NEM 3.0 is the common name for California’s Net Billing Tariff, the rule that decides what your utility pays you for solar power you send to the grid. It took effect in April 2023 and reduced export credits by roughly 75 percent for customers of the state’s three large investor-owned utilities.
It did not reduce the value of solar power you use yourself. That distinction is the whole point of the policy and it drives every design decision that follows.
Under the previous rules, known as NEM 2.0, exported solar earned credit at close to the retail rate you paid for electricity, roughly 30 cents per kWh by 2022. The grid effectively acted as a free battery. Send power out at midday, pull it back in the evening, and the credits roughly cancelled out.
The California Public Utilities Commission replaced that with compensation based on avoided cost, which is closer to what the utility would pay to buy the same power on the wholesale market. Export credits fell to roughly 5 to 8 cents per kWh on average, varying by hour, day and season. Evening hours pay more than midday hours, which matters because midday is when your panels produce most.
Two numbers illustrate the shift. A homeowner exporting 500 kWh in a month earned around 175 dollars in credit under the old rules. The same export earns closer to 30 dollars under net billing.
What did not change: power your system produces and you consume in the moment still offsets electricity you would have bought at full retail price. With SCE retail rates averaging near 35 cents per kWh and summer peak pricing reaching roughly 58 cents between 4 p.m. and 9 p.m., self consumed solar is worth more than it has ever been.
This is the part most articles get wrong, and it matters a great deal in our service area.
The Net Billing Tariff applies to customers of the three investor-owned utilities regulated by the CPUC: Southern California Edison, Pacific Gas and Electric, and San Diego Gas and Electric.
It does not apply to customers of municipally owned utilities. That includes LADWP and Pasadena Water and Power. Municipal utilities set their own net metering and interconnection rules independently. LADWP continues to operate its own net metering program that credits exports at or near full retail rates, and as of 2026 it has not announced a transition to net billing.
Practically, this means two homeowners a few blocks apart in the San Fernando Valley can face completely different solar economics depending on which side of a service boundary they sit. Confirm which utility bills you before you evaluate any proposal or any article you read online.
The logic is simple once you see it as a spread.
Every kWh you store instead of exporting is worth the difference between what you would have paid to buy that power later and what you would have received for exporting it. With retail around 35 cents and export credit around 6 cents, each stored and later self consumed kWh is worth roughly 29 cents more than the same kWh sent to the grid.
That gap widens during the 4 p.m. to 9 p.m. peak window, which is exactly when household demand rises and solar production falls. A battery charged from midday production and discharged through the evening peak is doing the most valuable work available under this tariff.
This is why system design under net billing looks different. Rather than sizing a system to export as much as possible, the goal becomes maximizing how much of your own production you actually use.
Systems interconnected under the earlier rules generally remain on those rules for a defined period from their interconnection date rather than moving automatically to net billing. Terms and durations differ between NEM 2.0 and the current tariff.
If you already have solar and are considering adding panels or a battery, ask specifically how the modification affects your existing tariff status before proceeding. Some changes are neutral and some are not. This is a question worth asking in writing.
New solar customers on SCE are placed on a time of use plan structured around the same evening peak window. TOU-D-PRIME is commonly applied to customers with solar, storage, an electric vehicle or a heat pump, and it carries a lower off peak rate with a higher peak rate.
The rate plan you are on changes which hours your system is offsetting and therefore changes your savings. A system that looks strong on one plan can look ordinary on another. Rate plan selection should be part of the design conversation, not an afterthought handled by the utility.
“NEM 3.0 killed solar in California.” It reduced the value of exports. It did not reduce the value of self consumption, and retail rates have risen since. Solar still works. It works differently.
“I should undersize my system now.” Not necessarily. The right size depends on how much of your production you can actually use, which depends on your load profile and whether you add storage. Undersizing to avoid exports can leave savings on the table.
“Everyone in California is on NEM 3.0.” Municipal utility customers are not.
“Export credits are a fixed rate.” They vary by hour, day and season under an avoided cost schedule.
It is California's Net Billing Tariff. It pays solar customers a lower, time varying rate for electricity exported to the grid instead of the near retail rate paid under previous rules.
April 2023, following the CPUC's Net Billing Tariff decision.
Roughly 5 to 8 cents per kWh on average, varying by hour and season. Evening hours pay more than midday.
No. LADWP is a municipally owned utility and is not regulated by the CPUC. It runs its own net metering program with export credits at or near full retail rates.
For many homeowners yes, particularly when paired with storage and designed around actual usage. See our full guide on whether solar is still worth it in California.
It is not required. It usually improves the result, because it converts low value exports into high value self consumption.
It depends on the nature of the change. Ask before you modify an existing system.
Green Additions designs and installs custom solar, battery storage, EV charging, and electrical solutions for Southern California homeowners.
Licensed California Solar Contractor
©2026 Green Additions | Designed and Develop By Designized.com
