customers: $0.036 per kWh
Lock-in period: nine years from the system's Permission to Operate date
Eligible utilities: PG&E and SCE only, not SDG&E
California Rule 21 Requirements For NEM 3.0 Projects
NEM 3.0 determines how exported energy is credited, while California's Rule 21 governs many of the technical requirements for connecting solar and storage systems to the grid. Every system interconnecting under NEM 3.0 also has to meet these standards, which keep distributed solar and storage working safely alongside a more dynamic grid.
Smart inverter capabilities: systems need smart inverters that support voltage and frequency ride-through, reactive power control, and ramp rate limitations
Anti-islanding protection: automatic shutdown during a grid outage to protect utility workers
IEEE 1547 compliance: standards covering power quality, safety, and interoperability for distributed energy resources
Battery storage integration: approved interconnection pathways for systems that include storage
Real-time monitoring: systems must support utility visibility into performance and compliance
Dynamic grid support functions: systems adjust voltage and frequency as needed to help maintain grid stability
GreenLancer's engineering team prepares Rule 21 interconnection applications, single-line diagrams, and permit plan sets for installers working through these requirements across California.
Downsides Of NEM 3.0 For Solar Customers
Lower bill savings, since avoided-cost export credits run well below the near-retail credit NEM 2.0 customers received
Longer payback periods for solar-only systems, often stretching past a decade
Reduced sales momentum across the industry since the 2023 rollout
Slower residential adoption without added storage or other incentives
Where Solar Plus Storage Can Still Add Value Under NEM 3.0
Battery storage lets homeowners shift midday solar into the expensive evening peak
NEM 2.0 customers can generally add storage without losing their grandfathered status
Solar-plus-storage systems often achieve stronger paybacks than solar-only designs under NEM 3.0
Backup power and resilience during grid outages
Rising retail rates make self-consumption more valuable each year
Is NEM 3.0 Still In Effect After The 2026 Court Case?
Yes. NEM 3.0 remains in effect for new PG&E, SCE, and SDG&E interconnections. The First Appellate District upheld the CPUC's decision again in March 2026, reconsidering the case under the standard the California Supreme Court had ordered the year before. The California Supreme Court then declined to hear a further appeal in June 2026, leaving that ruling in place.
That does not mean the tariff can never change. The CPUC and the California Legislature retain the authority to revisit net metering policy through their normal regulatory processes. For now, installers and customers can treat NEM 3.0 as the settled framework for new California solar interconnections.
How NEM 3.0 Has Changed California Solar
The Net Billing Tariff reshaped California's residential solar market in a few clear ways since 2023.
Residential Installations And Battery Adoption
Rooftop solar sales slowed sharply after NEM 3.0 took effect, with CALSSA reporting a steep drop in residential solar activity during the transition. Battery attachment rates moved in the opposite direction. SEIA's California data and its Q2 2026 Solar Market Insight Report both show storage now paired with a much larger share of new California solar systems than before 2023, and EIA grid data shows utility-scale solar and storage setting new output records across the state through mid-2026. New construction has stayed steadier, since California's solar mandate still requires solar on most new homes regardless of NEM 3.0 economics.
Federal Tax Credit Changes Add To The Pressure
Federal incentives shifted at the same time state policy did. The 30 percent Residential Clean Energy Credit is no longer available for owner-installed systems placed in service after December 31, 2025, according to IRS Form 5695 guidance. Installers walking homeowners through financing should factor that change in alongside the current NEM 3.0 rate structure. GreenLancer's Form 5695 guide covers how the credit still works for systems that qualified before the deadline.
Is Solar Still Worth It Under NEM 3.0 California?
NEM 3.0 California changed the math on rooftop solar, but it did not end the opportunity for well-designed systems. Export credits dropped sharply, and the courts have closed off the legal challenges that once created uncertainty. Systems paired with storage, sized around self-consumption, and documented correctly at interconnection still pencil out for many California homeowners and businesses.
Whether you are an installer preparing a NEM 3.0 interconnection package or a homeowner exploring solar-plus-storage, GreenLancer can help. Our U.S.-based engineering team supports solar contractors with utility interconnection applications, single-line diagrams, and permit plan sets across California.
California NEM 3.0 FAQs
Does NEM 3.0 Apply To LADWP Or SMUD?
No. NEM 3.0 applies only to PG&E, SCE, and SDG&E. LADWP, SMUD, and other municipal utilities operate their own separate solar billing programs.
Is NEM 3.0 The Same As The Net Billing Tariff?
Yes. NEM 3.0 is the common industry name for what the CPUC officially calls the Net Billing Tariff. Both terms describe the same policy that took effect on April 15, 2023.
Is NEM 3.0 Still In Effect After The Court Case?
Yes. The California Supreme Court declined to hear a further appeal in June 2026, leaving the March 2026 appellate ruling in place. NEM 3.0 remains the governing tariff for new PG&E, SCE, and SDG&E solar interconnections.
What Is The Difference Between NEM 2.0 And NEM 3.0?
NEM 2.0 credited solar exports close to the retail electricity rate. NEM 3.0 credits exports using the Avoided Cost Calculator, a lower, time-varying value that shifts by hour and season.
Does NEM 3.0 Require A Solar Battery?
No, a battery is not required to interconnect under NEM 3.0. Storage is optional, though it significantly improves the value of a system by shifting exports into higher-value evening hours.
How Long Are Solar Systems Grandfathered Under NEM 2.0?
Customers who submitted a qualifying interconnection application by April 14, 2023 generally stay on NEM 2.0 for 20 years from their original interconnection date, even if Permission to Operate came later. This preserves the higher, retail-rate export credit for the full grandfathering period.
Can You Expand A NEM 2.0 System Without Losing Grandfathering?
Generally, yes, up to the greater of 1 kW or 10 percent of the original system size, though a revised interconnection application is still required. Larger expansions typically move the system onto NEM 3.0, so installers should confirm the applicable utility rule before making changes.
What Inverter Standards Apply Under NEM 3.0?
NEM 3.0 systems need inverters that comply with IEEE 1547 and support functions such as voltage ride-through, frequency response, and reactive power control. These requirements help distributed solar systems support grid stability as more of them come online.
Whether you're a solar contractor looking for fast, code-compliant permit plan sets or a homeowner in need of expert solar repairs or upgrades, GreenLancer has you covered. Our U.S.-based team and nationwide network of licensed professionals deliver reliable support for every stage of your solar projects.
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