The NEM 3.0 Lawsuit: What the Courts Decided and What It Means for You

The court challenge to NEM 3.0 has, so far, left the tariff standing. Three groups sued to overturn the CPUC’s 2022 net billing decision. The Court of Appeal upheld it, the California Supreme Court sent the case back in August 2025 because the lower court had given the CPUC too much deference, and on March 9, 2026 the Court of Appeal looked again under the stricter standard and affirmed the decision.

This page is one part of our guide to California solar billing.

For a homeowner, that means the net billing tariff PG&E, SCE and SDG&E apply to new solar is still the rule, and existing NEM 2.0 accounts were never part of the case. Here is the timeline, what each side argued, and where changes could still come from.

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Timeline of the NEM 3.0 case

What the CPUC decided in 2022

Decision 22-12-056 replaced NEM 2.0 for new customers of the three large investor-owned utilities. The CPUC’s announcement said export credits would be based on the avoided cost to the utility of buying clean electricity elsewhere, with extra bill credits for residential customers who adopt solar or solar and storage in the following five years, guaranteed for nine years. It projected that average solar customers would save about $100 a month, solar-and-battery customers at least $136, and that systems would pay off in nine years or less on average. It said the decision includes no charges specific to solar customers and has no impact on existing rooftop solar customers.

For how that tariff compares with the old one, see net billing vs. net metering and the CPUC decision.

Who sued, and what they argued

The petitioners were the Center for Biological Diversity, the Environmental Working Group and the Protect Our Communities Foundation. Their case rests on Public Utilities Code section 2827.1, which tells the CPUC to design the successor tariff so that customer-sited renewable generation continues to grow sustainably, to include alternatives for residential customers in disadvantaged communities, and to weigh costs and benefits.

According to the March 2026 opinion, they made four arguments. The tariff slowed solar growth by cutting bill savings. It lacked specific alternatives for disadvantaged communities. The Avoided Cost Calculator left out benefits such as resiliency, out-of-state methane leakage, land use and transmission costs. And it put nonparticipating customers’ interests ahead of cost-effectiveness for the electrical system as a whole.

Why the Supreme Court sent it back

The first Court of Appeal ruling, reported at 98 Cal.App.5th 20, affirmed the CPUC using a highly deferential standard of review. In its August 7, 2025 opinion in case S283614, the California Supreme Court held that the deference described in the older Greyhound line of cases no longer governs review under Public Utilities Code sections 1757 and 1757.1 for industries other than water. Courts must instead exercise independent judgment on whether the agency followed the statute, under the framework known as Yamaha. It reversed and remanded so the Court of Appeal could apply that standard.

That was a ruling about how to judge the decision, not a ruling that the decision was wrong. The tariff stayed in effect while the case went back down.

What the Court of Appeal held on remand

On March 9, 2026, the First District, Division Three, applied independent judgment and affirmed, in an opinion certified for publication. It rejected each argument in turn. On sustainable growth, it read the statute as aimed at ending the cost shift the Legislature was concerned about, not at guaranteeing any particular growth rate. On disadvantaged communities, it pointed to the higher export adder for CARE customers and CalEnviroScreen communities, plus existing programs, as the required alternatives. On benefits, it upheld the CPUC’s method and noted the Commission can revise the tariff later on new evidence. On cost-effectiveness, it read the statute to require that total costs and benefits to all customers and the electrical system be approximately equal. Its disposition: the decision is affirmed.

Where change could still come from

The CPUC built its own review into the tariff. Decision 22-12-056 says the Commission will collect three years of data after full implementation, issue a draft evaluation within five years of implementation, and consider in a future proceeding whether changes are needed. The CPUC’s net billing page lists Decision 23-11-068 as planning that evaluation. Any change to the tariff would come out of that process, and a change for future customers would not necessarily reach existing ones: net billing customers get nine years on the tariff they enrolled under.

Legislation is the other route. The CPUC’s net billing page, checked September 23, 2026, still describes the net billing tariff as the one new applicants take service on.

What it means for you

If you already have solar on NEM 1.0 or NEM 2.0, nothing in this case changed your terms. Your tariff runs 20 years from interconnection; see when NEM 2.0 expires.

If you are considering solar now, plan for net billing as it is. The CPUC says residential PG&E and SCE customers who apply to interconnect before the end of 2027 get slightly higher export credits for nine years, and that storage is how customers maximize savings under the tariff. The NEM 3.0 timeline lists the dates that still matter.