The words on your electric bill and your solar quote, explained
Solar proposals and California utility bills are written in a language of their own — baseline allowances, true-up, net billing, non-bypassable charges. Every term below is defined plainly, with the primary source next to it, and a note where the rule works differently on a municipal utility like LADWP than on an investor-owned one like SCE. Each entry has its own link, so you can send someone straight to the definition.
Get a free solar estimateAll 18 terms
Jump straight to one.
Definitions
Baseline allowance
In investor-owned utility territory, the baseline allowance — SCE calls it the baseline allocation — is the quantity of electricity the CPUC sets each billing period to be sold to a residential customer at a discount, under Public Utilities Code section 739. The statute directs the Commission to set baseline quantities at 50 to 60 percent of average residential consumption, and 60 to 70 percent for all-electric homes in the winter heating season, accounting for climate zone and season. SCE applies this through nine climate-based baseline regions, and the allowance is a daily kWh quantity multiplied by the days in the billing period, so a longer bill period produces a larger allowance.
It decides how much of your usage gets the lowest price, which sets how expensive the leftover usage your solar does not cover will be.
Baseline credit
On some California residential time-of-use plans the baseline benefit appears not as a cheaper first tier but as a separate per-kWh credit line on the bill. SCE defines a baseline credit as a discount that reduces total electricity charges, calculated per kilowatt-hour used and capped by the monthly baseline allocation. SCE applies it on TOU-D-4-9PM and TOU-D-5-8PM, but lists None for TOU-D-PRIME.
SCE Solar Billing Plan customers are served on TOU-D-PRIME, which carries no baseline credit at all.
CARE and FERA
CARE (California Alternate Rates for Energy) and FERA (Family Electric Rate Assistance) are income-qualified bill-discount programs run by California's investor-owned utilities under CPUC oversight. The CPUC states CARE gives a 30–35% discount on the electric bill and 20% on natural gas. FERA is electricity-only, gives 18%, and is offered at SCE, SDG&E and PG&E to households just above the CARE income ceiling.
A CARE or FERA discount lowers the price of every kilowatt-hour you still buy from the utility, which changes what a solar system's bill offset is worth.
Community Choice Aggregation (CCA)
A community choice aggregator is a city, county or joint powers authority that buys the generation for customers within its boundaries under California Public Utilities Code section 366.2, while the investor-owned utility still delivers the power and sends the bill. Enrollment is automatic, and customers must be told of the right to opt out, with no penalty within 60 days or two billing cycles.
If a CCA serves your city, export credits for generation come from the CCA's schedule while SCE still bills delivery, so a savings estimate must cover both.
Export credit / Avoided Cost Calculator (ACC)
An export credit is the value a utility gives you for solar energy sent to the grid instead of used at home. Under California's Net Billing Tariff (NEM 3.0) that value comes from the CPUC's Avoided Cost Calculator — a model of the costs the grid avoids when your energy shows up — not the retail rate you pay for imports. Credits vary by hour, month and time of day, so a kilowatt-hour exported on a late-summer evening is worth considerably more than one exported at midday.
It is the main reason a NEM 3.0 system earns much less per exported kilowatt-hour than a NEM 2.0 one, and why batteries change payback.
Interconnection
Interconnection is the utility review and approval that lets a home solar or battery system operate in parallel with the grid rather than in isolation. For the investor-owned utilities it regulates, the CPUC governs this through Electric Rule 21, the tariff setting interconnection, operating and metering requirements; municipal utilities run their own rules. Separate from your city building permit — a project needs both.
Until interconnection is approved the array is just hardware; the utility's sign-off, not the installer's, is what lets it legally run and earn bill credits.
kW vs kWh
A kilowatt (kW) is a unit of power — the rate electricity flows at a given moment; the CPUC glossary defines a kilowatt as 1,000 watts. A kilowatt-hour (kWh) is energy: one kilowatt drawn for one hour. Equipment is rated in kW, while the energy a home uses or exports is counted in kWh — a 3 kW load running two hours uses 6 kWh.
Your proposal sizes the system in kW, but the bill settles in kWh, so a kW rating alone tells you nothing about a billing period's value.
Medical Baseline
Medical Baseline is a CPUC program that gives a residential household with a qualifying medical condition or life-support equipment an extra electricity allowance billed at the utility's lowest rate, on top of the standard baseline. Qualifying situations include life-support equipment, life-threatening illness, multiple sclerosis, scleroderma, paraplegia or quadriplegia, and a compromised immune system. Eligibility is medical, not financial: no income test, but a licensed medical professional must sign the application.
Medical equipment adds steady, round-the-clock load that a solar array and battery should be sized around, and eligible customers of the investor-owned utilities may receive advance outage notifications.
NEM 2.0 grandfathering
Grandfathering is the rule that a customer who interconnected under NEM 2.0 may stay on that tariff for 20 years from interconnection, or switch to the current tariff; SCE runs the clock from the Permission to Operate date. NEM 2.0 closed to new applications in April 2023. The system may be enlarged by up to the greater of 1 kW or 10 percent of its original size and keep the legacy tariff, subject to the applicable capacity and load limits.
Buying a home with existing solar, or adding panels to your own, can either preserve or forfeit retail-rate export credits for the rest of the 20-year window.
Net Billing Tariff (NEM 3.0)
The Net Billing Tariff, adopted by the CPUC in Decision 22-12-056 and known informally as NEM 3.0, replaced net energy metering for SCE, PG&E and SDG&E customers who submitted a complete interconnection application on or after April 15, 2023. Power drawn from the grid is billed at the retail time-of-use rate, while exports earn credits priced hour by hour at what that energy is worth to the grid.
Because exports no longer earn retail rates, savings come from using or storing your own production rather than banking it on the grid.
Net energy metering (NEM)
California Public Utilities Code section 2827 defines net energy metering as the difference between the electricity a customer takes from the grid and the electricity their own generator feeds back, measured over a 12-month period. Under a true NEM tariff exports are credited at the retail rate for the period in which they are exported, so an export can offset an import close to one-for-one — though non-bypassable charges still apply to every kilowatt-hour imported. NEM closed to new PG&E, SCE and SDG&E applicants on April 15, 2023.
Whether your system is on NEM or net billing decides if an exported kilowatt-hour earns full retail credit or a much smaller grid-value credit.
Non-bypassable charges
Non-bypassable charges are per-kilowatt-hour charges in investor-owned utility rates that a solar customer pays on grid electricity and that export credits cannot offset. SCE names four: Public Purpose Programs, Nuclear Decommissioning, Competition Transition and Wildfire Fund. Under NEM 2.0 they apply to imports net of exports in the interval; under the net billing tariff, to every kilowatt-hour on the meter's import channel.
They explain why a solar home that looks like it zeroed out its usage still owes money: evening grid draw carries them even in an export-heavy month.
Permission to Operate (PTO)
Permission to Operate (PTO) is the utility's written authorization to energize a finished solar or battery system and run it alongside grid service. It is the last step of interconnection, issued only after a complete package — for SCE, the interconnection application, single-line diagram, signed interconnection agreement and the local building department's final electrical permit approval. Municipal utilities require their own forms and agreements instead.
Operating the system or exporting to the grid before PTO is not permitted, so PTO — not the day the panels go up — is the real finish line for a solar project.
Public Safety Power Shutoff (PSPS)
A Public Safety Power Shutoff is a preemptive de-energization: the utility temporarily turns off power in specific areas to reduce the risk of fires caused by electric infrastructure, generally during strong winds. The CPUC oversees PSPS for the six electric investor-owned utilities it regulates, including advance customer notification and post-event reporting. It is a planned outage and can last longer than a typical one.
Most standard grid-tied systems shut down during an outage, so backup requires an islanding-capable configuration — usually solar plus a battery, though some inverters can supply limited daytime backup without one.
SGIP (Self-Generation Incentive Program)
SGIP is California’s Self-Generation Incentive Program, which pays incentives for energy resources installed on the customer’s side of the meter — for homeowners, primarily battery storage and, under qualifying equity budgets, paired solar and storage. It is funded by ratepayer collections plus a separate AB 209 appropriation, and administered by several Program Administrators including PG&E, SCE, SoCalGas, the Center for Sustainable Energy and LADWP. Budget categories release in declining steps and close or waitlist once their funds are reserved.
A battery can materially improve NEM 3.0 economics by shifting solar production into higher-value evening hours, and SGIP can cover part of its cost while a matching budget category is open.
Tiered rate
A tiered rate prices an initial block of electricity — the baseline allowance — at the lowest cents per kilowatt-hour, then steps up once usage passes that block in the billing period. The CPUC notes state law requires the baseline quantity be priced lower per kilowatt-hour than other energy used that month. Allowances vary by climate zone and season, and the tier counter resets each billing period; unlike time-of-use, tiering ignores time of day.
Tiering still governs the standard residential rate at LADWP and other municipal utilities, where production offsets usage that would otherwise be priced in the upper tiers.
Time-of-use (TOU)
A time-of-use rate charges different prices for the same kilowatt-hour depending on hour, day of week and season. The CPUC glossary defines TOU as a rate for electrical energy that varies with time, generally tracking the cost of generation at the time. The costly peak window differs by utility: SCE's TOU-D-PRIME peak runs 4–9 p.m., LADWP's High Peak on Schedule R-1B runs 1:00–4:59 p.m.
On a TOU rate savings depend on both how much the system produces and when that production lines up with the hours you would otherwise buy expensive power.
True-up
The true-up is the annual settlement closing a solar customer's 12-month billing cycle, reconciling a year of charges against the export credits earned. On SCE's Solar Billing Plan monthly bills already net charges against Energy Export Credits, so the true-up is mainly a reconciliation. Leftover credits are not refunded, though a net surplus over the period may earn Net Surplus Compensation at a wholesale rate.
Whether your true-up is a routine reconciliation or one large bill depends on which billing plan you are on, so check before your anniversary month.
Where these terms come from
Each definition above links to the body that sets the rule — the California Public Utilities Commission for tariffs that govern investor-owned utilities, the utilities themselves for their own schedules, and the state programs for incentives. Two things are worth remembering while you read:
- Municipal utilities write their own rules. LADWP, Burbank Water & Power and Glendale Water & Power are not bound by the CPUC decisions that created NEM 3.0, so several terms here mean something different depending on who sends your bill. We compare all four side by side on the utilities comparison page.
- Numbers change; mechanisms last. Rates, credit values and program budgets are revised regularly, which is why these definitions explain how something works rather than quoting a figure that will be stale by next year.
Keep reading
Still not sure what your bill is telling you?
Send us a recent statement and the property address. We read the tariff, the baseline and the charges the way your utility applies them, and tell you plainly what solar would and would not change — before anyone quotes you a system.
Get a free solar estimate+1 (323) 844-7777
Free site assessment · No obligation · We won’t spam or sell your number
Prepared by Cali Energy, September 1, 2026. General information, not legal, tax or financial advice. Utility tariffs, program rules and incentive budgets change; confirm current terms with your utility or the program administrator. See our Content Disclaimer. Cali Energy · 19201 Parthenia St, Unit E, Northridge, CA 91324 · +1 (323) 844-7777 · CSLB #1032379 (B, C-10, C-39)