California Net Billing (NEM 3.0): How It Works and Whether Solar Still Pays

California’s Net Billing Tariff, often called NEM 3.0, pays very little for the solar power you send to the grid: roughly 4 to 5 cents per kWh on average for most new PG&E, SCE and SDG&E customers. But solar you use in your own home still avoids California’s high retail rates. So solar can still be worth it in California, as long as the system is sized to your usage and you plan around self-consumption. A battery often helps, but it is not automatically a good buy.

This guide explains how the tariff works, as of October 2026, and how to judge a California quote honestly. For state-level numbers, see our California solar page.

Who is on the Net Billing Tariff

The Net Billing Tariff (NBT) applies to customers of California’s three big investor-owned utilities, PG&E, Southern California Edison and San Diego Gas & Electric, whose interconnection applications were submitted on or after April 15, 2023. It was adopted by the CPUC in decision D.22-12-056.

It does not apply to:

• Legacy NEM 1.0 and NEM 2.0 customers, who keep their original tariff for 20 years from interconnection.
• Municipal utilities and co-ops, such as LADWP and SMUD, which set their own rules.

Legal challenges have run their course for now. A state Court of Appeal upheld the tariff on remand in March 2026, and the California Supreme Court denied review on June 10, 2026.

How the Net Billing Tariff works

Self-consumed solar saves full retail

Any solar power your home uses the moment it’s produced never shows up as an import. You save whatever you would have paid for that kWh. With PG&E time-of-use rates reported in the 35 to 45 cent range, that’s valuable.

Exports earn hourly avoided-cost values

Power you send to the grid is credited using the CPUC’s Avoided Cost Calculator (ACC). The ACC sets a value for every hour of the day, averaged by month, with separate weekday and weekend sets. The values reflect what the utility avoids spending when your solar replaces grid power at that hour.

The result is very uneven:

• Midday exports, when the grid is flooded with solar, are often worth only a few cents.
• Summer evening exports, roughly 6 to 9 p.m., can be worth 20 cents or more.

One industry analysis reports average export values of about 3.9 cents for PG&E, 4.6 cents for SCE and 3.7 cents for SDG&E for 2025 and 2026 applicants. Early tranches also get a small “ACC Plus” adder, reported at about 1 cent for PG&E and 2 cents for SCE for 2026 applicants, and none for SDG&E. Treat these averages as estimates; your utility’s published ACC tables are the official source.

The 9-year lock

According to the CPUC, customers who receive permission to operate (PTO) between April 15, 2023 and December 31, 2027 have their export price schedule locked for 9 years. After that, your exports are valued under whatever ACC values apply at the time. Because the ACC is updated periodically, new applicants in later years may get different export values than today’s.

The lock covers export values, not your retail rates. Retail rates, fixed charges and rate plan rules can still change.

Mandatory time-of-use rates

NBT customers must take an electrification time-of-use rate, such as PG&E’s E-ELEC, SCE’s TOU-D-PRIME or SDG&E’s EV-TOU-5. These plans charge the most in the late afternoon and evening, right when solar output is falling. Our time-of-use guide explains how that interacts with solar.

Credits, true-up and fixed charges

• Export credits are dollar credits that roll forward month to month.
• After 12 months, there’s an annual true-up. Leftover credit is cashed out at the Net Surplus Compensation rate, a wholesale price of a few cents, and only for a net kWh surplus.
• All residential customers of the three big utilities now pay an income-graduated Base Services Charge: about $24.15 a month standard, about $12 for FERA customers and about $6 for CARE customers. It was introduced in late 2025 (SCE, SDG&E) and March 2026 (PG&E), alongside lower per-kWh rates. Solar cannot offset it.

Worked example: why right-sizing matters

Here is a simplified example for a PG&E-area home. It ignores rate increases and degradation, so use it to compare choices, not to predict your exact savings. Run your own numbers with the solar calculator.

Assumptions:

• 5 kW system producing 7,500 kWh a year
• $2.90 per watt, our California default based on EnergySage’s state data = $14,500
• No federal tax credit for an owned system installed in 2026
• 35% of production used in the home, valued at 32 cents per kWh (a midday time-of-use rate; yours may differ)
• 65% exported at an average of 5 cents per kWh

	Amount
Self-consumed: 2,625 kWh × 32¢	$840
Exported: 4,875 kWh × 5¢	$244
Annual savings	about $1,084
Simple payback	about 13.4 years

Now suppose a salesperson suggests 2 kW more “to cover future needs.” That adds about 3,000 kWh a year. If the home can’t use it, nearly all of it is exported at about 5 cents, adding roughly $150 a year in savings for about $5,800 in cost. Payback on those extra panels alone: close to 39 years.

Under full retail net metering, a bit of oversizing was cheap insurance. Under net billing, it’s mostly wasted money unless you’ll genuinely use the power, for example from a planned EV or heat pump. See our solar and EV charging guide and the oversized system red flag.

Why batteries matter under net billing

A battery lets you store midday solar that would have earned about 5 cents and use it in the evening, when your time-of-use rate is highest. That’s the core value under the NBT. Some battery systems can also export during high-value summer evening hours.

Continuing the example, assume a 13.5 kWh battery costs about $15,000 installed (about $1,130 per kWh, per EnergySage’s H1 2026 data), with no federal credit for an owned battery in 2026.

• It shifts 3,000 kWh of exports a year into the evening.
• Each stored kWh would have earned 5 cents as an export.
• With about 89% round-trip efficiency, each stored kWh offsets 0.89 kWh of evening power at an assumed 42 cents.
• Value per stored kWh: 0.89 × 42¢ − 5¢ = about 32 cents.
• Annual added savings: about $970. Simple payback on the battery: about 15 years.

That’s longer than many battery warranties, which commonly run 10 to 15 years. So a battery under NBT can make sense, especially if you also value backup power or can get an incentive, but it is not a quick win on bill savings alone. Run your own case in the battery calculator and read do solar batteries pay off? for the full picture.

Battery incentives in California, as of October 2026

• SGIP (Self-Generation Incentive Program): the Residential Solar and Storage Equity budget offers rebates of roughly $1,100 per kWh of storage for income-qualified and other eligible households, with a waitlist. A commercial source reports the general-market residential storage budget is closed. Check the CPUC SGIP page for current status.
• DSGS (Demand Side Grid Support): a state virtual power plant program that pays for battery dispatch during grid emergencies. Funding for 2026–27 was not confirmed in our research.
• DAC-SASH: no-cost solar for income-qualified homeowners in disadvantaged communities, administered by GRID Alternatives.

Watch out: Don’t let a battery pitch rely on SGIP rebates unless the installer can show the funds are actually available to you. Ask for the reservation confirmation, not a promise. See the battery oversell red flag.

Legacy NEM 1.0 and NEM 2.0 customers

If your system was interconnected under NEM 1.0 or NEM 2.0, you keep that tariff for 20 years from your interconnection date. Exports under those tariffs earn close to retail value, which is far better than the NBT. NEM 2.0 customers do pay certain non-bypassable charges on imported power.

That protection stays with the home if it’s sold. A 2025 bill (AB 942) originally included a provision that would have ended legacy status on sale, but that part was stripped in July 2025. Its final status should be confirmed, but as of our research the home-sale provision is not in effect.

If you’re on a legacy tariff:

• Don’t make big system changes without checking how your utility treats them.
• Keep your interconnection paperwork and PTO date; buyers and their agents will ask. See selling a house with solar.
• Plan for the end of your 20-year term, when you’ll move to whatever tariff is then current.

Is solar still worth it in California?

Honestly: often yes, but less automatically than before, and the margin for a bad deal is thin.

Solar is more likely to be worth it if:

• Your bills are high and your usage is steady through the day, or you can shift usage into daylight hours.
• You size the system close to what you’ll actually use, not to “offset 100%” of past bills plus extra.
• You pay a fair cash price. California’s 2025 median installed price for owned systems was $3.3 per watt in LBNL’s data, which includes dealer-fee loans, while EnergySage marketplace quotes averaged about $2.52 per watt. See what’s a good price per watt.
• You plan to stay in the home long enough to pass payback.

It’s harder to justify if:

• Most of your usage is at night and you don’t want a battery.
• The quote assumes old-style net metering or ignores the Base Services Charge.
• The price includes a hidden dealer fee, which can push payback past 20 years.
• Your roof needs replacing soon. See replace your roof before solar.

Leases and PPAs deserve a fair look in California right now. Lease and PPA providers can still claim a 30% federal credit that homeowners can’t, subject to deadlines and sourcing rules. EnergySage’s H1 2026 report found PPA prices about 59% below utility rates in California. That can make a well-structured PPA competitive, but watch for escalators and transfer terms. Read lease vs buy vs PPA vs loan and solar escalator clauses first.

How to check a California quote

1. Confirm the quote uses the Net Billing Tariff with hourly export values, not a flat retail credit.
2. Ask what percentage of production the installer assumes you’ll self-consume, and why.
3. Check that the savings estimate subtracts the Base Services Charge rather than promising a near-zero bill.
4. Ask for the exact time-of-use rate plan used in the model.
5. Get a cash price and a system-only price without a battery, so you can see what the battery adds.
6. Verify the installer’s CSLB license (C-46 or C-10) on the CSLB website.

Then put competing offers side by side in the quote comparison tool, and test sizing and battery scenarios with compare options.