Senate Overturns State Assembly Bill Written to Upend 20 Year Solar Contracts
In a stunning reversal, the California Senate overturned a state assembly bill which was originally written to cancel the NEM 2.0 rate plan potentially impacting 2-million current solar customers. A revised version of the bill would have retained the 20 year “grandparent” agreement b[rotecting NEM 2.0 but not apply to new homeowners when the solar home was sold. The current position on AB 942 protects BOTH the 20 year NEM contract AND is transferrable when the home is sold.
In 2005, a mere 20,000 solar installations existed in California. Gray Davis was just recalled, and California was reeling from the Enron energy mismanagement crisis. Utilities including PG&E were bankrupt. The debacle cost an estimated $40-$45-Billion.
Then came an unlikely bipartisan coalition led by then-Republican Governor Arnold Schwarzenegger, launching the 1-million solar roofs initiative. It spun headlines like a Kennedy moonshot speech, but 15 years later the 1-millionth solar installation cemented California’s solid position as the world’s clean energy leader. The initiative further mandated and achieved solar on every new California home by 2020. a requirement still in place today.
What took 15 years to achieve doubled in just 5 years to over 2-million solar homes, schools and businesses by 2024. Those who took the risk to install solar, at a time when the math and technology was far less proven, were rewarded with a 20 year utility contract. The agreement, Net Energy Metering (NEM 1 and NEM2) stipulated that the state’s investor-owned utilities must purchase excess solar electricity sent back to the grid from solar arrays at the prevailing rate otherwise charged to customers. In addition, this contract became transferrable to new owners, protecting the solar (and battery storage) investment as a solid value-add to a California home.
The 2020’s Storm Clouds Forming Over State Solar Policy
But the drumbeat of solar dissent from utilities, regulators and even state universities and agencies were beating with increasing unity. The first rumblings of a souring state government solar mood began in 2020, when Gavin Newsom-appointed CPUC regulators began reviewing proposals to cut back solar incentives to new customers. The argument was that solar was “cost shifting” higher utility rates to non solar, particularly financially disadvantaged rate payers. Thus, $1 for $1 net metering was vastly responsible for raising utility costs for non solar customers. Evidence was cited by studies endorsed by state government agencies such as The CA Public Advocates Office, and created by University of California (the largest state funded college system)
The First Wave: NEM 3.0
In April 2023, the CPUC mandated the most restrictive solar decision in state history, by approving a Net Billing Tariff (NBT) or NEM 3.0. The plan applied to all new residential customers and ties solar reimbursement to real time supply and demand, resulting in about 75% less credits for the average solar customer.
The utilities successfully won their case to earn 75% more on solar generation credits, in exchange for a promise to make more subsidies available for batteries, especially in lower income and high wildfire risk zip codes. In its 24th year, the Self Generation Incentive Program (SGIP) has awarded $1.2-billion to date with another $1-billion authorized since NEM 3.
Meanwhile in 2025 the average state annual electric bill is $3132 paid by about 13-million households, a price tag of over $42-billion annually. That represents a 43% jump for PGE customers, 25% for SoCal Edison and just 5% for SDGE (San Diego) since NEM 3.0 became law.(2)
At a conservative 24% increase, the IOU’s have gained ~$8-billion since 2023, PLUS avoided paying over $200-million to new solar customers for their grid-delivered electricity post NEM 3.0. Against this backdrop, $1-billion over the next few years serves several purposes for the IOU’s: meet the Governors’ affordability mandate, justify inflation-exceeding rate hikes, and financially dis-incent the deployment of new solar.
The Second Wave: Lawmakers Move to Rescind 2-million NEM 1&2 Solar Contract
In early 2025, the CPUC submitted a proposal to cancel NEM 1 and NEM 2 20 year contracts and move 2-million solar customers to NEM 3.0. They pointed to (state university funded) studies which show solar customers cost-shifted over $8-billion in utility costs to non solar homes.
Lisa Calderon, State Assembly Member, District 56
The proposal was adopted into Assembly Bill 942 by state assembly member Lisa Calderon, a 24-year SoCal Edison career government affairs veteran and part of a multigenerational Democratic power family.
After debate and public protest, a modified version of AB 942 narrowly passed and went to the Senate, removing the 20-year Net Metering cancellation clause. However, another key element of the contract, the provision to transfer the NEM 1 or NEM 2 asset to new owners, was eliminated. If passed into law, the transferred solar system to new homeowners would automatically revert to NEM 3.0, a provision opposed by the California Association of Realtors, and most of the solar industry. If passed and signed into lawm the new policy would take effect January 1st, 2026.
