The short answer
- NEM 3.0 pays you an hourly "avoided cost" for exported solar, averaging about 4¢ per kWh.
- Power you use yourself still saves the full retail rate of roughly 35–45¢.
- So under NEM 3.0, design for self-use and consider a battery.
NEM stands for net energy metering. It's the set of rules that decides how your utility credits the solar power you send to the grid. California is on its third version. Officially it's called the Net Billing Tariff, but almost everyone calls it NEM 3.0.
Who it applies to
NEM 3.0 applies to new solar customers of California's three big investor-owned utilities: PG&E, Southern California Edison and San Diego Gas & Electric. It took effect for applications submitted after April 14, 2023. It does not apply to municipal utilities like LADWP or SMUD, which set their own rules.
How the credits work
Under NEM 2.0, a kWh you exported earned close to what a kWh you imported cost. Your meter essentially ran backward. Under NEM 3.0, exports are valued using the CPUC's "avoided cost calculator," which estimates what that power is worth to the grid at each hour of the year.
- Midday exports, when the grid is flooded with solar, earn very little, often just a few cents.
- Exports on late-summer evenings can earn much more.
- For 2025–26 applicants, averages were about 3.9¢ (PG&E), 4.6¢ (SCE) and 3.7¢ (SDG&E) per kWh.
Your export rate schedule locks for nine years based on the year you apply. A new schedule is expected for 2027 applicants.
Is it final?
Yes, for now. After years of legal challenges, a state Court of Appeal upheld the Net Billing Tariff in March 2026, and the California Supreme Court declined to review it on June 10, 2026. Any future change would have to come from the CPUC or the Legislature.
How to design a system for NEM 3.0
- Size to your usage, not your roof. Extra panels that only export earn little.
- Add storage. A battery shifts midday solar to your evening peak, where each kWh is worth roughly ten times more than exporting it.
- Pick the right rate plan. Time-of-use plans reward evening self-use. We help you choose.
- Plan for electrification. An EV or heat pump raises your usage, which increases the value of self-generated power.
Already have solar on NEM 1.0 or 2.0?
You keep your original terms for 20 years from your interconnection date, and those terms transfer if you sell the house. A 2025 proposal (AB 942) to move homes onto NEM 3.0 at sale was removed in committee. Be careful about expanding your system, since significant changes can affect legacy status. Talk to us before adding panels; adding a battery is often fine.
Systems interconnected in 2006 hit their 20-year mark in 2026. If yours is one of them, your utility will move you to current rules at your true-up. That's a great time to review adding a battery.
Quick questions
Does NEM 3.0 mean solar isn't worth it?
No. It changes how you design the system. Because retail rates are so high, self-consumed solar is still very valuable. See Is solar still worth it?
Can I still get a "true-up" bill?
Yes. Credits build up across the year and are reconciled annually, though the monthly Base Services Charge is billed separately each month.