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.

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

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. Independent analyses put the blended NEM 3.0 export credit at roughly $0.05–$0.08/kWh versus roughly $0.25–$0.30/kWh under NEM 2.0 — an average reduction on the order of 75% (EnergySage). These blended figures are approximate and vary heavily by plan, season, and hour.

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. Under NEM 2.0, a well-sized solar-only system in an IOU territory often paid back in about 5–7 years. Under NEM 3.0, solar-only paybacks have stretched to roughly 8–10 years, because the excess you export is now worth so little. Adding storage typically brings payback back into the ~7–8 year range for a household with high evening usage, since the battery captures value the panels alone can no longer export profitably (EnergySage).

These ranges are approximate and depend on your rate plan, usage pattern, system size, financing, and season. The takeaway is directional: solar still saves money in California — the state's average residential price is about 35.25¢/kWh, nearly double the U.S. average of 18.83¢/kWh (EIA, April 2026) — but under NEM 3.0 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. Adding a battery to an existing NEM 2.0 system generally does not forfeit that status, though a large system upsize can (CPUC). New systems interconnecting today fall under NEM 3.0.

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 August 4, 2026.

1. CPUC — Net Billing Tariff (NEM 3.0)
2. CPUC — Net Energy Metering and Net Billing
3. SCE — Time-Of-Use Residential Rate Plans
4. IRS — Residential Clean Energy Credit
5. EIA — Electric Power Monthly (avg residential price, Apr 2026)
6. SelfGenCA — SGIP Program Metrics
7. EnergySage — NEM 3.0 explainer (export value / payback estimates)