Net Metering 3.0 in California: Here’s What You Need to Know About this Impending, Utility-Friendly Policy Change

We’ll keep this post updated with the latest news on Net Metering 3.0, including any meetings of the Public Utilities Commission in which Net Metering is discussed and any updates as to the timeline of Net Metering 3.0’s adoption

The latest: Updated 9/21/22

With just over a week to go until the theoretical deadline for a decision, there’s still no word from the California Public Utilities Commission on a new net metering framework.

California leaders at all levels of government are continuing to speak out in favor of preserving the value of net metering, however. Last week, 16 California members of the U.S. House of Representatives sent a letter to the CPUC expressing concern about the possibility that a reduction in the value of net metering, or new fees levied on solar-empowered homeowners, would undermine the clean energy goals of the recently-passed Inflation Reduction Act.

Update: 8/23/22

Although the CPUC has maintained “radio silence” on the proposed changes to net metering over the last few weeks, there’s some reason to think that we’ll see the Commission take action soon. Observers have pointed out that CPUC rules require a decision within 90 days of the close of the last public comment period. For NEM 3.0, the last round of public comment ended July 1 – meaning that theoretically, the Commission has until September 29 to issue a new proposed decision.

Of course, the Commission’s original proposed decision was issued last December – triggering a storm of outcry that led to where we find ourselves today. Notably, the Commission did recently make a procedural ruling extending the deadline for completing the entire process, which had originally been set at the end of August, for one year – to late August 2023. So there are no guarantees that this whole story will actually be over any time soon. Of course, we’ll continue to monitor the situation and bring you updates. Since there’s no way to predict when the Commission will act or exactly what the decision should be, California homeowners interested in solar should take advantage of the delays to lock in the current, high-value net metering rates. Talk to one of our energy consultants today to learn more.

Update: 8/3/22

While there’s been no new action by the CPUC on the proposed net metering changes, a lot of attention from solar industry observers has been focused on the possibility of the federal solar income tax credit being extended. An extension would obviously be welcome news for homeowners considering solar, but some analysts warn that an extension of the ITC could result in an even stronger push from utilities to undermine net metering, or regulators underestimating how important net metering will still be to the residential solar value proposition.

You can read our ongoing coverage of the ITC expiration/extension topic here.

Update: 7/11/22

After being extended from its initial mid-June deadline, the new public comment period for feedback to the CPUC on the proposed net metering revisions is now closed. Among the many messages sent urging the commission to preserve the value of net metering, some of the most notable were sent by local government leaders. Over 20 city governments, plus 43 mayors and 40 individual city or county council members from across California made comments calling for the commission to preserve the value of solar.

Once the CPUC has reviewed all of the comments submitted during the new feedback period, a decision on the net metering proposal could come as soon as late this month, although there is still no firm timetable set. We will continue to monitor this important story.

Update: 5/12/22

After several weeks with no new developments, the CPUC is now asking for more feedback from the public on the proposed changes to net metering in California. 

The Commission is looking for input in three main areas: the “glide path” transition period between the current policy and the proposed “Net Metering 3.0” policy; the question of monthly fees for solar customers that some critics called a “tax on the sun”; and potential changes to California’s community solar program for customers in disadvantaged communities.

The Commission has set a deadline of June 10 for public feedback. You can find out more on the CPUC website here. The CPUC has also provided a brochure explaining different options for California residents to submit their comments. 

We will continue to monitor any developments in this story. 

Update: 2/23/22

There’s been no further official word on the proposed net metering changes since the CPUC said they would need more time to consider the issue early this month. However, the California Solar and Storage Association (CALSSA), a solar industry trade association, has reported that the timetable for the CPUC to take any further action will probably be a matter of months rather than weeks.

We want to make it clear that CALSSA’s report was based on what they said were off-the-record insider sources with the CPUC. That means it would be fair to take this claim with a healthy degree of skepticism until the CPUC themselves make a public statement on a timeline for revising or making a final decision on the net metering proposal. We’ll continue to update this post as soon as any new information becomes available.

Update: 2/4/22

The CPUC has issued a notice saying that they need additional time to consider the proposed changes to California’s Net Metering policies, and that new oral arguments will be held at an unspecified later date.

The Commission’s new president Alice Reynolds only joined the CPUC at the end of last year and was not a member of the Commission during the process where the current proposal was drafted.

We’ll continue to update this article as soon as any definite action is taken by the CPUC.

Update: 1/28/22

Despite the vote on the new Net Metering proposal being removed from the agenda of the CPUC’s meeting yesterday, a huge number of people took advantage of the opportunity for public comment to the Commission to give their opinions about the issue. Hundreds spoke out against the changes to the state’s net metering policies, while the total speaking in favor was reportedly in the single digits.

The CPUC has not scheduled a new time for the vote on the proposed changes. The agenda for the next CPUC meeting, scheduled for February 10, does not include a vote on the Net Metering proposal, so the soonest a vote could occur is at the following meeting scheduled on February 24. That said, there is no guarantee the proposal will go to a vote at that meeting, either.

Update: 1/24/22

The scheduled vote on the new Net Metering proposal has been removed from the CPUC’s agenda for January 27th, with no new date set. Observers noted that it is not unusual for the Commission to push back action on complex matters or those that have attracted a high degree of public attention. Another factor which may have played a part in the delay is that the Commission’s new president has only been in office since shortly before the beginning of the year, while another seat on the five-member Commission remains vacant pending state Senate confirmation of a new member appointed by Gov. Newsom.

This delay comes on the heels of Gov. Newsom’s recent comments stating that the proposed changes “need more work.” At a press conference just a few weeks ago, Newsom stated he’d only recently read the proposed changes himself.

Update: 1/13/22

A final vote of the California Public Utilities Commission (CPUC) on proposed changes to the Net Metering program is currently scheduled to take place on January 27.

Asked during a press conference on Monday, California Governor Gavin Newsom said that “changes need to be made” to the proposals under consideration by the CPUC.

Newsom appointed four of the five current members of the CPUC.

Update: 12/2/21

The California Public Utilities Commission is reviewing its Net Energy Metering policy, with a policy revision expected to be finalized in early 2022 and implemented over the course of the year. The revised policy will walk back some of the benefits homeowners enjoy under the current policy – however, homeowners who go solar before the new policy is implemented will be “grandfathered in” to the current policy for a period of 20 years.

A major change expected in the move from the current policy, Net Metering 2.0, to the revised Net Metering 3.0 is a reduction of the value of credits granted for excess production. Under 2.0, homeowners are credited at the retail rate per unit of production, and can roll over credits for up to a year. Under 3.0, homeowners can expect to be credited at a lower rate and see their credit balance reset at the end of each month. Homeowners may also be hit with one-time and recurring fees based on the amount of solar capacity installed.

For homeowners in California considering going solar, time is of the essence – eligibility to be grandfathered in to Net Metering 2.0 is likely to hinge on the date of submission of the Interconnection Application, which is submitted after installation of panels. Once the new policy is finalized, a date will be identified at which time the policy goes into effect. Homeowners will need to have their Interconnection Applications submitted before that date to be grandfathered in. Industry insiders expect an implementation period of around 6 months.

Key Dates for Net Metering 3.0 in California:

Update (1/24/22): The CPUC removed a vote on proposed net metering changes from its agenda for its meeting on January 27th, delaying the timeline for any changes this year.

January 2022: Decision expected on Net Metering 3.0 policy updates.

July 2022: Net Metering 3.0 policy expected to go into effect (assuming 6 month implementation period). Homeowners will need to have panels installed and Interconnection Application submitted prior to this date to be grandfathered into Net Metering 2.0.

It’s not too late to make your voice heard about the utilities’ attack on the value of solar. Several advocacy groups are collecting signatures for petitions to California Governor Gavin Newsom on this issue. To find out more, visit Save California Solar, Solar Rights Alliance, and Vote Solar.

Read on for more information about Net Metering in California, its history, evolution, and governance, and the effects of the impending changes.

Net Metering 3.0 – Just a Matter of Time

California’s net metering policy is one of the factors that makes it the best place in the country to go solar – but changes are coming that will make the policy less lucrative for homeowners. Net Metering 3.0, as it’s commonly known, is on the horizon, and although no firm date has been set for its adoption, when it goes into effect, it will leave homeowners who waited to go solar kicking themselves.

Solar will continue to be a winning investment for homeowners in California under Net Metering 3.0, but homeowners who go solar now, locking themselves into the current structure, will enjoy a much bigger bang for their buck.

What is Net Metering?

Simply put, net metering is the system where your utility pays you for energy that your solar system produces beyond what you actually use. Some form of net metering is available in many states, depending on where you live and which utility you use, but California has a statewide net metering program.

net metering

California’s current Net Energy Metering policy incentivizes the adoption of solar power through the use of a crediting system. Basically, a homeowner pays a one-time interconnection fee and then can earn credits for energy that they generate that doesn’t get used in the home and goes on to the grid. Those credits offset the cost of the energy that the customer gets from the grid and lowers – or in some cases eliminates – the electric bill.

Net Metering in California is similar to a cell phone rollover plan, where unused minutes are “rolled over” to the subsequent month. California’s current Net Energy Metering program, known as NEM 2.0, is particularly advantageous in that energy credits roll over for an entire calendar year, allowing homeowners to rack up credits during the sunniest months of the year to use during periods of relatively lower production.

Net Metering: Great for Homeowners, Not So Great For Utilities

Net metering has helped many thousands of California homeowners get more value out of their solar systems and gain more independence from the state’s high-priced, unreliable utilities. So it should be no surprise that the utilities are now trying to change net metering to make it less advantageous for homeowners and slow down solar adoption in California.

History of Net Metering

California’s Net Energy Metering policy first went into effect in 1996, and it was a huge success in making it more financially feasible for thousands of California homeowners to go solar. The original policy remained basically unchanged for two decades.

In 2016, the governor-appointed California Public Utilities Commission enacted Net Energy Metering 2.0. The main change under 2.0 was switching solar customers to a “time of use” rate where they’re charged different rates based on the time of day and electricity demand, and also changes the value of the energy “sold” back to the grid in the same way. This made Net Energy Metering 2.0 less valuable to solar-empowered homeowners. However, the 2.0 policy contained a “grandfather clause” allowing existing solar systems to stay on the 1.0 standard for 20 years. This is an important precedent to note as Net Metering 3.0 is considered.

Just four years later, in 2020, the state’s Public Utilities Commission (CUPC) announced they were reviewing the policy again. Although the details of Net Energy Metering 3.0 aren’t yet finalized, it’s not going to be good news for homeowners. All signs point to the utilities at least partially getting their way again and making this new version of the policy a worse deal for homeowners.

What Would Change Under NEM 3.0?

Under Net Energy Metering 2.0, homeowners are credited for excess energy at the same retail rate per unit of excess power they send back to the grid. One of the biggest proposed changes in Net Energy Metering 3.0 is to credit homeowners at a predetermined rate, lower than the retail rate for power – essentially, devaluing the credits homeowners can build up.

Another possible change in Net Energy Metering 3.0 is switching solar-empowered homeowners to a Net Billing arrangement. Although it has a similar name, Net Billing is a substantially worse deal for homeowners. Credits for excess energy produced by your solar system would be paid each month. This means you would no longer be able to “bank” credits month to month and choose to be paid out in cash at the end of the year as you can under the current Net Energy Metering 2.0 system.

Finally, Net Energy Metering 3.0 could result in all solar customers being slapped with a monthly “grid benefits charge” regardless of their production or consumption – expected to be about $75 each month for residential solar systems – further eating into the savings created by net metering.

Is Going Solar in California Still Worth It?

The answer is an emphatic yes – but the time to act is now. There quite literally may never be a better time to go solar in the Golden State. Utility rates will inevitably continue to rise, and solar systems will continue to come down in cost and get more efficient, so even under Net Energy Metering 3.0, many California homeowners will still find that going solar allows them to save money and live more comfortably. But you don’t want to regret the value in going solar you missed out on by waiting too long to take advantage of the more homeowner-friendly 2.0 policies.

The CUPC is expected to make a final decision on the 3.0 policy in January 2022. Implementation of Net Energy Metering 3.0 will probably occur over a period of around six months after that, although possible legal action could delay the process. The good news is this: experts predict that existing solar systems will be “grandfathered” in to the more homeowner-friendly provisions of Net Energy Metering 2.0 for a period of at least 20 years, just as existing solar customers were when 2.0 replaced the original version of the policy back in 2016.

However, the key factor to be grandfathered in to the 2.0 standard is the date that the interconnect application for your system is submitted. In most projects, this application can only be submitted when panels have been installed on your roof

That’s what makes it so critical to begin your solar installation process now. If you’ve been on the fence about going solar, making the decision to go solar now versus a year from now could save you thousands of dollars depending on whether you can lock in the more favorable Net Energy Metering 2.0 provisions for your system.

Don’t wait until it’s too late: schedule a consultation with one of Zenernet’s energy consultants today!

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