NEM-3 Frequently Asked Questions
If you’re thinking about Solar in 2023 or 2024, you need to understand the impact of NEM-3 in California. Below is more information to help you better understand key takeaways for new solar projects. If you have questions, contact a Solar Consultant at Got Watts.
What is NEM?
Net metering (NEM) allows customers to get credit from their utility for the electricity they “export” to the power grid. When a solar system produces more energy than the building uses, electricity flows onto the power grid and is consumed by neighboring customers. The utility gives a credit to the generating customer for that energy. At the end of the month, the credits are netted against the cost of the electricity that the customer draws from the grid.
Traditionally, net metering (NEM) provided one-for-one credit. Under NEM-1, a kWh exported to the grid was deducted from the kWh total consumed from the grid. A January 2016 decision of the California Public Utilities Commission (CPUC) created NEM-2. The value of export credits under NEM-2 was reduced by about 2.5 ¢/kWh compared with NEM-1, and NEM-2 customers were required to be on time-of-use rates.
When was NEM-3 Approved?
On December 15, 2022, The California Public Utilities Commission (CPUC) unanimously passed NEM 3.0, a new net metering policy that will ultimately reduce the monthly energy bill savings for new solar owners.
The CPUC’s name for NEM-3 is the net billing tariff (NBT). It took effect for projects submitting applications after April 14, 2023. We caution that some of the tariff details have yet to be formally approved, but the remaining disputed items should result in relatively minor changes.
How do I propose a system that is big enough for load growth?
NBT allows customers to install systems that generate up to 150% of the past 12 months of consumption. When you enter the system specifications, if the portal determines that generation will be 101%-150% of historic load, it will include a provision in the interconnection agreement for the customer to attest that they expect load growth to reach the full amount of generation within one year. For residential customers, this will be within the application since the agreement is generated automatically from the application. If you size to more than 150% of the load, the portal will likely allow you to submit but the application will later get tagged for a deficiency.
Why is there a true-up when customers now get billed monthly?
If you have excess credits at the end of a month, they carry over to the following month until true-up. At the end of the year, if you have more credits than usage, the excess gets paid out at wholesale according to the net surplus compensation rules. This is the same as NEM-1/NEM-2. The difference is if your charges outweigh your credits every month, which will be the case for most NBT customers because export rates are so much lower. Under NEM-1/NEM-2, charges accumulate until the end of the year for residential customers and you pay the total owed for the year at true-up. Under NBT, you pay those charges monthly. If you are not a net generator on an annual basis, the true-up won’t do anything because you will have paid the amount owed each month.
Net surplus compensation rates change monthly in response to recent wholesale market costs. In July 2023, they were 8.2 c/kWh for PG&E, 7.2 c/kWh for SCE, and 4.6 c/kWh for SDG&E. You can get the latest rates with a simple web search: [PG&E/SCE/SDG&E] net surplus compensation rates.
Is the NBT contract void after 9 years?
The interconnection agreement is ongoing until canceled. It will last 30 years or more if you don’t change the system. The NBT terms are guaranteed for 9 years if you install before 2028. If there is a NEM-4, the customer will be switched to it after 9 years, though for project planning purposes it is safe to assume there will not be a NEM-4 because export rates are already very low and fixed charges are being addressed in rates.
Is there still a minimum bill under NBT?
The residential minimum bill still exists. However, in practical terms, for many customers it will be superseded by the new treatment of non-bypassable charges. In net billing, export credits cannot offset NBCs. Therefore, there is a “bill floor” equal to kWh drawn from the grid multiplied by the four relevant NBCs, which total approximately 2.5 c/kWh. If a customer pulls 6000 kWh/year from the grid (regardless of exports that partially offset the cost of those imports), the bill floor is approximately 6000 * $0.025 = $150/year = $12.50/month.
How often will the export rates be updated?
The Avoided Cost Calculator is updated every two years. The most recent update was in September 2022. Customers that install in 2023 and 2024 will have the first nine years of values from that version of the calculator locked in. Customers that install in 2025 and 2026 will get values from the 2024 version of the ACC, etc.
How can I take advantage of the small number of hours per year that have really high export rates when I am limited to customer load?
You are not limited to customer load if you use a certified power control system that guarantees the battery is charged exclusively from solar. If all of the electrons in the battery are green, you can export from the battery to the grid for export credit. See CALSSA’s fact sheet on NEM Paired Storage for more information.
What are the export rate adders?
NEM-3 has very low export rates for most hours of the year. The decision includes export rate “adders” for residential customers of PG&E and SCE. They are intended to ease the shock of how much lower the export rates are compared to retail rates. For low-income customers and customers in disadvantaged communities, the adders are significant in the early years. The adders that exist for some other customers are very low and do not really ease the shock, but it will still be an advantage to have them. See the CALSSA webinar slides or our NEM-3 Export Rates file for the specific adder values.
The ¢/kWh values will be added to the export rates in every hour for the first nine years of system operation. Customers who install in 2023 will get the Year 1 adder on top of the export rate for nine years. Customers who install in 2027 will get the Year 5 adder for the first nine years of their system.
What exactly is locked in during the nine-year legacy period?
The export rates will be locked in for 9 years at the values that are in place in the year of interconnection. The export rates are hourly, and different for each month, and different for weekdays and weekends. Each year will be different. The current calculator has values for the current year as well as each individual year in the future. It is those future values that are locked in as they appear in the current version of the calculator. After nine years, you will still be paid for avoided costs, but it will be according to the version of the calculator that is in effect at the time.
Is the lock-in determined by the time of application submittal or interconnection?
VNEM and NEMA
How are NEMA and VNEM systems affected by this decision?
NEMA and VNEM remain eligible for NEM-2, but if you did not apply by April 14 you only have 9 years on NEM-2 instead of 20 years.
How long do we have to develop NEMA and VNEM projects before bigger changes happen?
A decision to create a NEM-3 version of VNEM and NEMA will come in September or later, and it is safe to assume there will be a sunset period after that for applications to be completed under the 9-year NEM-2 version of VNEM and NEMA. It is highly likely that you will be able to submit applications through the end of this year and qualify for the 9-year term.
Will I be able to convert a single-meter interconnection to a NEMA system without losing grandfathering?
You can convert to NEMA as long as the location had multiple active meters on or before 12/15/22 and you don’t change anything about the generating facility. If the site had one meter on that date and added meters later, you will have to wait until the next NEMA tariff is available.
How do I apply to NEMA for a site that added a second meter after 12/15/22?
If multiple meters did not exist at the site as of that date, you will not be able to submit a NEMA application until the NEM-3 version of NEMA is available.
In NEMA or VNEM, can we add or remove meters from the arrangement without losing NEM status?
Yes. If you do not change the generator you do not get a new interconnection agreement and can retain the existing NEM status.
Change of Ownership
Unlike NEM-1 and NEM-2, in which NEM status stays with the system when a property is sold, the export rate lock-in and export rate adders in NEM-3 are limited to “the customer who originally causes the system to be installed” or “a legal partner ... of the original customer.”
In a change of ownership, can the new owner reapply for adders?
In a change of ownership, adders and export rate lock-in are lost, but does it mean that the NEM agreement is void?
The system still has a NEM agreement, and the property buyer will still get compensation for exports. It’s just that the export rates will change every two years when the Avoided Cost Calculator is updated. That might not be a bad thing since updates are more likely to go upward than downward, but it won’t be locked in like it is for the first nine years for the original customer.
Is this the same for VNEM and NEMA?
This is not settled for VNEM and NEMA. This will be determined in the upcoming decision. CALSSA will fight to preserve the 9-year legacy period for VNEM/NEMA on change of ownership. For standard NEM, the difference between legacy treatment and post-legacy treatment is not as big as it is likely to be for VNEM/NEMA, and VNEM/NEMA customers won’t know what is coming after the legacy period when they buy the system. The CPUC should be supportive of this logic, but we will need to get the right language in the next decision.
In a change of ownership of a NEM 1 or NEM 2 system, are the new owners switched to NEM 3?
No. The changes related to property sales in NEM-3 have no impact on NEM-1 or NEM-2 customers. For example, a person buying a house 12 years after solar was installed gets 8 more years on NEM-1.
Expanding Grandfathered NEM Systems
How can I add a battery without losing NEM status?
A NEM-1 or NEM-2 customer can add a battery without altering their NEM-1 or NEM-2 status. There is a special exception for storage because the CPUC doesn’t want to discourage existing NEM customers from installing batteries. You may be increasing system size, but if it is only for the addition of a battery it does not alter your NEM status.
For PG&E: Use the standard application process for NBT/NEM Paired Storage, noting the existing equipment and the new storage system. The portal will recognize it as a storage addition to a NEM system and will preserve the original PTO date for NEM grandfathering purposes. It feels scary to use the same application form as NBT, but that is why it is called NBT/NEM instead of just NBT.
Can I add DC capacity to a NEM system without losing NEM status?
For the purpose of system modifications, system size is defined as the lesser of inverter nameplate and CEC-AC rating. (See Rule 21 Table F.1) Therefore, if the current system size is limited by the inverter size, you can add more solar modules without increasing system size. Follow the same application process outlined above for adding a battery.
The exception to this is if the expansion causes the CEC-AC rating to go from less than 1 MW to more than 1 MW. In that case, the customer would need to reapply and would lose NEM status.
If the inverter currently has headroom, CEC-AC is the defining constraint and you cannot add modules without increasing system size.
If I add capacity after the transition, can I count it as two systems with the old system on NEM-2 and the new system on NEM-3?
No. If you add capacity (beyond the 10% allowance intended for maintenance) without export controls behind the same meter as an existing system, the combined system will move to NBT.
However, you can add capacity to a NEM system without losing NEM status if the new capacity is a separate system that does not export. For PG&E and SCE, you will apply under the NBT-MT tariff that is designed for having two separate generators behind the same meter. For SDG&E, you will apply in DIIS as a non-NEM application and it will recognize the existing NEM system at the site. The details on this option are currently being worked out and may involve additional product certification for inverters or battery controllers. For this reason, it might not be available until 2024.
Can the customer change contractors on a grandfathered application before the system is installed?
You can change contractors with PG&E and SCE, but not with SDG&E. PG&E’s process can be done by the customer, but SCE requires written authorization from the original contractor.
For PG&E SNEM projects, the customer should email NEMfollowups@pge.com. PG&E will respond by email letting them know the necessary steps, which includes re-submitting the applicable Form 79-1151A/-02/-03.
For PG&E Complex Rule 21 projects, the customer needs to submit notification of a change in contractors with a complete Authorization form (79-1095) for the new contractor.
If the property with a pending application is sold, can the new property owner take over the application?
PG&E: For systems larger than 30 kW, PG&E will make the change if you provide the new Service Agreement ID. For SNEM, this is possible only for new construction. If the sale is from one homeowner to another a new application is required, though exceptions may be made for transfers from a landlord to a new renter or spouse to spouse in a divorce.
How should we submit the final building permit for NEM-2 applications with PG&E?
For systems larger than 30 kW, email the final approved permit to the assigned single point of contact at PG&E’s EGI team. For systems smaller than 30 kW, PG&E prefers that you upload the permit in the YourProjects portal. If this option is not available on the portal, there may be outstanding deficiencies. If you have resolved those deficiencies but they have not yet been reviewed, you have the option of waiting until the Action tab allows the building permit upload or emailing the building permit. PG&E claims that it is faster to wait because reviewing emails can be slower than reviewing new information in the portal. If you send a document multiple times, it goes in the queue position of the latest submission.
What changes can be made to submitted applications that have NEM-2 eligibility after the sunset period without losing NEM-2 status?
You are allowed one set of changes to a pending application under Rule 21 Fast Track. It is normal to change the specific equipment in the application because the models you intended to use may no longer be available. For Fast Track review, equipment substitutions can be made as long as the system size does not increase at all and does not decrease by more than 20%. You cannot change the point of interconnection without withdrawing the application and resubmitting. See Table F-1 in Rule 21. Systems going through Detailed Study do not have such clear lines for material modifications, but the basic measure is whether a change will cause the utility to re-study the project. Under Fast Track, the utilities may be lenient about allowing multiple rounds of changes in limited circumstances, but we cannot count on that.
What if the panels I selected are not available when it is time to install and I need to use higher wattage panels? Is there a buffer to allow for this?
There is no buffer. System size cannot increase at all. If you use higher wattage panels, you need to reduce the number of panels.
What constitutes changing the point of interconnection?
This is mostly relevant to properties with multiple meters or large properties where you are installing new service. Changing the exact location of the tie-in at the same residential meter is not a change to the point of interconnection, including changing from load-side to line-side.
Can I add a battery to the application after April 14 but before I install?
SCE allows this if the application has not been reviewed. For SDG&E, you can submit a separate application for the battery even if the solar application is still pending. For PG&E, if you submitted as solar-only and change the application before PTO to add a battery, you will lose NEM-2 status. You can install and PTO as solar-only under NEM-2 and then submit a new application to add a battery.
If you meet the deadline for the submittal of the interconnection application, how long do you have to start construction or complete the project without losing the grandfathered position?
The system must have final electrical clearance from the local jurisdiction by three years after April 14, 2023. The start of construction does not help. It has to be the final building permit.
PG&E sometimes changes the SAID when there is a main panel upgrade. Will that force us to withdraw the application and resubmit it?
No. If the SAID changes due to a main panel upgrade, PG&E will make the change to the application on the back end. Obviously, that could cause some communication delays, but if they stick to this stated policy we should be able to work through it.
If a NEM-2 customer builds an ADU after NEM-3 goes into effect and puts solar on the ADU, can they add it as a separate NEM-3 system on the ADU and keep their NEM-2 on the primary residence?
They can if they put the ADU on a new account with a separate meter. There is a cost to establishing a second service on the property but it is likely worth it.
What is grandfathered if a customer submitted a complete application before the transition date?
The system will be on NEM-2 for 20 years. That means NEM credits will be valued at rates minus non-bypassable charges, and electrification rates will not be mandatory for residential customers. We should be careful to understand that the rates for electricity you buy from the utility are not grandfathered. They are subject to change as always. An EV rate could go away, or peak to off-peak differences can change, for example.
What about customers who expand by less than 10% after April? Do they stay under their current plan?
Yes. Just like the policy for NEM-1, customers on NEM-2 after the transition will be able to increase system size for maintenance purposes by 10% or 1 kW, whichever is greater, without getting switched to NEM-3.
For PG&E systems smaller than 30 kW, if the service application was submitted by April 14, 2023 the property is eligible for NEM-2. There are two options for submitting the solar information. PG&E prefers that you submit it on the generation tab within the service application. For this, you need the builder to add you to the service application as an approved user. There is a guide for this on the CALSSA website called “PG&E Share My Project Guide.” The other option is to submit a traditional application that references the service application number. Answer “Yes” where the portal asks: “Did an application for new/permanent service or billing issue exist before 4/15/23?” If you use this second method, PG&E will need to take the additional step of verifying that the service application number you enter matches the property you are applying for.
The builder tried to link me to the service application but couldn’t do it. What do I do now?
Tell them to look for the three dots on the right side of the list of their active projects in the service application portal, and select “Actions --> Link Users.” For more on this, CALSSA can send you PG&E’s Share My Projects guide.
Make sure they are using an email or username for you that is already a registered user in the PG&E portal. They will not be able to link you if your email is not already registered in the PG&E system.
What do I do if I am linked to the service application, but there is no generation tab?
This was a common problem, but it should be resolved for most properties at this point. The exceptions are if the builder made the service request by phone rather than online or if the request was made more than six years ago. For these, you will need to submit a traditional interconnection application and include the service application number.
I am doing system replacements and suddenly have a lot of old modules. What can I do with them?
CALSSA encourages functional decommissioned modules to be donated or reused. If you are planning to recycle the modules, see CALSSA’s fact sheet on handling end-of-life modules. FAQ #1 of the fact sheet contains a list of CALSSA members who decommission, reuse, and recycle modules.
Does this decision impact municipal utilities?
No. It is only for the three IOUs. Many public utilities have already changed their NEM tariffs. LADWP has expressed that they do not intend to revise NEM at this time.
Does this decision impact RES-BCT?
No. That tariff is not NEM and is not impacted. However, RES-BCT participation is capped, so starting new projects for participation in that program is highly risky.
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