Solar Home Sale in California (2026): Does Your NEM 1.0 or 2.0 Contract Transfer to the Buyer?
- May 11
- 15 min read
A client I used to supply equipment to in the San Gabriel Valley called me last fall in a panic. He'd installed a 7 kW NEM 2.0 system back in 2019, locked in a 20-year agreement with SCE, and was finally ready to sell the house. His real estate agent had just told him:
"There's a bill in Sacramento that could wipe out all that solar value before the deal closes."
He wanted to know one thing: does the buyer inherit his NEM 2.0 contract, or do they get forced onto NEM 3.0 — where export rates drop by roughly 75%?
It's a legitimate question, and in 2026, it's one of the most important things to understand before listing a home with solar in California. The answer affects not just your sale price, but how you structure the listing, what disclosures you need to make, and how a buyer will actually value the system.
Here's what you need to know before you put that sign in the yard.
Quick Answer:
As of 2026, NEM 1.0 and NEM 2.0 contracts do transfer to new buyers when a home is sold in California — the controversial AB 942 provision that would have stripped that right was removed by the California Senate in July 2025.
However, AB 942 isn't dead. It removed the home-sale provision but still contains other changes that affect existing solar customers.
The situation is still evolving, and there are real steps you need to take to protect the contract during a transaction.
Table of Contents
What Is AB 942 — And Why Solar Homeowners Are Watching It Closely
What NEM 1.0 and NEM 2.0 Actually Mean for Your Monthly Bill
Does the NEM Contract Transfer on a California Solar Home Sale?
What Changed: The AB 942 Timeline, From Threat to Senate Amendment
What AB 942 Still Does (Even Without the Home-Sale Provision)
How Much Is a NEM 1.0 or 2.0 Contract Worth to a Buyer?
How to Protect the NEM Contract During a Home Sale
What Buyers Need to Know Before Purchasing a Solar Home
Scenarios: How This Plays Out Depending on Your System and Timeline
FAQ
Conclusion
Related Posts
What Is AB 942 — And Why Solar Homeowners Are Watching It Closely
If you haven't heard of AB 942, here's the short version: it's a California Assembly bill introduced in early 2025 by Assemblymember Lisa Calderon — who spent 25 years as a government affairs director for Edison International, SCE's parent company — that sought to significantly reduce the financial benefits of older solar contracts.
The bill targeted California's Net Energy Metering (NEM) program, which is the system that determines how solar homeowners get credited for the excess electricity their panels send back to the grid.
In its original form, AB 942 proposed two major changes:
Change 1 — The 10-year sunset:
Any solar customer who had been on NEM 1.0 or NEM 2.0 for 10 or more years would be automatically kicked off that program and moved to NEM 3.0, which pays roughly 80% less per kWh for exported solar energy.
Change 2 — The home-sale provision:
When a home with solar was sold or transferred, the new owner could not inherit the existing NEM 1.0 or 2.0 contract. They would be required to enroll in NEM 3.0 regardless of when the system was originally installed.
Both provisions were deeply controversial. The California Solar & Storage Association (CALSSA) called it "breaking a contractual promise with millions of solar users." The California Association of Realtors, the California Building Industry Association, and more than 100 environmental and consumer advocacy organizations all came out in opposition.
Understanding AB 942 matters because it tells you exactly how much risk exists around NEM contract transfers — and why the rules can change again.
What NEM 1.0 and NEM 2.0 Actually Mean for Your Monthly Bill
Before getting into what transfers and what doesn't, it helps to understand what these programs are and why they're worth fighting over.
NEM 1.0 was California's original net metering program, in effect until 2016–2017. Under this plan, when your solar panels generate more electricity than your home uses, the excess gets sent to the grid — and your utility credits you at the full retail rate. If SCE charges you 26 cents per kWh to buy electricity, you get 26 cents back for every kWh you export. It's a true 1:1 exchange.
NEM 2.0 replaced NEM 1.0 starting in 2016. It added a few small costs — customers pay time-of-use (TOU) rates and certain non-bypassable charges — but still compensated solar exports at or near retail rates. For most homeowners, the financial performance of NEM 2.0 is very close to NEM 1.0.
NEM 3.0 (officially called the Net Billing Tariff, or NBT) went into effect in April 2023 for new installations. Under NEM 3.0, your exported solar energy is valued at the utility's "avoided cost" — basically, what it would cost the utility to generate that power themselves. That number fluctuates by time of day and season, but typically comes out to just 2–8 cents per kWh, compared to the 26–80 cents per kWh retail rates that NEM 1.0 and 2.0 customers receive.
To put that in dollars: a typical 7 kW NEM 2.0 system in SCE territory might save a homeowner $4,000 per year through bill offsets and export credits. The same system under NEM 3.0 — without a battery to store daytime production — might save only $2,100 per year. That's a $1,900 annual difference, or roughly $158 more per month in electricity costs for the buyer.
This is why NEM 1.0 and 2.0 contracts are genuinely valuable assets, not just marketing talking points.
Does the NEM Contract Transfer on a California Solar Home Sale?
Yes — the NEM contract transfer on a solar home sale in California is still protected in 2026. Your NEM 1.0 or 2.0 agreement follows the system, not the owner, and the buyer inherits it when the deal closes.
California's original NEM law established a 20-year guarantee tied to the solar system, not the property owner. The state's own Solar Consumer Protection Guide — which every NEM customer was required to receive — explicitly stated that PG&E, SCE, and SDG&E customers are "guaranteed NEM for 20 years from the time their solar system starts operating."
That guarantee has not been eliminated. Here's the current status by system type:
Your NEM Version | When Installed | Does It Transfer? | Buyer Gets |
NEM 1.0 | Before 2016–2017 | Yes | Full retail credit rate |
NEM 2.0 | 2016–April 2023 | Yes | Near-retail credit rate |
NEM 3.0 | April 2023 or later | Yes | Avoided-cost rate (~2–8¢/kWh) |
The critical caveat: this is the current law as of May 2026. AB 942 is still active in the California Senate, and its final form — and whether the governor signs or vetoes it — is not yet settled. If the bill is amended again or a new version passes, the rules could change. Check the current CPUC or CALSSA resources before any transaction closes.
What Changed: The AB 942 Timeline, From Threat to Senate Amendment
Understanding the legislative history helps you assess what risk remains. Here's how it unfolded:
February 2025:
Assemblymember Calderon introduces AB 942. The original version proposes cutting all NEM 1.0 and 2.0 contracts from 20 years down to 10.
April 2025:
The bill passes the Assembly Utilities & Energy Committee 10–4. At this stage, it still includes both the 10-year sunset provision and the home-sale provision. Opposition from more than 100 organizations is already mobilizing.
May 2025:
The Assembly Appropriations Committee passes AB 942 in a 9–1 vote, but an amendment removes the 10-year sunset for all customers. The home-sale provision — requiring new buyers to switch to NEM 3.0 — remains.
June 2025:
The full California Assembly passes AB 942 46–14 and sends it to the Senate. CALSSA's executive director says Assemblymembers "heard more opposition to AB 942 than any other bill this session."
July 2025:
The California Senate Energy, Utilities and Communications Committee votes 9–4 to amend AB 942 and remove the home-sale provision entirely. Committee Chair Senator Josh Becker leads the amendment, citing the legal and consumer protection concerns. Solar contracts remain transferable on home sale.
August 2025:
AB 942 continues through the Senate Appropriations process with the home-sale language stripped out.
2026 status:
AB 942 has not been signed into law as of the time of this writing. However, what remains in the bill still has real implications for existing NEM customers — which brings us to the next section.
What AB 942 Still Does (Even Without the Home-Sale Provision)
Even after the Senate amendment removed the home-sale provision, AB 942 still contains changes that affect solar homeowners. These are worth knowing whether you're selling or staying put.
California Climate Credit elimination for NEM customers.
Starting January 1, 2026, NEM customers are no longer eligible for the annual California Climate Credit — a modest but real financial benefit that non-solar utility customers still receive. This change took effect regardless of AB 942's final status, as it was already phased in through CPUC decisions.
Non-bypassable charges.
The bill, in various forms, included provisions around non-bypassable charges — fees that fund low-income programs and grid maintenance — applying immediately to solar customers when their compensation rates change, without a transition period.
10-year sunset provisions remain contested.
While the blanket 10-year forced sunset for all customers was removed in committee, there are still ongoing CPUC proceedings about the long-term future of legacy NEM contracts. The 20-year guarantee is intact for now, but regulatory pressure to revisit it has not gone away.
The bottom line: the home-sale transfer is protected, but the overall NEM policy environment continues to shift. Monitoring CPUC decisions at cpuc.ca.gov and CALSSA updates at calssa.org is the best way to stay current.
How Much Is a NEM 1.0 or 2.0 Contract Worth to a Buyer?
This is where the conversation moves from policy to money — which is ultimately what matters when you're trying to price and sell a home.
The value of a NEM 1.0 or 2.0 contract to a buyer depends on three things: how many years remain on the 20-year term, the system's annual production, and the buyer's current utility rate.
Here's a practical example using a 7 kW NEM 2.0 system installed in 2019 in SCE territory:
The system produces roughly 10,500 kWh per year. Under NEM 2.0 export rates near retail (~26–40¢/kWh blended), that translates to approximately $3,500–$4,000 in annual bill savings. The contract runs through 2039, so about 13 years remain.
If a buyer had to start fresh under NEM 3.0 with no battery, their annual savings from the same system would fall to roughly $2,100. That's a $1,400–$1,900 per year difference — and over 13 years, that's $18,000–$25,000 in cumulative savings that the buyer gets specifically because the NEM 2.0 contract transfers.
That's real value — not something to leave out of the listing description or negotiations.
What buyers and sellers should understand is that solar appraisal methods are still inconsistent across California. Some appraisers use income-based approaches that properly account for NEM contract value; others still use cost-minus-depreciation, which can undervalue the system significantly. If you're selling, consider requesting a solar-specific appraisal or providing the buyer with a detailed savings projection from your utility bills. If you're buying, ask for the last 12 months of utility statements — not just the verbal assurance that the system "saves a lot."
How to Protect the NEM Contract During a Home Sale
The NEM contract transferring legally is one thing. Making sure it actually transfers cleanly through a real estate transaction is another. Here's what both parties need to do.
Seller's checklist:
First, pull your NEM enrollment documentation from your utility — PG&E, SCE, or SDG&E — and have it ready before listing. This should include the interconnection agreement, your NEM version (1.0 or 2.0), and the enrollment date, which establishes when your 20-year clock started.
Second, disclose the solar system's NEM status in the listing. In California, solar systems and their financing or lease terms must be disclosed to buyers. Make sure the NEM version and remaining contract term are clearly communicated, not buried in footnotes.
Third, if the system is financed with a loan, the loan is tied to you, not the property — so it will need to be paid off or assumed by the buyer. If it's a lease or PPA, the third-party owner holds the contract, and the new buyer must qualify to assume it. Work this out before closing, not at the last minute.
Fourth, contact your utility before listing to understand their specific transfer process. SCE, PG&E, and SDG&E each have slightly different procedures for transferring NEM accounts when a home changes hands. Getting ahead of this avoids delays at closing.
Buyer's checklist:
Request the NEM enrollment confirmation and interconnection agreement from the seller. Verify the NEM version and remaining years directly with the utility — don't rely solely on the seller's representations.
Confirm the system size, panel brand, inverter type, and monitoring data. Ask for at least 12 months of production history from the monitoring platform (SolarEdge, Enphase, SMA, etc.) and cross-reference it with the utility bills.
If the home has a battery, confirm whether it's included in the sale or separately owned, and check whether it's enrolled in any utility demand response programs with ongoing obligations.
Finally, have your real estate attorney confirm that the NEM transfer documentation is in order before closing. This is an area where a small paperwork gap can create a headache that takes months to resolve with the utility.
What Buyers Need to Know Before Purchasing a Solar Home
Buying a home with NEM 1.0 or 2.0 solar in California in 2026 is generally a financial positive — but not automatically. The value depends entirely on what kind of system it is and what plan it's on.
The first question to ask is simple: is this system owned, leased, or financed through a PPA?
Owned system (paid off):
The cleanest situation. The NEM contract transfers to you, you inherit the savings, and there's no ongoing payment tied to the system. Focus on verifying production history and remaining contract years.
Loan-financed system:
The seller pays off the loan at closing, you inherit a free-and-clear system, and the NEM contract transfers. Same outcome as owned — just confirm the loan payoff is part of the purchase agreement.
Leased or PPA system:
This is more complicated. You're not buying the panels — you're assuming a contract with a third-party company (Sunrun, Tesla, etc.) that owns the equipment. You'll need to qualify for the assumption and agree to the ongoing monthly payments. The NEM contract may also work differently depending on how the third-party ownership is structured. Read this agreement carefully, and have an attorney review it if the terms are unclear.
One more thing buyers often overlook: system age. A NEM 2.0 system installed in 2018 still has about 12 years left on its NEM contract, but those panels are 7 years old. Residential panels typically carry 25-year manufacturer performance warranties, so the system still has plenty of life — but check the inverter.
Microinverters (Enphase) and string inverters (SMA, SolarEdge) have different lifespans and replacement costs, and a 7-year-old string inverter may be approaching the midpoint of its typical 10–15 year replacement cycle.
For a full breakdown of how to evaluate solar system quality, see Best Solar Panels for US Homes in 2026: Top Brands & Tips.
Scenarios: How This Plays Out Depending on Your System and Timeline
Scenario 1 — NEM 2.0 Seller, System Paid Off, 10+ Years Remaining
This is the most straightforward situation. You installed solar between 2016 and 2023, paid it off (or it will be paid off at closing), and the NEM 2.0 contract runs until the mid-to-late 2030s. The buyer inherits the full NEM 2.0 benefits — near-retail export rates, TOU pricing, minimal fees.
Expected buyer benefit: $1,400–$1,900 per year more in savings compared to the same system under NEM 3.0. Contract value over remaining term: $15,000–$25,000+, depending on utility rates and production. This is a genuine selling point — price it accordingly and document it clearly.
Scenario 2 — NEM 2.0 Seller, Leased System
The buyer must assume the lease from the third-party owner. The NEM 2.0 billing structure may or may not transfer cleanly depending on the lease agreement's language. Some leases were structured around the assumption that NEM 2.0 economics would hold for the full term; others have provisions that adjust payments if the underlying NEM tariff changes.
Expected outcome: buyer needs to review the lease carefully before assuming it. Monthly lease payments plus remaining electricity costs need to total less than what the buyer would pay without solar. Don't assume this math works — verify it with actual numbers.
Scenario 3 — NEM 1.0 Seller, System Installed Before 2017
The system is 8–10+ years old. The NEM 1.0 contract — which provides full retail credits without TOU rate requirements — still transfers. This is the most valuable NEM version from a billing standpoint, but the system age requires closer inspection.
Expected outcome: NEM 1.0 export credits at full retail rates are genuinely rare and valuable. Panels from 2014–2016 are still within their performance warranty period but should be inspected. Inverter replacement may be on the horizon. Factor system maintenance costs into the purchase price negotiation, but don't let an aging inverter scare you off from what could be an excellent long-term energy asset.
For a breakdown of current solar system component costs, see Solar Battery Costs in California 2026: Price Breakdown and Best Solar Inverters for California Homes in 2026: Brands & Costs.
FAQ: Solar Home Sale in California (2026)
Q: Does my NEM 2.0 contract automatically transfer to the buyer, or do I have to do something?
A: It doesn't happen automatically — you need to notify your utility (PG&E, SCE, or SDG&E) about the home sale and initiate the NEM account transfer process. Each utility has its own procedure, and timing matters. Contact your utility's interconnection or NEM department at least 30 days before your expected close date to avoid gaps in coverage.
Q: What happens if I sell my home before the 20-year NEM contract is up?
A: Under current California law as of 2026, the remaining years of your NEM 1.0 or 2.0 contract transfer to the new owner. If your system was installed in 2018 and you sell in 2026, the buyer inherits the remaining 12 years of NEM 2.0 benefits. The 20-year clock started on your installation date, not the sale date.
Q: Can the buyer be forced onto NEM 3.0 when they buy my solar home?
A: Not under the current rules. The California Senate removed the AB 942 provision that would have required this. As of 2026, new homeowners who purchase a property with an existing NEM 1.0 or 2.0 system inherit the same NEM terms as the previous owner.
Q: Does my solar system increase my home's value?
A: Generally yes in California, especially in high-rate utility territories like SCE, PG&E, and SDG&E. California law (Revenue & Taxation Code Section 73) excludes solar systems from property tax reassessment, so the system increases your home's value without increasing your property taxes. Buyers in these areas understand what high utility bills feel like — a system with locked-in NEM 2.0 savings is a quantifiable asset.
Q: What if my solar system is financed with a PACE loan (Property Assessed Clean Energy)?
A: PACE loans attach to the property, not the owner, and transfer with the home sale. This means the buyer inherits both the system and the loan repayment obligation, which is paid through their property tax bill. California law requires PACE disclosure before sale, and buyers must be informed — this is not an optional step. Some buyers will negotiate the PACE loan payoff into the purchase price.
Q: What is AB 942 and is it law yet?
A: AB 942 is a California Assembly bill that, in its original form, would have forced home buyers to switch to NEM 3.0 when purchasing a solar home and would have sunset existing NEM contracts after 10 years. As of 2026, the home-sale provision was removed by the California Senate in July 2025, and the bill has not been signed into law. The legislative situation is still active — confirm current status at calssa.org or cpuc.ca.gov before any transaction.
Q: What documents should I have ready as a seller?
A: Pull together your interconnection agreement (from your utility), your NEM enrollment confirmation, 12 months of utility bills showing the NEM billing structure, your panel warranty documentation, and any monitoring system login credentials. If the system is leased or financed, include the full contract documents.
Q: If I install solar now, will it transfer when I sell in the future?
A: New installations in 2026 go onto NEM 3.0, not NEM 1.0 or 2.0. NEM 3.0 also comes with a 20-year contract, so it will transfer to buyers — but at the much lower NEM 3.0 export rates. The savings are still real, especially with battery storage, but they're not at the level of legacy NEM contracts. For a full analysis of whether solar still makes sense under today's rules, see Is Solar Still Worth It in California 2026 Without the Federal Tax Credit?.
Conclusion: What This Means Before You List or Make an Offer
Back to the contractor in San Gabriel Valley who called me in a panic: his NEM 2.0 contract transferred cleanly to the buyer. The deal closed, the buyer understood what they were getting, and the solar system actually helped shorten the negotiation because the savings were documented in the utility bills.
That's the outcome when the process is handled correctly. The three steps that make the difference:
Step 1:
Pull your NEM enrollment documentation from your utility and verify the contract version, start date, and remaining term before listing. If anything is unclear, call the utility's interconnection department directly.
Step 2:
Disclose the NEM version and remaining years in the listing — clearly and with actual numbers. Buyers who understand the value will pay for it. Buyers who don't understand it will undervalue it, and you'll leave money on the table.
Step 3:
Contact your utility at least 30 days before closing to initiate the NEM account transfer. Don't wait until the week of close — utility transfer processes are not fast.
The NEM 1.0 and NEM 2.0 contracts are protected for now. But California's solar policy environment has changed significantly in the last two years, and it will keep changing. Before any major transaction, confirm current rules at cpuc.ca.gov and calssa.org.
Related Posts
Sources
California Public Utilities Commission (CPUC) — NEM & Net Billing Tariff: cpuc.ca.gov
California Solar & Storage Association (CALSSA) — AB 942 legislative updates: calssa.org
California Legislative Information — AB 942 bill text (2025–2026 session): leginfo.legislature.ca.gov
EnergySage — California Solar Market Report (April 2026): energysage.com
PV Magazine USA — AB 942 Senate amendment coverage (July 2025): pv-magazine-usa.com
California Revenue & Taxation Code Section 73 — Solar property tax exclusion
About the Author
Hi, I'm James Ree, founder of ElecGuys. With 8 years of experience in electrical, HVAC, and solar wholesale in Los Angeles, I used to consult contractors and supply equipment for residential and commercial projects. I now run this blog full-time to share clear, honest, and practical information with homeowners who are new to solar and home energy. My goal is simple: to help you save money, avoid costly mistakes, and make smarter energy decisions.
Disclaimer
Costs, rebates, and local regulations can change over time and vary by location. The status of AB 942 and related CPUC proceedings may change after the publication of this guide. Always confirm current NEM policy and transfer procedures with your utility provider, a licensed solar contractor (CSLB C-46), and a real estate attorney before finalizing any transaction.
