California NEM 3.0 Net Billing Tariff: Rules for Solar Customers (August 2026)

Key Takeaways

• The new Net Billing Tariff (NBT) applies to interconnection applications since April 15, 2023.
• Export compensation under NBT is typically lower than the retail rate, but can rise above it on late summer evenings.
• Residential PG&E and SCE customers may receive an export compensation adder for nine years if they apply to interconnect NBT facilities before the end of 2027.
• Previous Net Energy Metering (NEM) tariffs, including NEM 1.0 and NEM 2.0, are closed to new enrollments.

What is California's Net Billing Tariff (NBT), also known as NEM 3.0?

The California Public Utilities Commission (CPUC) established the new Net Billing Tariff (NBT), commonly referred to as NEM 3.0. This tariff applies to interconnection applications submitted since April 15, 2023, pursuant to D.22-12-056 (August 2026). The NBT applies to the types of renewable electrical generation facilities that would previously have used standard Net Energy Metering (NEM) tariffs. Investor-Owned Utilities (IOUs) in California refer to the NBT as the "Solar Billing Plan."

Under the NBT, onsite generation is first used to serve onsite load, offsetting energy costs. This is consistent with previous NEM tariffs. However, compensation for excess generation exported to the electric grid is applied to a customer's bill at a rate reflecting the value of this generation to the grid (August 2026). The IOUs term this value "Energy Export Credits." The value of these export credits is usually lower than the retail rate (August 2026). It can, however, rise above the retail rate on late summer evenings (August 2026).

Customer-generators can maximize bill savings under the NBT by installing battery storage along with their generation (August 2026). This allows them to use or export stored energy during these high-value hours (August 2026).

An export compensation adder is available for some customers. Residential PG&E and SCE customers who apply to interconnect NBT facilities to the grid before the end of 2027 receive slightly higher-than-normal bill credits for exported energy for nine years (August 2026). SDG&E customers are excluded from this adder because their solar systems generate more bill savings due to SDG&E's higher electric rates (August 2026). Additionally, customers who are required to add solar, for example, by California's building code for new construction, do not receive this adder (August 2026).

Customer-generators are required to take service on a specific Time-of-Use (TOU) rate under the NBT (August 2026). These TOU rates feature lower off-peak prices and higher on-peak prices than other TOU rates (August 2026). The rates currently approved are E-ELEC for PG&E, TOU-D-PRIME for SCE, and EV-TOU-5 for SDG&E (August 2026).

The original customer who causes a generation facility to be interconnected to the grid under the NBT is guaranteed the use of the NBT tariff for nine years (August 2026). However, customer-generators who move to the NBT from a previous NEM tariff are not eligible for this NBT legacy period (August 2026).

Payment for bill charges is due monthly under the NBT (August 2026). This is designed so that customers are not surprised by a large annual bill after their true-up date (August 2026). In months when there are excess solar bill credits, the credits roll over to following months until the annual true-up (August 2026).

How does the Net Billing Tariff (NBT) compare to previous NEM tariffs?

Previous Net Energy Metering (NEM) tariffs, including NEM 1.0 and NEM 2.0, are now closed to new enrollments (August 2026). Understanding their structure provides context for the NBT.

Under NEM tariffs, participating customers received bill credits for excess generation that was exported to the electric grid when it was not serving onsite load (August 2026). These bill credits were applied to customers' monthly bills at the retail rates (August 2026). NEM customer-generators paid the same non-bypassable charges for public services as other IOU customers (August 2026). These charges included Department of Water Resources bond, public purpose program, nuclear decommissioning, and competition transition charges (August 2026). NEM customer-generators were exempt from standby charges (August 2026).

At the end of a customer's 12-month billing period under NEM, any balance of surplus electricity was trued up at a rate based on the recent market rate for energy, resulting in "net surplus compensation" (NSC) (August 2026). The NSC rate was approximately $0.02 to $0.03 per kWh (August 2026).

The CPUC created the first NEM tariff, commonly known as "NEM 1.0," in 1996 pursuant to SB 656 (Alquist, 1995) (August 2026). Customer-generators interconnected their systems to the grid under the NEM 1.0 tariff between 1996 and the 2016-2017 NEM 1.0 sunset dates (August 2026).

The CPUC created the second NEM tariff, "NEM 2.0," in 2016 pursuant to AB 327 (Perea, 2013) (August 2026). Under NEM 2.0, customer-generators with facilities under 1 MW paid a one-time interconnection fee based on each IOU's historic interconnection costs (August 2026). Specifically, PG&E's fee was $145 (August 2026), SCE's was $94 (August 2026), and SDG&E's was $132 (August 2026). Customer-generators with systems over 1 MW paid an $800 fee and were responsible for all transmission/distribution system upgrades (August 2026). Additionally, NEM 2.0 customer-generators paid small non-bypassable charges on each net kilowatt-hour in each metered interval (August 2026).

How we verified this information

We sourced all information regarding the California Net Billing Tariff (NEM 3.0) directly from the official website of the California Public Utilities Commission (CPUC). We accessed and verified the details on August 23, 2026.

Important Considerations for California Solar Customers

When evaluating solar options under the Net Billing Tariff (NBT), it is important to be aware of certain aspects and information gaps. We have not verified specific avoided cost rates for PG&E, SCE, and SDG&E, as the CPUC page references external IOU pages for these rates. You should consult your specific Investor-Owned Utility's website for the most current avoided cost rates applicable to your service area.

Detailed information on "non-export" interconnection, energy sales at avoided cost, or wholesale market transactions is explicitly excluded from the provided CPUC information. The exact "true-up" date for monthly bill payment is not specified, only that it occurs annually. The specific "recent market rate for energy" used to determine Net Surplus Compensation (NSC) is not detailed beyond the approximate $0.02 to $0.03 per kWh figure.

The NBT framework emphasizes the value of battery storage. As compensation for exported energy is typically lower than the retail rate, integrating battery storage allows you to store excess solar generation and use it during higher-value hours, or export it when rates are more favorable, such as late summer evenings (August 2026). This strategy can help maximize your bill savings. Remember that if your solar installation is required by building code for new construction, you will not be eligible for the export compensation adder (August 2026).