When Your NEM Contract Expires

If you installed solar under NEM 1.0 or NEM 2.0, your export credit rate was never actually permanent. Both programs lock in for 20 years from your system’s interconnection date (Permission To Operate), not forever. The earliest wave of California solar customers, installed during the mid-to-late 2000s CSI-era boom, is starting to reach that 20-year mark now, and the tariff they land on afterward is not the same one they signed up for.

Here’s exactly how the clock works and what actually happens when it runs out.

The 20-Year Clock Starts at Interconnection, Not Enrollment

CPUC Decision 14-03-041 set the rule for NEM 1.0: customers keep their net metering structure for 20 years from the date their system was interconnected and given Permission To Operate, not from when they signed a contract or submitted an application. Decision 16-01-044 applied the same 20-year rule to NEM 2.0.

That clock is tied to the system, and it transfers with the system if the home is sold. A NEM 1.0 system interconnected in 2008 keeps its NEM 1.0 export structure until 2028, regardless of who owns the home in the meantime.

Who’s Actually Closed Out of Each Program

NEM 1.0 closed to new applications at different dates depending on utility (roughly mid-2016 for SDG&E, late 2016 for PG&E, and mid-2017 for SCE, once each utility hit its statutory enrollment cap). NEM 2.0 stayed open until April 14, 2023. Anyone who interconnected on or after April 15, 2023 was placed on the current Net Billing Tariff, commonly called NEM 3.0, from day one.

That means the customers hitting 20-year expiration right now are exclusively legacy NEM 1.0 accounts from the earliest years of the program. NEM 2.0 customers don’t start hitting their own 20-year cliff until the mid-2030s at the earliest, since the program didn’t exist before 2016.

What You Actually Roll Onto

This is the part that surprises people, and utility guidance on it has shifted. Older consumer-facing FAQs suggested NEM 1.0 customers would simply roll onto “the NEM successor tariff, currently NEM 2.0” once their 20 years ended. That language is now outdated.

Current utility documentation is more direct: once your 20-year legacy period ends, your account moves to whatever the then-current successor tariff is for new solar customers. Today, that’s the Net Billing Tariff (also called the Solar Billing Plan), the same NEM 3.0-era structure applied to anyone who installed after April 2023. You do not get another 20 years on NEM 2.0’s better export rates just because your NEM 1.0 term ran out.

Practically, that means your export compensation drops from something close to the full retail rate (roughly $0.30-$0.45/kWh under NEM 2.0-era crediting) to the wholesale avoided-cost rate that NEM 3.0 uses, about $0.03-$0.08/kWh during most hours. If your system was sized to zero out your bill under a legacy NEM 1.0 rate, it will not zero out your bill on the tariff you land on next.

One detail worth knowing if you’re buying a home with an aging solar system: customers who transition off legacy NEM at expiration are not eligible for the Net Billing Tariff’s own separate 9-year grandfathering period. You go straight to the current terms with no additional buffer.

Why This Matters More Than It Used To

Under NEM 1.0 and NEM 2.0, oversizing a system was a reasonable strategy, since surplus export was worth close to full retail price. On whatever tariff you land on after expiration, exported power is worth a fraction of that. A system that was properly sized for maximum export value in 2008 is now oversized for a self-consumption-only export rate.

The fix that changes the math the most is battery storage. Instead of exporting midday surplus for pennies per kWh, a battery lets you store it and use it during the evening peak, when retail rates on most California TOU plans run $0.28-$0.59/kWh depending on utility and season. That’s the same logic driving every new NEM 3.0 solar install today, and it applies just as directly to a legacy system rolling off its 20-year term.

What To Do Before Your Contract Expires

Find your exact interconnection date. Check your original interconnection agreement or your utility’s solar account portal. The 20-year clock starts there, not from your installation invoice date or contract signature.

Model your bill under the current export tariff before it happens. Don’t wait for the transition to show up on a bill. Run your actual usage against the current Net Billing Tariff’s avoided-cost export rates to see how much your bill increases without changes.

Evaluate a battery now, not after the transition. Adding storage before your legacy NEM period ends means you’re not stuck exporting at avoided-cost rates for months while you shop for a system. See our solar savings breakdown for current battery payback math under NEM 3.0-era export rates.

Don’t assume your rate plan is still your cheapest option. The Base Services Charge and current per-kWh rates changed materially since most legacy NEM systems were installed. Re-run the comparison across your utility’s current plans, not the ones that existed when you first went solar.