In a significant victory for rooftop solar users, California lawmakers have backed away from a controversial proposal that would have substantially reduced long-term compensation for solar system owners under the state’s net metering program. The reversal followed months of strong public opposition, industry advocacy, and concerns about undermining consumer confidence in clean energy investments.

Background: What Is Net Metering and Why It Matters

Net Metering (NEM) allows solar panel owners to send excess electricity to the grid in exchange for utility bill credits. This policy has been central to California’s solar boom, providing a stable return on investment for households and small businesses that install rooftop systems.

Under the previous NEM 2.0 structure, customers secured a 20-year lock-in period for favorable compensation rates. However, a recent legislative proposal sought to reduce that period to 10 years, including for users who had already installed their systems in the past few years.

Timeline of Events

• April 2023: The California Public Utilities Commission (CPUC) introduced NEM 3.0, which significantly lowered the value of exported solar energy for new customers but maintained the 20-year rate lock for systems approved under earlier versions of the program.

• Early 2025: Assembly Bill AB 2863 was introduced in the California State Legislature. It proposed reducing the net metering compensation period from 20 to 10 years for all customers, including retroactively for those under NEM 2.0. Utilities argued this would address the issue of cost-shifting between solar and non-solar ratepayers.

• March–April 2025: The proposal sparked widespread resistance:

  • More than 150,000 public comments were submitted in opposition.

  • Solar industry associations, local installers, and clean energy advocates organized campaigns to block the measure.

  • Legal experts raised concerns about the constitutionality of retroactive changes to contracts.

• May 1, 2025: The California Assembly Energy Committee formally removed the retroactive 10-year provision from the bill. The 20-year compensation guarantee remains in place for existing solar customers.

Reactions from Stakeholders

Solar Industry Leaders praised the decision as a reaffirmation of California’s leadership in clean energy and distributed generation. They emphasized that long-term policy certainty is critical to sustaining investment and consumer trust.

Utility Companies expressed disappointment, arguing that the original proposal aimed to rebalance grid costs fairly. However, they agreed to continue participating in policy discussions around future rate design.

Policy Experts noted that while utility concerns over cost equity are valid, abrupt and retroactive changes risk deterring future clean energy investments and contradict the state’s climate goals.

Implications for the U.S. Solar Market

California remains the largest residential solar market in the United States, representing nearly 40% of total rooftop solar installations. Its policies often influence regulatory trends in other states.

The decision to preserve 20-year net metering contracts:

• Strengthens consumer and investor confidence

• Stabilizes the project pipeline for solar developers and installers

• Sets a precedent that policy reforms must avoid retroactive penalties

Looking Ahead

This outcome does not end the broader debate around how rooftop solar should be valued within evolving grid systems. As the state moves toward 100% clean electricity, future proposals may again address rate structures, but this episode underscores the importance of transparency, fairness, and protecting early adopters.

The solar industry, utilities, and policymakers will need to work collaboratively to develop a grid system that is both equitable and resilient—without compromising the momentum of residential solar adoption.