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When Will NEM 3.0 Go into Effect?

Updated: Oct 13, 2022

When California enacted its first net metering policy in 1996, it aimed to spur industry growth and promote solar use among residents. Its second version, NEM 2.0, continued to compensate customers for sending surplus energy back to the grid. However, as it will sunset soon, the California Public Utilities Commission (CPUC) will implement new provisions for net metering under NEM 3.0.

The NEM 3.0 timeline began in August 2020 when CPUC initiated reform for the current version. Based on the original schedule, the main proceedings will occur in 2021. The expected implementation will be in 2022—two years after discussions began, similar to California’s solar mandate on new constructions and major upgrades. Here is a breakdown of the NEM 3.0 timeline:

• January 2021: CPUC finishes the study on the impact of net metering on consumers and the grid

• February 2021: Finalizes guiding principles on NEM 3.0

• March 2021: Opens proceedings for proposal inputs from interested groups or parties

• April to August 2021: Holds hearings for changes to be included in the new policy before the final decision

• November 2021: CPUC issues final decision following comprehensive discussions and deliberations

• 2022: following several weeks of industry outcry, public protest, and political leader involvement, California’s Net Energy Metering (NEM) 3.0 was delayed indefinitely.

Based on the latest news, the new net metering policy proceedings are on hold until further notice as CPUC asks for more time to review. Even though the commission did not issue its final decision last November 2021 as originally planned, it released a proposed decision in December 2021 for further discussions.

Proposed Changes under NEM 3.0

Although the NEM 3.0 timeline is on indefinite pause, that doesn’t mean solar consumer generators can heave a sigh of relief just yet. The proposed decision outlines significant changes to the current net metering policy, such as the following: Shift to Revised Time of Use (TOU) Plans Under the new TOU plans for solar consumers, electricity rates are highly differentiated based on times of highest grid usage. As a result, expect to be charged higher during peak hours and lower for off-peak periods.

Lower Energy Credits

Currently, the credit for exported surplus energy ranges between $.022/kWh and $0.36/kWh. With NEM 3.0, the rate substantially decreases to only $0.047/kWh and $0.058/kWh. It was based on the state’s avoided cost calculator, which estimates the value of distributed excess solar energy to the public grid.

Additional Monthly Fees

Besides higher rates for electricity consumed when solar panels aren’t generating power, NEM consumers have to pay $8 per installed kW of solar capacity monthly. The grid participation charge supposedly levels every consumer’s access to the public grid.

Shorter Term for NEM 1.0 and 2.0 Credits

Under NEM 3.0, all current solar owners will have a reduced term agreement, from 20 years to only 15, for their existing credits. However, the transition isn’t automatic since they need to sign an interconnection agreement to maintain NEM 2.0 for the next 15 years.

An Example of NEM 3.0

CALSSA and Aurora put together a case study to compare the value of going solar today under NEM 2.0 to the value of going solar under the proposed NEM 3.0. This is based on the average rates & fees from the three IOUs, and an average system size of 6kW.

Data from Aurora Solar

From the study, you can see the reduced monthly bill savings for the homeowner under NEM 3.0. Even with the extra 4% or 8% solar tax credit from the Inflation Reduction Act, NEM 3.0 will substantially change the payback period for solar customers in California.

When Will NEM 3.0 Take Effect?

First, know that these NEM 3.0 changes are simply a proposal at this time. As of August 19, 2022 the soonest NEM 3.0 could go into effect is March 2023 — leaving plenty of time for Californians to install solar and be grandfathered into NEM 2.0.

The NEM 3.0 timeline is expected to go as follows:

• California Public Utilities Commission (CPUC) releases the draft proposal on September 29, 2022

• The release kicks off a minimum 30 day public comment period • CPUC will schedule a vote in November or December 2022

• Following the vote, there is a 120 day grandfathering window for NEM 2.0

• NEM 3.0 takes effect in March 2023 Based on this schedule, Californians would have until March 2023 to install and file for interconnection to be grandfathered into NEM 2.0.

*NEM 3.0 Timeline Update: September 29 came and went without a draft proposal release. The proposal may not come out until after the elections, pushing the entire timeline back up to six weeks. There’s speculation that this indicates a utility-friendly proposal that would be deeply unpopular to voters.

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