The NEM 3.0 Case: California Supreme Court Hears Oral Arguments on Controversial Net Metering Bill

• 19 Jun, 2025
• Solar energy news

The California Supreme Court has taken up a case related to NEM 3.0. Since its passage in 2023, this legislation has dictated the terms of California’s net metering policy. Environmental interests groups have brought a suit against the California Public Utilities Commission, arguing that the bill is harmful to the climate and solar customers. Read more about what net metering is, how NEM 3.0 affects it, and how the California Supreme Court case could play out. 

What is Net Metering? 

Net metering is the process by which homeowners with solar panels can transfer the excess energy their solar systems create to the public electric grid in exchange for a financial credit. If you contribute more energy to the grid than you consume in a given billing cycle, you’ll see a proportional discount reflected on your statement. The compensation measurement for this surplus is called the export rate. 

Net metering is a key incentive for homeowners to install solar panels because it offers a financial benefit for choosing a renewable, energy efficient power source. Today, California homeowners with solar panels can expect export rates of approximately 8 cents per kWh. 

How Does NEM 3.0 Affect Net Metering?

Under the previous agreement, called NEM 2.0, customers had significantly higher export rates. NEM 2.0, implemented in 2016, offered compensation rates roughly 75% higher than the current ones. In 2023, NEM 3.0 took effect and slashed rates due to a new method for calculating energy exports. NEM 3.0 uses an avoided cost calculator, which means the customers are credited based on how much they saved the utility company instead of receiving compensation based on the full retail rate of the energy they consumed. These NEM 3.0 rates apply to three utility companies: Pacific Gas & Electric Company (PG&E), San Diego Gas & Electric (SDG&E), and Southern California Edison (SCE). 

This change in rate calculation lies at the heart of the California Supreme Court case regarding NEM 3.0. Solar advocates argue that this change makes solar energy economically unviable for many homeowners, and undercuts California’s solar adoption rate. Proponents of NEM 3.0 say the avoided cost calculation is fairer to non-solar customers and encourages battery storage for existing solar customers. 

How Could the Supreme Court Case Play Out? 

The case was initiated by various environmental activists and public-interest groups against the California Public Utilities Commission. The California Supreme Court heard oral arguments regarding NEM 3.0 in early June 2025. A decision is expected within a month. Here are a few things that could happen based on the ruling.

Rules in Favor of California Public Utilities Commission 

• Existing customers may see permanently reduced export rates
• Potential customers may be hesitant to adopt solar panels
• California may struggle to reach its goal of using 100% carbon-free energy by 2045. 

Rules Against California Public Utilities Commission 

• All or part of NEM 2.0 is temporarily reinstated
• Utility companies seek additional legislation to lower their costs
• Interest in residential solar panels increases

Solar Power is Still the Best Choice

Although net metering is undergoing legal challenges, there remain plenty of reasons to choose solar panels for your home. Tax credits, reducing your carbon footprint, and helping California reach its sustainable energy goals should all be top of mind for you as you consider switching to solar energy. Contact us today to get started with your residential solar power journey.