California · Net billing in court

The NEM 3.0 lawsuit: what California's courts decided

Three groups sued to overturn California's net billing tariff, the rules most people call NEM 3.0. The case went from the Court of Appeal to the state Supreme Court and back, and it ended on June 10, 2026, when the Supreme Court declined to review it a second time. Net billing stands. Here's what each court decided and what it means for your solar.

Reviewed October 2026 · From the court opinions, the California Supreme Court's minutes and the CPUC

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2022CPUCAdopts net billing
Decision 22-12-056 replaces NEM 2.0 for new solar customers.
Adopted
2023CPUCDenies rehearing
Decision 23-06-056. The challengers then ask the Court of Appeal to review it.
Denied
2023Court of AppealUpholds the tariff
98 Cal.App.5th 20, using the deferential standard courts had long applied to the CPUC.
Upheld
Aug 7, 2025Supreme CourtSends it back
18 Cal.5th 293: the lower court gave the CPUC too much deference. It didn't rule on the tariff itself.
Sent back
Mar 9, 2026Court of AppealUpholds it again
Applying the stricter standard, it finds the CPUC followed the law. "The Decision is affirmed."
Upheld
Jun 10, 2026Supreme CourtDeclines to review
Petition S296256: "Petition for review denied." The case is over.
Final

At a glance

The lawsuit is over and net billing stays. The Center for Biological Diversity, the Environmental Working Group and the Protect Our Communities Foundation argued that the CPUC's 2022 decision broke the state law that ordered a successor to net energy metering. In August 2025 the California Supreme Court ruled the Court of Appeal had judged the case under too deferential a standard and sent it back. On March 9, 2026, the Court of Appeal applied the stricter standard and upheld the CPUC again. On June 10, 2026, the Supreme Court denied review.

If you have solar, nothing about your billing changed because of the case. If you're shopping, the rules you see now are the rules.

What was argued, and what the court held

What the challengers arguedWhat the court held (2026)

GrowthThe law says rooftop solar must "continue to grow sustainably." Net billing slows growth by stretching payback, so it breaks that rule.Nothing in the law requires growth "at the same pace as before." The CPUC targeted a nine-year payback and added a five-year "glide path" of extra credits for new customers.

Disadvantaged communitiesThe CPUC didn't include "specific alternatives designed for growth" in disadvantaged communities.The higher bonus credit for CARE customers and homeowners in disadvantaged communities, plus programs adopted earlier, count as those alternatives.

Costs and benefitsThe tariff must be based on the costs and benefits of a home's solar, and the CPUC left out benefits and counted lower grid use as a cost.The CPUC weighed the solar system's benefits. Customers still pay for the power they import; the tariff only ends offsetting exports against imports at the full retail price.

Balance for everyoneThe CPUC put customers without solar ahead of the electric system as a whole.The CPUC used its standard cost-effectiveness tests, including one that counts the total costs to participants and the utility, and the law doesn't require weighing "societal" benefits there wasn't enough evidence for.

Summarized from the Court of Appeal's March 9, 2026 opinion on Public Utilities Code section 2827.1(b)(1), (b)(3) and (b)(4).

The law at the center of the case, Public Utilities Code section 2827.1, gave the CPUC three goals for the successor tariff: rooftop solar that "continues to grow sustainably," with "specific alternatives" for disadvantaged communities; a tariff "based on the costs and benefits" of the solar system; and total benefits "approximately equal to the total costs" for all customers and the grid. The court found the CPUC met each one.

Why the Supreme Court sent it back

The 2025 Supreme Court decision wasn't about solar credits at all. It was about how much courts should defer to the CPUC. For decades, courts upheld the commission's reading of utility law unless it bore no "reasonable relation" to the law's purpose and language. The Supreme Court, in a unanimous opinion by Justice Kruger, held that this approach no longer applies after the Legislature expanded court review of CPUC decisions. Courts may give the commission's view weight, but they "must . . . independently judge the text of the statute."

It then left the question of whether net billing survives that closer look to the Court of Appeal, which answered it in 2026: it did.

A pen resting on a thick stack of papers on a patio table, with a brick home with rooftop solar panels behind it

What it means for you

Already on NEM 1.0 or 2.0

Nothing changes. The CPUC lets NEM 2.0 customers keep it for 20 years from when their system was interconnected.

On net billing now

Your tariff and export credit schedule stay as they are. The CPUC guarantees the original customer nine years on net billing.

Thinking about solar

The rules are settled. Homes that apply by the end of 2027 still get a nine-year locked export credit schedule, and at PG&E and SCE a small bonus credit.

Hoping for NEM 2.0 back

The courts won't restore it. Any future change would have to come from the CPUC, which the court said can revise the tariff "upon new or additional evidence."

For how net billing works day to day, see NEM 3.0 and net billing explained and NEM 2.0 vs. NEM 3.0.

Looking for a different solar lawsuit?

Searches for "California solar lawsuit" also turn up cases against individual solar companies and lenders. Those are separate from this case, and we don't track them. If your own solar contract is the problem, these guides cover the rights California law gives you:

Cancel a solar contractthe three-day right to cancel, five days if you're 65 or older
If your solar company went out of businessthe $25,000 license bond, warranties and loans
Check a solar companylicense, complaints and the required disclosure document

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Common questions

Is the NEM 3.0 lawsuit over?

Yes. The Court of Appeal upheld the net billing tariff on March 9, 2026, and the California Supreme Court denied review on June 10, 2026 (petition S296256). Net billing remains the rule for new solar customers at PG&E, SCE and SDG&E.

What did the California Supreme Court decide about NEM 3.0?

In August 2025 it decided only how closely courts should review the CPUC's reading of utility law. It held the old, highly deferential approach no longer applies, and it sent the case back to the Court of Appeal without ruling on the tariff itself.

Did the court bring back NEM 2.0?

No. The Court of Appeal found the CPUC followed Public Utilities Code section 2827.1 when it adopted net billing, and the Supreme Court declined to review that decision.

Who sued over NEM 3.0?

The Center for Biological Diversity, the Environmental Working Group and the Protect Our Communities Foundation. PG&E, SCE and SDG&E took part as real parties in interest, alongside the CPUC.

Can NEM 3.0 still change?

Through the CPUC, yes. The Court of Appeal noted that nothing prevents the commission from revising the tariff in the future upon new or additional evidence about its total benefits and costs.

Does the lawsuit affect my existing NEM 2.0 system?

No. The case was about the tariff for new customers. The CPUC lets NEM 2.0 customers keep it for 20 years from when their system was interconnected.

This summarizes the published court opinions and orders; it isn't legal advice. Sources: California Supreme Court, Center for Biological Diversity v. Public Utilities Commission (2025) 18 Cal.5th 293 (PDF) · Court of Appeal, First District, Center for Biological Diversity v. Public Utilities Commission, A167721, March 9, 2026 (PDF) · California Supreme Court minutes, June 10, 2026 (PDF) · California Supreme Court case page, S283614 · CPUC: Net energy metering and net billing. Reviewed October 2026.

Next guideNEM 3.0 and net billing explained →