Net Metering vs Net Billing: The Difference That Changes Your Solar Savings

If you are shopping for rooftop solar, one policy detail matters more than almost anything else in your quote: how your utility pays you for the extra electricity your panels send back to the grid. In California that rule changed dramatically in 2023, and in March 2026 a California appellate court affirmed the new rules [1]. Nevada, meanwhile, runs a different version of the same idea. Here is what each system means for your wallet.

Transmission towers carrying power lines across the grid at sunset — Photo: Unsplash

What net metering is

Net metering is the classic deal: your rooftop panels power your home first, and any surplus flows out to the grid. Your utility meters the two directions and you get bill credits for the surplus. Under California's old net metering tariffs (NEM 1.0 and NEM 2.0), those credits were calculated at retail rates — the same per-kilowatt-hour price you pay when you buy electricity [1]. That made payback math simple: every extra kilowatt-hour your panels made was worth about what one cost.

Net billing keeps the first half of that arrangement — your solar still serves your own home first, offsetting your energy costs — but changes the second half. Instead of crediting exports at the retail rate, the utility credits them at a rate reflecting the value of that generation to the grid. In California's version that value comes from the CPUC's Avoided Cost Calculator, and it is usually lower than the retail rate, though it can rise above retail on late summer evenings [1].

California: the NEM 3.0 era is locked in

Since April 15, 2023, customers of California's three large investor-owned utilities — PG&E, Southern California Edison, and San Diego Gas & Electric — who apply for interconnection take service on the Net Billing Tariff (NBT), often called NEM 3.0. It was adopted under CPUC decision D.22-12-056, and the IOUs market it as the "Solar Billing Plan." The older NEM 1.0 and NEM 2.0 tariffs are closed to new enrollments [1].

In March 2026 a California appellate court affirmed the new tariff [1]. Homeowners shopping for solar in California should treat net billing as the settled rule.

Under the NBT, several mechanics differ from the old net metering regime [1]:

Export credits use Avoided Cost Calculator values. Credits for electricity you export are applied to your bill at values that reflect what that power is worth to the grid — usually below the retail rate you pay for imports.
A battery changes the math. The CPUC notes that nearly 70 percent of net billing customers had paired batteries with their solar by the end of 2024, and customer-generators can maximize bill savings by storing midday surplus and using or exporting it during high-value hours [1].
You must use a specific time-of-use rate. NBT customer-generators take service on "electrification" TOU rates with lower off-peak and higher on-peak prices (E-ELEC for PG&E, TOU-D-PRIME for SCE, EV-TOU-5 for SDG&E) [1].
Monthly billing. Bill charges are due monthly rather than settled in one big annual true-up, so you are not surprised by a large annual bill. Excess solar credits still roll over month to month until the annual true-up [1].
Nine-year legacy period. The original customer who interconnects under the NBT is guaranteed the tariff for nine years; customers moving over from an older NEM tariff are not eligible for that guarantee [1].

Nevada's approach: same idea, different numbers

Nevada is the clearest real-world example of how another state implements the net-billing concept. NV Energy's NMR-405 Tier 4 tariff is the default for newly installed residential rooftop systems of 25 kilowatts or less. Its excess-energy credit is set at 75% of the retail volumetric electricity rate (excluding public policy charges), and that rate is locked in for 20 years [2].

Mechanically it works like this: each month NV Energy nets the energy it delivered to you against the energy it received from your system. If you exported more than you imported, the net excess is credited at the 75%-of-retail rate and can be applied to future energy consumption charges. Year-end leftover credits carry over to future bills. Credits cannot offset the basic service charge, meter charges, or local government fees, and they stay with the premises — they do not transfer or pay out if you move or end service [2].

Residential rooftop solar panels at sunset on a family home — Photo: Unsplash

What this means for your quote

The old way of estimating solar savings — one-for-one credit at retail rates — only applies if your utility still runs a true net metering tariff. In California's IOU territories and in Nevada, the credit for exported power is worth meaningfully less than retail, and that shifts the economics in two directions [1][2]:

Self-consumption is king. The cheapest kilowatt-hour is the one you never buy. Using your solar directly — and especially shifting usage into sunny hours — matters more under net billing than it ever did under net metering.
Batteries earn their place. Under California's NBT, stored energy used or exported during high-value evening hours captures the biggest credits, which is why most new NBT customers pair storage with panels [1]. Ask your installer for a savings estimate both with and without a battery.
Watch the true-up, not just the rate. Monthly billing (California) versus monthly netting with annual credit carryover (Nevada) changes cash flow. Ask to see month-by-month bill projections, not just an annual total.

A simple decision framework

Decision framework: match your system size and battery choice to whether your utility credits exports at retail rates or below. Credits are at retail under true net metering [1]; California's NBT uses Avoided Cost Calculator values (usually below retail) [1] and Nevada's NMR-405 Tier 4 uses 75% of retail, locked 20 years [2].

Before you sign anything

Utility tariff rules are state- and utility-specific, and they change — California's own tariff history runs from NEM 1.0 through NEM 2.0 to today's NBT [1]. Ask your installer three questions: (1) which tariff will my system be enrolled under, and is enrollment guaranteed before the rules change again? (2) what is the exact per-kWh export credit rate today, and for how long is it locked? (3) how do my projected savings change if I add a battery? Get the answers in writing, and read the utility's tariff page yourself before you act.

Sources

[1] CPUC — Net Energy Metering and Net Billing
[2] NV Energy — NMR-405, Tier 4

Verified: 2026-10-12

Disclosure: This article was drafted with AI assistance and reviewed by a human editor. Figures reflect sources available on the verified date; confirm current program rules before acting.