NEM 2.0 vs NEM 3.0 California: What Changed and What It Means For You

What the two tariff names describe

The CPUC describes NEM as a program in which a participating customer receives bill credits for excess generation exported to the grid. Its current Net Billing Tariff, also called the Solar Billing Plan or NEM 3.0, applies to new interconnection applicants in the large investor-owned utility territories beginning April 15, 2023.

Under both structures, generation used in the home first reduces electricity bought from the grid. The key billing difference is how exported generation is credited. The CPUC says Net Billing export compensation usually differs from the retail rate and can vary by time; the account's current utility documents control the actual calculation. Why midday exports earn so little and evening exports so much comes down to the grid pattern known as the duck curve behind net billing.

What is NEM 2.0 in California?

NEM 2.0 (written NEM2 on PG&E paperwork, and sometimes mistyped as “NMEC 2.0”) is California's second net energy metering tariff for rooftop solar. The CPUC created it in 2016 under Assembly Bill 327, in Decision D.16-01-044, to replace the original NEM 1.0. It applied to PG&E, SCE and SDG&E customers who applied to interconnect from their utility's NEM 1.0 sunset in 2016 or 2017 until April 14, 2023.

Under NEM 2.0, solar you export is credited at the same retail price you pay for power in that hour, including generation, distribution and transmission. The CPUC added three conditions NEM 1.0 did not have:

• A one-time interconnection fee for systems up to 1 MW: $145 at PG&E, $94 at SCE and $132 at SDG&E.
• Non-bypassable charges, small per-kWh charges for public programs, paid on the net energy you draw from the grid in each hour instead of once a year.
• A time-of-use rate. Any of the utility's TOU plans qualifies; NEM 2.0 does not tie you to one plan.

Billing is annual: charges and credits roll forward for 12 months and are settled at the true-up. If you exported more than you used over the year, the surplus is paid at the net surplus compensation rate, which the CPUC puts at roughly 2 to 3 cents per kWh. PG&E's rate for true-up months in 2025 ranged from 2.919 to 3.396 cents.

The side-by-side: NEM 2.0 vs. NEM 3.0

Both tariffs work the same basic way — your solar offsets what you use first, and only the leftover gets exported — but they price that leftover, and the years you're locked into a plan, differently.

NEM 1.0 vs. NEM 2.0 vs. NEM 3.0: all three

The CPUC created NEM 1.0 in 1996 under Senate Bill 656, and systems joined it until the 2016–2017 sunset dates. NEM 2.0 followed in 2016, and the Net Billing Tariff (NEM 3.0) has applied to new applications since April 15, 2023. This is how the CPUC compares them:

Source: CPUC, Net Energy Metering and Net Billing, comparison of standard NEM tariffs and NBT, checked September 23, 2026. Applies to PG&E, SCE and SDG&E.

When does NEM 2.0 expire?

Twenty years after your system's interconnection date, under CPUC Decision D.14-03-041, unless you choose to switch to the current tariff sooner. A system interconnected in 2020 keeps NEM 2.0 until 2040. The clock follows the system's interconnection date, not the date you bought the house. PG&E states the same 20-year period for its NEM 1.0 customers.

The door to new NEM 2.0 accounts is shut. PG&E says applications submitted before April 15, 2023 had to be completed by April 15, 2026 to keep NEM2; from that date, unfinished NEM2 applications move to the Solar Billing Plan.

Municipal utilities and non-export systems

NEM 2.0 and NEM 3.0 are CPUC tariffs for PG&E, SCE and SDG&E. City-owned utilities write their own. LADWP still uses net energy metering: its NEM rider credits exported energy at your rate schedule's energy price and carries credits forward, but zeroes any balance left when you close the account. SMUD moved new solar customers to its Solar and Storage Rate on March 1, 2022, which pays 9.6 cents per kWh for exports at any hour, and lets its NEM 1.0 customers stay on that rate through 2030. See LADWP net metering and the SMUD solar program for the details.

A non-export system is a third path. PG&E's Rule 21 defines it as a system sized and designed so its output serves only the home and cannot flow onto the grid. It takes no NEM or net billing credits because it sends nothing out, but it still has to be interconnected under the utility's Rule 21 process. The CPUC's net metering page expressly leaves non-export interconnection out of scope.

Who should check the existing NEM tariff

The CPUC states that NEM 2.0 customers may remain on that tariff for 20 years from interconnection, unless they choose to switch to the current tariff. A homeowner should confirm the interconnection date, tariff and any proposed system change directly with the utility before treating a proposal as a continuation of the prior arrangement.

Three changes cause most of the questions. Adding panels past your utility's threshold moves the account to NEM 3.0 (see adding solar panels to an existing system). Selling the home does not restart the 20-year clock, which runs from the interconnection date, and a lease or PPA contract is a separate matter (see selling a home with a solar lease or PPA and solar PPA vs. lease). And the rate plan you pick still decides what each exported kWh earns under NEM 2.0, since credits follow the hour's retail price; PG&E's plans are listed in PG&E rate schedules.

What a comparable proposal needs to show

Ask every bidder to identify the utility, tariff, assumed onsite use, projected imports, projected exports, remaining delivery and fixed charges, and the source date for each assumption. A single estimated monthly payment does not show those inputs.

Put the quotes on the same basis

A smaller monthly payment can hide a longer contract, less equipment or a larger remaining electric bill. Ask each bidder to fill the same gaps.

Use the current bill before relying on a comparison

This guide applies to PG&E, SCE and SDG&E Net Billing context. A municipal or community-choice account can have additional service and billing details. Read the current bill and utility enrollment before comparing it to a generic example. For the official consumer checklist, see the CPUC guide.