California
California NEM 3 in 2026: How the Solar Billing Plan Affects Homeowners
A plain-English guide to California’s Net Billing Tariff, commonly called NEM 3, including self-consumption, export credits, and batteries.
Quick answer
Under California’s Net Billing Tariff, commonly called NEM 3 or the Solar Billing Plan, solar electricity used in the home offsets purchases, while exported electricity receives time-varying credits that are usually lower than retail rates. This makes system sizing and self-consumption especially important.
What NEM 3 actually is
The California Public Utilities Commission adopted the Net Billing Tariff as the successor to NEM 2.0. New eligible systems in the territories of PG&E, Southern California Edison, and SDG&E generally began taking service under the new tariff on April 15, 2023. Utilities may call it the Solar Billing Plan, while homeowners often call it NEM 3.
Solar production first serves electricity being used onsite. That energy can avoid a retail purchase. Extra production sent to the grid earns Energy Export Credits based on the value of electricity to the grid, which the CPUC says is usually lower than the retail rate but can be higher during some late-summer evening periods.
Why the time of production matters
A traditional annual-offset calculation adds all solar kilowatt-hours together, but net billing makes timing important. Midday production may exceed household load and flow to the grid at a lower credit. Evening consumption may occur after solar production falls and be purchased at the applicable retail rate.
This is why two systems with identical annual production can create different bill savings. A home that uses more electricity during solar hours may consume a larger share directly. Load shifting—such as scheduling some appliances or EV charging during solar production—may improve self-consumption when practical.
How batteries fit into the Solar Billing Plan
A battery can store midday production for evening use instead of exporting it immediately. That may reduce higher-priced grid purchases, but the financial outcome depends on equipment cost, control strategy, efficiency, and the utility’s current tariff. CPUC materials describe the tariff as encouraging solar paired with storage, not as guaranteeing a battery payback.
Ask installers for two proposals: solar-only and solar-plus-battery. Both should use the same annual consumption, roof layout, equipment assumptions, and current tariff. The battery proposal should show its incremental cost and incremental savings separately.
Questions to ask before signing a California solar contract
California requires consumer-protection documents for residential solar interconnections in major investor-owned utility territories. Read the official guide and the complete contract. Be cautious of claims that solar is free, that every electric bill becomes zero, or that export credits always equal the retail rate.
- Which utility tariff and rate schedule does the savings model use?
- What percentage of production is assumed to be used onsite?
- How are hourly or monthly export credits modeled?
- Does the estimate include fixed charges and battery losses?
- What utility-rate escalation is assumed each year?
- Are the cash price, financed amount, and total payments all disclosed?
Frequently asked questions
Is NEM 3 the same as the Solar Billing Plan?
The terms are commonly used for California’s Net Billing Tariff. PG&E, SCE, and SDG&E use Solar Billing Plan terminology.
Does California NEM 3 make solar worthless?
No. Onsite solar can still avoid electricity purchases, but exports are valued differently. Roof, load timing, system price, tariff, and storage determine the economics.
Do I need a battery under NEM 3?
A battery is not automatically required. It can shift energy into higher-value hours and provide backup, but compare its added cost with added savings and resilience value.
Primary sources
This guide was written for homeowners and reviewed against the following government and research resources. Programs and utility rules can change, so verify current details before making a financial decision.