Net Metering 3.0 in California: What You Need to Know

By Jeremy Pearl


Last Updated on May 3, 2021 by Jeremy Pearl
May 03

In August 2020, the California Public Utilities Commission (CPUC) started a motion to change California’s net energy metering (NEM) program for the second time in four years. Experts are calling this “NEM 3.0.” While there are currently no new rules to report, changes are expected to be approved this year.

In this post, we’ll provide an overview of net metering 3.0 in California, what you need to know about the future of the program, and how it affects customers interested in going solar.

Let’s dive in.

The Benefits of NEM Programs

Net energy metering is a program that allows businesses and homeowners to generate electricity with a private solar energy system and to send the power they do not use back into the grid for a billing credit.

These credits can offset electricity costs and help customers lower their utility bills.

Here are a few big benefits of NEM for customers:

  • Efficiency. Under the NEM program, excess energy produced by solar panels doesn’t go to waste. This benefits everyone on the grid – even those who don’t have solar panel systems.
  • Reduced energy loss. Utility companies that receive solar energy through home solar systems reduce the loss of energy associated with long-distance electricity transmission.
  • Reductions in greenhouse gasses. Solar energy is cleaner than traditional energy Research has shown that when homes without solar panels use solar energy, it helps cut greenhouse gas emissions related to the production and use of power.
  • Carryover credits. One of the biggest benefits of the California net metering system is that it doesn’t operate on a month-by-month basis. Solar panels will generate the most power during the summer and the day. However, at night and in the winter, users likely need to draw from the main electricity grid. Under California’s net metering system, those credits operate in annual cycles and carry over from month to month for a 12-month period before they start over. This means customers can use credits from solar panel overproduction during the summer to help pay for their energy costs in the winter.

California Net Metering 3.0: A Complete Overview of Proposed Changes 

Proposed changes to NEM include the following:

  • Reforms that could function to eliminate distributed solar access for California residents and businesses.
  • Under the new plan, NEM will charge the highest solar fees in the United States. The average residential customer will pay a required fee of $78 per month just to have access to solar.
  • The new plan would also require large fees for non-residential customers. Schools in PG&E territory, for example, would pay an unavoidable $950 monthly fee to invest in solar power. Southern California schools in Edison’s territory, meanwhile, would pay an unavoidable fee of $3,400 per month.
  • The proposed changes would also enforce credit reductions for contributing customers. Even for customers sending surplus energy back to the grid on hot summer days, NEM 3.0 would cut credits down to wholesale levels, or by about 77%. This means that when solar users share the electricity they produce, the utility would charge those receiving the electricity about 25 cents while extending 5.7 cents in bill credits to the solar producer. That’s an unfair cut for customers and stands to change the way customers use NEM to lower their energy bills.

3CE’s Proposed Rate Changes

Our local energy provider, Central Coast Community Energy (3CE), has also proposed rate changes that will impact solar customers. As it stands now, a Policy Committee vote is scheduled for June 2021. If approved, changes will go into effect on January 1, 2022.

3CE’s proposed rate changes are problematic for NEM customers. Not only would they damage current solar jobs and businesses across 3CE territory, but the changes would also put an end to the 15% growth rate projected if solar NEM rates are left unchanged.

As it stands now, many solar customers are upset about 3CE’s proposed rate changes. Customers believe 3CE should avoid changing its solar rates until the IOU sets its rates – hopefully later this year.

Until then, 3CE should honor its commitment to beat the IOUs’ state mandated rates for solar customers, thereby supporting local solar customers across the board.

How NEM 3.0 Will Affect Central Coast Solar

The new NEM rates are proposed for approval in June 2021. If approved, the 3CE (our local energy provider) solar rate hikes could go into effect as soon as January 1, 2022. These rate hikes would have a long-lasting effect on both solar production and storage.

Here are some of the likely impacts:

  • Elimination of the requirement that 3CE provides better rates for local solar, storage, and microgrids than the IOU’s NEM rates.
  • Reduced or eliminated local solar or storage stakeholder input into proposed NEM rate design processes.
  • Monthly fixed charges of about $4.50 for all customers, in addition to existing fixed charges.
  • Under the NEM tariff, “Net Consumption” will be billed monthly while credits (net energy production) may accumulate and true-up on a 12-month billing cycle each year. These monthly true-ups impact customers and make NEM less appealing.
  • Reduced Net Surplus Compensation (NSC) for solar PV systems – from $0.0662/kWh to $0.0247/kWh.
  • NEM rates will now be adjusted and created via a process that local stakeholders have little visibility and access

What you can Do to Preserve Solar Power Rights in California

The majority of California voters oppose changes to NEM — and for good reason. If the measures pass, they will make solar power more expensive and difficult for California residents and businesses to access.

So, what can you do to protect solar access in California? 

First, we recommend using your voice to sign one of the many petitions circulating the web. People in California can sign this petition. People who live on the Central Coast specifically can sign this petition, as well. You can also view our recent blog on the topic.

Next, we recommend that you call and write to your local representatives to let them know you support more rooftop solar on homes, not less, and that you are concerned that these new proposed NEM changes will negatively impact people’s ability to go solar and achieve energy independence.

Spread this message far and wide to your friends, families, co-workers, and peers. Stay engaged and keep an eye out for opportunities to amplify your voice.

If we band together, we can save solar power in California, and resist the unneeded and expensive changes to solar policies in this state.

About the Author

Jeremy has worked in the solar industry since 2006. He has a Bachelor’s Degree from UC Santa Cruz in Environmental Studies. Jeremy has spent most of his solar career in residential sales and Sales Management in both California and Hawaii. He was raised in Santa Cruz County and is passionate about helping local residents make the switch to clean and reliable renewable energy. Jeremy lives on the Westside with his wife and two boys and enjoys music, photography and hiking in his personal time.