NEM 3.0 — the Net Billing Tariff — explained for California homeowners

The Net Billing Tariff (NEM 3.0) is the successor to net energy metering that the California Public Utilities Commission (CPUC) adopted in Decision D.22-12-056 on December 15, 2022. It applies to customers who submit an interconnection application on or after April 15, 2023 (CPUC, Net Billing Tariff).

The core idea is a shift in how your utility values the solar power you export. Under the older rules, exported energy was credited at roughly the retail rate. Under the Net Billing Tariff, exports are credited at the utility's avoided cost — closer to wholesale — using the CPUC's Avoided Cost Calculator. That value changes by hour, day, and month, so a kilowatt-hour you export at 1 p.m. in April is worth far less than one you export at 7 p.m. in September.

Two names matter when you go looking for this on your own bill. SCE does not call it “NEM 3.0” — it calls the plan the Solar Billing Plan, and the credit for exported energy appears as an Energy Export Credit (EEC) line. And the tariff is not yours indefinitely: the CPUC guarantees the original customer who interconnects under the Net Billing Tariff the use of that tariff for nine years, where a NEM 2.0 customer was allowed twenty years from the date of interconnection.

This is the most misunderstood part of the policy. The Net Billing Tariff applies only to the three large investor-owned utilities (IOUs):

Read down a row rather than across the table, because the row is what you get. For new Solar Billing Plan customers SCE locks these prices for nine years, set by the year you began solar with SCE. Someone buying a house that already has solar takes the current year’s prices instead of the seller’s.

A second credit sits on top of those values. Customers who enroll in the Solar Billing Plan before 2028 receive an Energy Export Bonus Credit of about 4¢ per kWh for residential customers, and about 9¢ for income-qualified customers, for the first nine years. On a summer midday export that lifts the credit from 6¢ to about 10¢ — roughly two thirds more. It also behaves differently from the ordinary credit: an Energy Export Credit cannot be applied to non-bypassable charges, fixed fees such as the Base Services Charge, or taxes, whereas the bonus credit may offset non-bypassable charges.

1. Export value dropped sharply. Under NEM 2.0, exported energy was credited at close to the full retail rate (minus small non-bypassable charges). Under NEM 3.0, exports are valued at avoided cost from the CPUC's Avoided Cost Calculator. On SCE's published schedule an exported kilowatt-hour is worth 3¢ to 21¢ depending on the season and the hour, against a retail price for that same kilowatt-hour of roughly 34¢ to 58¢. The drop is therefore not one number: it is deepest at midday in winter and shallowest on a summer evening.

2. Export value became time-varying. The Avoided Cost Calculator produces hundreds of distinct hourly export prices across the year. Midday exports — when solar floods the grid — are worth very little. A handful of hours on hot late-summer evenings are worth a great deal. This is exactly opposite to when rooftop solar naturally overproduces.

3. The winning strategy changed. Under NEM 2.0, oversizing a panel array and "banking" credits at retail value made sense. Under NEM 3.0, the value is in self-consumption — using your own solar directly and storing the excess to discharge during expensive evening peak hours rather than exporting it cheaply.

The logic is simple once you see the timing mismatch. Solar panels produce most of their power at midday — exactly when the grid is saturated and export credits are lowest. Household demand peaks in the evening, when SCE's time-of-use rates are highest. On the SCE TOU-D-4-9PM plan, summer weekday peak (4–9 p.m.) runs around 58¢/kWh, and on TOU-D-5-8PM the 5–8 p.m. peak reaches roughly 74¢/kWh (SCE Residential Rate Plans).

A battery bridges that gap. It stores your cheap midday solar and discharges it during the expensive evening peak, so you avoid buying grid power at 58–74¢ instead of exporting it for pennies. That "avoided purchase" is where the real savings live under the Net Billing Tariff — not in export checks. Batteries also provide backup during outages, which is a real benefit in fire-prone and PSPS-affected parts of Southern California.

Battery costs can sometimes be partially offset through the Self-Generation Incentive Program (SGIP), though SGIP is not a single fixed rebate — it has multiple categories and step-downs. The high-value equity and equity-resiliency tiers reach roughly $1.00–$1.10/Wh, but most SGIP budgets (General Market, Equity, and Equity Resiliency) closed to new applications at the end of 2025, and the remaining income-qualified tier is largely reserved or waitlisted (SelfGenCA program metrics). Standard residential rebates are much smaller, and funding status changes frequently, so treat any SGIP number as approximate and confirm your eligibility before counting on it for your project.

Honestly: it lengthens it. The export half of the return shrank — a kilowatt-hour that was once credited near the retail price now earns between 3¢ and 21¢ — so the return has to come from self-consumption instead.

How long that takes depends on the household, and in 2026 one change moved the number more than the tariff did: the 30% federal credit ended for systems placed in service after December 31, 2025. Running our own scenarios for an LA-area home puts cash payback at roughly 10 to 13 years, with the loss of that credit accounting for two to four years of it on its own — the workings are in our is solar worth it in 2026 guide.

A battery moves both sides of that ratio at once: it adds cost up front, and it captures the evening value the panels can no longer export profitably. Whether it shortens or lengthens payback for you turns on how much of your usage falls in the expensive evening hours, which is why the answer comes from running your own load rather than from a rule of thumb.

Solar still saves money in California: the state's average residential price is about 34.74¢/kWh against a U.S. average of 18.34¢ (EIA, June 2026). But under this tariff the design that saves the most is solar sized for self-consumption plus a right-sized battery.

If you already have solar and received Permission to Operate on or before April 14, 2023, you were placed on NEM 2.0 with a 20-year grandfathering period measured from your PTO date. Routine maintenance and modest changes do not touch it. What does put it at risk is a large expansion: the allowance is a one-time increase of 1 kW or 10% of the original system size, whichever is greater, and going past it typically moves the whole system — not just the new panels — onto NEM 3.0. Adding a battery is generally treated separately and usually allowed, though the configuration is worth confirming with your utility in writing (CPUC). Our NEM 2.0 grandfathering guide walks the line in detail. New systems interconnecting today fall under NEM 3.0 — where the guarantee runs nine years, not twenty.

One more critical 2026 change: the federal Residential Clean Energy Credit (the 30% ITC) is no longer available for homeowner-owned residential systems placed in service after December 31, 2025 (IRS). If you were counting on a 30% tax credit to shorten your payback, that math has changed — factor it in before signing anything.

The Net Billing Tariff (NEM 3.0) did not kill residential solar — it changed the winning strategy. Exports are now worth roughly a quarter of what they were, and they are worth the most exactly when your panels produce the least. The response is not to abandon solar; it is to design for self-consumption and pair panels with storage, especially on high evening-peak SCE rate plans. And remember: if your address is on LADWP, Burbank, or Glendale, none of NEM 3.0 applies to you — those munis have their own rules, and the analysis is different.

Cali Energy (Northridge, CSLB #1032379) designs both SCE/NEM 3.0 and municipal-utility systems with in-house crews, and models your actual rate plan before recommending a size. If you want a straight, no-hype breakdown for your specific utility and usage, call +1 (323) 844-7777.

Figures on this page come from the primary sources below and, where noted, from Cali Energy calculations using the stated assumptions. Rates, incentives, and program terms change; each was verified September 9, 2026.

1. CPUC — Net Billing Tariff (NEM 3.0)
2. CPUC — Net Energy Metering and Net Billing
3. SCE — Solar Billing Plan (Energy Export Credit values)
4. SCE — Solar glossary (EEC, EEBC, non-bypassable charges)
5. SCE — Time-Of-Use Residential Rate Plans
6. IRS — Residential Clean Energy Credit
7. EIA — Electric Power Monthly (avg residential price, June 2026)
8. SelfGenCA — SGIP Program Metrics