top of page

NEM 1.0 or 2.0 in California? Here's What Happens to Your Solar Bills After July 2026

  • May 12
  • 17 min read

Updated: May 13


A homeowner in Pasadena called me last spring, genuinely shaken. She'd installed a 6 kW system in 2014 under NEM 1.0, and a neighbor had just told her the state was going to force her off her contract in July 2026 — wiping out the bill savings she'd counted on for another decade.

 

"Do I need to do something right now?" she asked. "Or is this one of those things that sounds scary but doesn't actually apply to me?"

 

It's one of the most common questions I've been getting from NEM 1.0 and 2.0 customers in 2026. And the honest answer is more nuanced than most articles are giving it: the July 2026 forced transition was real — it was written into AB 942's original language — but the most damaging version of that provision was removed before the bill reached the governor's desk.

 

That doesn't mean there's nothing to watch. What it means is that the answer to "what happens to your solar bill after July 2026" depends heavily on when you installed, which utility you're on, and what's still moving in Sacramento.

 

Here's the full picture, broken down without the alarm and without the spin.

 

 

Quick Answer: 



As of 2026, NEM 1.0 and NEM 2.0 customers are still protected under their original 20-year contracts. 

The AB 942 provision that would have forced customers who'd been on NEM 1.0 or 2.0 for 10+ years to switch to NEM 3.0 starting July 1, 2026 was removed by the California Senate in July 2025. 

Your 20-year clock is still running. However, there are real changes already in effect — including the loss of the California Climate Credit and a new Base Services Charge from PG&E — that will affect your bill in 2026 regardless of AB 942's final status.

 

 

Table of Contents

 


 


What Is NEM 1.0 and NEM 2.0 — And Why the 20-Year Guarantee Matters

 

Before getting into what changed and what didn't, it helps to understand what NEM 1.0 and NEM 2.0 actually are — and why they're worth so much attention in 2026.

 

NEM stands for Net Energy Metering — the billing system that determines how your utility credits you for excess solar electricity your panels send back to the grid.

 

NEM 1.0 was California's original program, available from 1996 until 2016–2017 depending on the utility. Under NEM 1.0, every kilowatt-hour (kWh) you exported to the grid earned you a full retail-rate credit. If PG&E charged you $0.35/kWh to buy electricity, you earned $0.35 back for every kWh you exported. No time-of-use rate requirement, no non-bypassable charges — the simplest and most generous version of net metering California ever offered.

 

NEM 2.0 replaced NEM 1.0 starting in 2016 and remained available until April 14, 2023. It added time-of-use (TOU) rate requirements and small non-bypassable charges — fees that fund programs like CARE for low-income customers — but still compensated solar exports at or very near the retail rate. For most customers, NEM 2.0 performs similarly to NEM 1.0 in real-world savings.

 

When you signed up for either program, California guaranteed those terms for 20 years from the date your system received Permission to Operate (PTO). The state's own Solar Consumer Protection Guide stated explicitly:


"PG&E, SCE, and SDG&E customers are guaranteed NEM for 20 years from the time their solar system starts operating."

 

That 20-year guarantee is the reason NEM 1.0 and 2.0 customers have been paying close attention to Sacramento in 2025 and 2026. Because AB 942 threatened to cut that guarantee short — and whether it succeeded or failed matters directly to your electricity bill.

 

 

California solar homeowner reviewing electricity bill changes in 2026


What Was the July 2026 Forced Transition? (AB 942 Explained)

 

AB 942 is a California Assembly bill introduced in February 2025 by Assemblymember Lisa Calderon. In its original form, the bill contained language that sent a wave of concern through California's 1.8 million NEM-enrolled households.

 

The specific provision that created the "July 2026" deadline read like this: starting July 1, 2026, any customer-generator who had been on NEM 1.0 or NEM 2.0 for 10 or more years would no longer be entitled to take service under that contract or tariff. They would be required to switch to whatever current tariff was in effect — at that point, NEM 3.0 (also called the Net Billing Tariff).

 

To understand why this alarmed so many people, you need to know what NEM 3.0 actually pays.

 

Under NEM 1.0 and 2.0, exported solar energy earns credits at or near the retail rate — typically $0.30–$0.40/kWh for most California utilities in 2026.


Under NEM 3.0, the same exported energy is valued at the utility's "avoided cost" — what it would have cost them to generate that power elsewhere. That averages out to about $0.05–$0.08/kWh during most daytime hours.

 

That's a reduction of roughly 75–80% in export compensation.

 

For a typical 6 kW NEM 2.0 system exporting 30% of its production, switching from NEM 2.0 to NEM 3.0 mid-contract could mean roughly $63 more per month in electricity costs — or about $756 per year — according to estimates from pv magazine USA. For a NEM 1.0 customer on a flat-rate plan with no TOU requirement, the impact could be larger because they'd also face mandatory enrollment in a TOU rate schedule for the first time.

 

As of April 2025, the bill analysis estimated about 471,000 NEM 1.0 customers would have been immediately affected on July 1, 2026 — those who'd been on the program for 10 or more years.

 

This is why the July 2026 date became such a flashpoint for California solar homeowners.

 

 


What Actually Happened: The Senate Amendment That Changed Everything

 

The short version: the most damaging provision of AB 942 — the July 2026 forced transition for long-tenured NEM customers — was removed before the bill could become law.

 

Here's how the legislative process unfolded:

 

AB 942 passed the California Assembly Utilities & Energy Committee in April 2025 with the 10-year sunset already amended out. But the home-sale provision — requiring new buyers to switch to NEM 3.0 — remained. Both versions of the bill contained the forced-transition language for long-tenured customers.

 

In May 2025, the Assembly Appropriations Committee passed the bill 9–1, sending it to the full Assembly and then the Senate.

 

On July 26, 2025, the California Senate Energy, Utilities and Communications Committee, led by Senator Josh Becker, voted 9–4 to amend AB 942 and strip out the forced-transition provisions. The committee removed both the home-sale clause and the language that would have sunset legacy NEM contracts. As Sun Light & Power reported at the time: "The bill no longer proposes any changes to existing NEM contract terms or transferability."

 

What remains in AB 942 as of 2026 is a significantly narrowed version focused primarily on the California Climate Credit — an issue covered in the next section.

 

The key takeaway: if you installed solar before April 2023 and enrolled in NEM 1.0 or 2.0, your contract is not being cut short by AB 942. Your 20-year guarantee, as of today, is intact.

 

That said, the bill hasn't been fully signed or finally disposed of yet, and California's regulatory environment continues to evolve. Checking calssa.org and cpuc.ca.gov before making any major system decisions remains the right call.

 

 


What Still Changed in 2026 — Even Without the Forced Transition

 

Here's where many articles stop, and where they probably shouldn't. Because while the July 2026 forced transition was defeated, 2026 is not the same as 2024 for NEM 1.0 and 2.0 customers. Several real changes are already in effect.

 

1. California Climate Credit — eliminated for NEM customers

 

The California Climate Credit is a twice-yearly credit that California utility customers receive from the state's cap-and-trade program, which collects revenue from large industrial emitters. In 2025, this credit was worth approximately $100–$130 per year for a typical residential PG&E customer.

 

Starting January 1, 2026, NEM customers are no longer eligible for this credit. It's a relatively small hit — but it's real, and it shows up on your bill as a line item you used to see and now don't.

 

2. PG&E Base Services Charge — effective March 2026

 

Starting March 2026, PG&E replaced the monthly Minimum Electric Charge with a new Base Services Charge of approximately $24/month for residential customers, including NEM solar customers. This is roughly $10 more per month than the previous minimum charge. The charge is designed to be partially offset by lower per-kWh rates — but for NEM customers who were already keeping their grid consumption low, the math doesn't always work in your favor.

 

3. ACC Plus adder declining for NEM 3.0 customers

 

This one affects NEM 3.0 customers specifically, but it's worth knowing about if you're comparing plans. The Avoided Cost Calculator Plus (ACC+) adder — a bonus rate on top of standard NEM 3.0 export compensation for early adopters — decreases 20% per year. By 2026, it's worth roughly 40% less than when NEM 3.0 launched in 2023. This makes the gap between NEM 2.0 and NEM 3.0 performance slightly smaller over time, but NEM 2.0 still holds a significant advantage.

 

4. Ongoing CPUC proceedings

 

AB 942 may have been amended, but the regulatory pressure to revisit legacy NEM contracts hasn't disappeared. The CPUC continues to evaluate the long-term structure of the NEM program, and there are active proceedings that could affect compensation rates, charges, or tariff rules for existing customers over the next few years. None of these are immediate threats to your contract, but they're worth monitoring.

 

 


NEM 1.0 vs NEM 2.0 vs NEM 3.0: What Your Bill Looks Like in 2026

 

This is the section most people actually need — a direct comparison of NEM 1.0 and NEM 2.0 solar bills in California in 2026, set against NEM 3.0 so you can see exactly what you have and what you'd lose. Let's put real numbers next to each program so you can see exactly what you have — and what you'd be losing if you were ever moved to NEM 3.0.

 

Using a representative 7 kW system producing 10,500 kWh/year, with 40% exported to the grid (4,200 kWh/year), in SCE territory:

 


NEM 1.0

NEM 2.0

NEM 3.0

Export Rate

~$0.30–0.40/kWh (full retail)

~$0.28–0.38/kWh (near retail)

~$0.05–0.08/kWh (avoided cost)

Annual Export Credit

~$1,260–$1,680

~$1,176–$1,596

~$210–$336

TOU Rate Required

No

Yes

Yes

Non-bypassable Charges

No

Yes (small)

Yes

Battery Required to Maximize Value

No

No

Strongly recommended

Annual Savings vs No Solar

$3,500–$4,500

$3,200–$4,200

$1,800–$2,800

Typical Payback Period

5–7 years

6–8 years

9–13 years (solar only)

 

Sources: CPUC Net Billing Tariff data, EnergySage California Solar Market Report (April 2026), SCE TOU-D-PRIME 2026 rate schedule.

 

The difference between NEM 2.0 and NEM 3.0 annual savings — roughly $1,400–$1,900 per year for this system size — is exactly why the AB 942 battle mattered so much. And it's why your current NEM contract is worth protecting carefully as it approaches its natural expiration.

 

For a deeper breakdown of how NEM 3.0 affects solar economics, see NEM 3.0 California Explained (2026): Solar Costs, Battery Savings & Is It Still Worth It?

 

 


How to Check Your NEM 1.0 or NEM 2.0 Status in California Right Now

 

Before doing anything with your NEM 1.0 or NEM 2.0 solar system in California — adding panels, adding a battery, considering a move — you need to know three specific facts. 

 

Fact 1: Your NEM version

 

Log into your utility account (PG&E, SCE, or SDG&E) and look for your rate plan or tariff designation. It should say NEM 1.0, NEM 2.0, or Net Billing Tariff (NEM 3.0). If you're unsure, call your utility's solar billing department directly. Don't rely on installer paperwork from years ago — verify with the utility.

 

Fact 2: Your Permission to Operate (PTO) date

 

This is the date your system was officially approved to send power to the grid. Your 20-year NEM clock started on this date, not your installation date or contract signing date. PG&E lists this on your interconnection agreement. SCE and SDG&E should have it on record as well.

 

Fact 3: How many years remain

 

Simple math: PTO date + 20 years = your contract expiration date. A system that received PTO in August 2014 expires in August 2034. That's about 8 years of NEM 1.0 savings still on the clock — worth preserving.

 

Once you have these three facts, you can make informed decisions about system modifications, battery additions, or future home sales without guessing.

 

 


Should You Add a Battery Before Your NEM Contract Expires?

 

This is one of the most practical questions NEM 1.0 and 2.0 customers ask in 2026 — and the answer isn't as simple as "yes, always."

 

The good news first: adding a battery to an existing NEM 1.0 or 2.0 system does not trigger a switch to NEM 3.0, as long as the solar system itself isn't expanded beyond the CPUC's minor modification threshold (1 kW or 10% of original capacity, whichever is less). This was confirmed by CPUC decision and verified by solar.com's July 2025 update. You can add a Powerwall, Enphase IQ Battery, or Franklin WH unit to your existing system and keep your NEM contract intact.

 

The strategic question is whether the economics make sense while you still have NEM 2.0 rates.

 

Under NEM 2.0, the grid effectively acts as a free battery during the day — you export at near-retail rates and buy back when needed. A home battery's value under NEM 2.0 is primarily about backup power and resilience during PSPS events, not about maximizing financial return from the solar system itself.

 

Under NEM 3.0, the math flips: exported energy earns only ~$0.05–$0.08/kWh while peak grid power costs $0.40–$0.59/kWh. Storing your own solar and using it during the evening becomes worth $0.35+ per kWh saved — which is where battery ROI becomes compelling.

 

The practical recommendation: if your NEM 2.0 contract has 5 or more years remaining, adding a battery primarily for resilience (PSPS backup, outage protection) makes sense. If you're within 3–5 years of your NEM expiration and plan to stay in the home, adding a battery now starts to make stronger financial sense as you prepare for the transition to NEM 3.0 economics.

 

 


 

What Happens When Your 20-Year NEM Contract Actually Ends

 

This section is for NEM 1.0 customers who installed between 2003 and 2006 — some of whom are approaching, or have already passed, their 20-year mark. It's also the eventual reality for every NEM 2.0 customer in California.

 

When your 20-year NEM contract expires naturally, you move to the current tariff at your next annual True-Up date. As of 2026, that means NEM 3.0 (the Net Billing Tariff). There is no grace period, no glide path for customers coming off a legacy NEM contract — you switch at True-Up.

 

PG&E's website confirmed this process in March 2026: "Customers whose 20-year NEM legacy period ends on their original NEM program will move over at their annual True-Up date."

 

What this means in practical terms: your electricity bill will change — potentially significantly — at that transition point. Export credits will drop from near-retail rates to avoided-cost rates (~$0.05–$0.08/kWh). If you don't have battery storage, you'll be exporting midday solar at low rates and buying expensive evening power from the grid.

 

The transition from NEM 1.0 specifically also involves a rate plan change. NEM 1.0 customers on flat standard residential rates will need to move to a TOU plan — a change that can affect your bill significantly depending on when you use electricity.

 

Planning for this transition at least 12–18 months before your contract ends — by evaluating battery storage, adjusting usage patterns, and understanding the TOU rate structure — is the single best thing a long-tenured NEM customer can do right now.

 

 

 


Scenarios: How This Plays Out Based on Your Installation Year

 


Scenario 1 — NEM 1.0, Installed 2008–2013, 10–15 Years Remaining

 

You're in the strongest position of any solar homeowner in California right now. You have a decade or more of full retail-rate export credits ahead of you, no TOU rate requirement, and no forced transition on the horizon. The AB 942 provisions that would have affected you were removed.

 

Your main task is to verify your PTO date, make sure your system is producing at expected levels (check your monitoring data), and start thinking about battery storage in the next 5–7 years as you approach the back half of your contract. The SGIP battery rebate may still be available depending on your income level and utility territory — worth checking before that program changes.

 


Scenario 2 — NEM 2.0, Installed 2018–2022, 12–16 Years Remaining

 

Similar position — you have a long runway of near-retail export credits ahead. The AB 942 forced-transition threat has passed, your 20-year clock is intact, and you're in the sweet spot where the system has paid back a significant portion of its cost but still has most of its contract value remaining.

 

One thing to monitor: whether you've expanded or modified your system in ways that might have affected your NEM 2.0 status. Expansions above 1 kW or 10% of original capacity can trigger a reclassification to NEM 3.0. If you added panels in the last few years without checking this threshold, verify with your utility that your NEM 2.0 enrollment is still active.

 


Scenario 3 — NEM 1.0, Installed 2004–2007, Contract Expiring 2024–2027

 

This scenario requires the most immediate attention. If your PTO date was in 2004, 2005, or 2006, you may have already transitioned to NEM 3.0 at your most recent True-Up — or you're within 1–3 years of that transition.

 

The priority here is understanding exactly when your True-Up date falls, getting a battery evaluation done as soon as possible, and making the behavioral adjustments (running high-load appliances during solar hours, shifting EV charging to midday if possible) that will matter much more under NEM 3.0. The drop in export compensation will be real, but it can be managed with the right preparation.

 


 

FAQ: NEM 1.0 and NEM 2.0 Solar Bills in California (2026)

 


Q: Did the forced July 2026 NEM transition actually happen?

 

A: No. The AB 942 provision that would have required NEM 1.0 and 2.0 customers on their contracts for 10+ years to switch to NEM 3.0 starting July 1, 2026 was removed by the California Senate Energy Committee in July 2025. As of May 2026, that forced transition has not occurred and is not currently law.

Q: Am I still on NEM 2.0? How do I check?

 

A: Log into your utility account online and look for your rate plan or tariff code. PG&E NEM 2.0 customers will see "E-NET" or similar NEM 2.0 designation. SCE customers will see their NEM 2.0 tariff listed under their account details. You can also call your utility's solar billing line directly. Verify your NEM version and PTO date from the source — don't rely on paperwork from your original installer.

Q: If I add solar panels to my existing system, will I lose my NEM 2.0 status?

 

A: It depends on how much you add. The CPUC allows additions of up to 1 kW or 10% of your original system's nameplate capacity (whichever is less) without triggering a reclassification to NEM 3.0. Adding more than that — even to an existing NEM 2.0 system — typically requires a new interconnection agreement, which puts you on NEM 3.0 for the expanded capacity. If you're considering expanding, talk to your utility's interconnection team before signing anything with an installer.

Q: What is the California Climate Credit, and why did I stop getting it?

 

A: The California Climate Credit is a twice-yearly credit funded by the state's cap-and-trade program, which requires large industrial emitters to purchase carbon allowances. A portion of that revenue was historically distributed to residential utility customers, including NEM solar customers. Starting January 1, 2026, NEM customers are no longer eligible for this credit. The credit was worth approximately $100–$130 per year for a typical PG&E residential customer.

Q: Can I add a battery without losing my NEM 2.0 status?

 

A: Yes. Adding battery storage to an existing NEM 1.0 or 2.0 system does not trigger a switch to NEM 3.0, as long as you are not simultaneously expanding your solar capacity beyond the minor modification threshold. This was confirmed by CPUC decisions and applies to systems on PG&E, SCE, and SDG&E.

Q: What happens to my NEM contract if I sell my house?

 

A: Under current 2026 rules, your NEM 1.0 or 2.0 contract transfers to the buyer when the home is sold. The buyer inherits the remaining years on your 20-year contract. The AB 942 provision that would have prevented this transfer was removed by the California Senate.


For the full breakdown of how this works in a real estate transaction, see Selling a Home with Solar in California (2026): Does Your NEM Contract Transfer on a California Solar Home Sale?

Q: When exactly will my NEM 2.0 contract end?

 

A: Your NEM 2.0 contract ends 20 years from the date your system received its Permission to Operate (PTO). This date is on your interconnection agreement from your utility. A system that received PTO on March 15, 2020 expires on March 15, 2040. At your next annual True-Up date after expiration, you'll transition to the current tariff — NEM 3.0 as of 2026.

Q: Is solar still worth it in California in 2026 for someone on NEM 2.0?

 

A: Yes — being on NEM 2.0 in 2026 means you're getting significantly better economics than new solar installations. Your export credits are still worth 5–8 times more per kWh than NEM 3.0 rates. The key is protecting your contract through the remainder of its term and planning the NEM 3.0 transition before it happens rather than after.


For a full analysis of current solar economics, see Is Solar Still Worth It in California 2026 Without the Federal Tax Credit?

 

 


Conclusion: The Threat Passed — But the Planning Starts Now

 

For anyone still tracking NEM 1.0 and NEM 2.0 solar bills in California in 2026, the situation comes down to this: the forced transition threat is gone, but the natural expiration of your contract is not.


The Pasadena homeowner I mentioned at the beginning? She had 11 years left on her NEM 1.0 contract when we spoke. The July 2026 forced transition that had her worried was removed from AB 942 before it could become law. Her bill is safe — for now.

 

But here's the thing I told her that matters more than the good news about AB 942: in 11 years, her NEM 1.0 contract expires naturally. And when that happens, the transition to NEM 3.0 will be just as real — and potentially just as jarring — as the forced transition she was scared of. The difference is she has time to prepare.

 

For anyone on NEM 1.0 or 2.0 in California right now, the three steps that matter most are simple:

 

Step 1: 


Find your PTO date and calculate exactly how many years remain on your NEM contract. Don't estimate — look it up from your utility directly.

 

Step 2: 


Evaluate whether battery storage makes sense in the next 2–3 years, especially if your SGIP eligibility window is still open or you live in a high fire-risk zone with PSPS exposure.

 

Step 3: 


Start learning how NEM 3.0 works — the TOU rate structure, the self-consumption strategies, the battery dispatch logic — before you need to rely on it. The homeowners who transition smoothly are the ones who prepared 2–3 years ahead of time, not the ones who scrambled at their first NEM 3.0 True-Up.

 

The deadline passed. The contract held. Now use the time you have.

 

 


Related Posts

 










Sources

 

  • California Public Utilities Commission (CPUC) — Net Energy Metering and Net Billing Tariff: cpuc.ca.gov

  • California Solar & Storage Association (CALSSA) — AB 942 legislative updates: calssa.org

  • PG&E — Solar Billing Plan (NEM transition, Base Services Charge, March 2026): pge.com

  • pv magazine USA — AB 942 Senate amendment coverage (July 2025): pv-magazine-usa.com

  • Sun Light & Power — AB 942 amended: win for solar customers (July 2025): sunlightandpower.com

  • EnergySage — California Solar Market Report (April 2026): energysage.com

  • CPUC Decision D.22-12-056 — Net Billing Tariff (NEM 3.0): cpuc.ca.gov

 

 




About the Author


James Ree has eight years of experience in electrical, HVAC, and solar wholesale in Los Angeles, supplying equipment to residential and commercial installers. He now writes practical guides on solar, EV charging, battery storage, and home electrical systems for U.S. homeowners and outdoor enthusiasts.

 



Disclaimer


Product prices and specifications change frequently. Verify current pricing and specs on manufacturer websites and major retailers before purchasing. Prices listed are 2026 reference ranges and may differ from current retail pricing.

bottom of page