What is NEM 3.0 True-Up and Should You Select a Monthly or Annual Bill Schedule? 

Most California’s solar customers are now operating under Net Energy Metering (NEM) 3.0, a policy that impacts how homes with solar panels are billed for electricity.

NEM 3.0 builds on the previous NEM 2.0 by changing how solar energy is valued and how savings are calculated.

This article focuses on the True Up billing schedule specific to NEM 3, and includes some additional comparisons to True-Up on NEM 1 and NEM 2.  If you’re not sure about the differences between net energy metering 1,2, or 3, you can learn more about Key Changes in NEM 3.0: What Solar Energy Consumers Need to Know.

Before you get too far into this article, know that we’re here to help.

New Day Solar has been helping homeowners understand these evolving policies so they can continue maximizing savings through service like battery storage or zero export solar.

Please contact our solar specialists if you have any questions that are not answered on our website.

What is True-Up in Net Energy Metering?

They call it a “true-up” because it’s when the utility company “trues up” or balances everything at the end of a billing period (monthly or annually). It’s like making sure everything adds up correctly.

They check how much energy you used versus how much your solar system produced, and then they figure out if you owe more money or if you get some credit back.

Sending Energy Back to the Grid? Here’s Why True-Up Important once you go solar

Imagine you have a piggy bank where you keep track of how much energy your house uses and how much your solar panels make. At the end of a certain time (either each month or year), the true-up is like opening that piggy bank to see if you have saved enough for a surplus, or if you owe more.

Here’s how the things in the table affect that piggy bank:

1. Compensation for Excess Energy:
   If your solar panels generate more electricity than your house uses, the extra gets sent back to the grid. In return, you get credits, like adding money to your piggy bank.
   • In NEM 1.0 / 2.0, they give you a bigger credit (like giving you a dollar for every dollar of energy).
   • In NEM 3.0, you get a small credit (like giving you only 50 cents for every dollar of energy).
2. Time-of-Use (TOU) Rates:
   This is like being told that things cost more or less depending on the time of day. During expensive times (like dinner time when everyone uses electricity), energy costs more.
   • If you use energy when it’s expensive, you take more money out of your piggy bank.
   • If you send excess electricity to the grid during expensive times, you get bigger credits (net surplus compensation).
3. Non-Bypassable Charges:
   Even if your solar panels make lots of energy, you still have to pay a small fee to the grid, like a membership fee. This takes a little money out of your piggy bank no matter how much solar energy you make.
4. Minimum Bill Requirement:
   Every month, you have to pay at least a small amount no matter what. So, even if your solar energy is enough for your house, you still owe a little bit, and it adds up in your piggy bank for the true-up.

When it’s time for your “true-up”, they open the piggy bank and check:

• Did your solar energy make more than you used? You get credits!
• Did you use more energy than your solar made? You have to pay what’s left.

NEM 3.0 gives you smaller credits and charges more fees, so at true-up, you might not save as much as with the older bet metering versions.

How is True-Up different under NEM 3?

Under the latest net energy metering, the biggest change in the solar industry is how much compensation you receive for extra solar power electricity sent back to the grid.

With lower credit rates for excess energy, homeowners may find that the savings aren’t as large as they were under NEM 2.0.

When discussing the true-up process, the most applicable items from the table above are:

Compensation for Excess Energy:

This directly impacts how much credit you receive during your true-up period for any excess solar energy you sent back to the grid. Under NEM 3.0, since the compensation rate is much lower (based on wholesale rates), your annual or monthly true-up may result in lower credits compared to NEM 1.0 or 2.0.

Time-of-Use (TOU) Rates:

TOU rates are important because they affect how much you’re charged for energy use during peak times and how much you’re credited for energy sent to the grid. This can influence whether you owe money or get a credit at true-up, depending on when you use and generate solar energy.

Non-Bypassable Charges:

These charges are applied regardless of how much solar energy you produce. Even if you produce more than you consume, the non-bypassable charges are part of the true-up calculation, meaning you may still owe a small amount at the end of the period.

Minimum Bill Requirement:

This impacts the true-up because even if your solar production covers your energy needs, you may still have a minimum monthly charge or bill that accumulates over the true-up period. For NEM 3.0, this minimum bill requirement is typically higher, which could increase your true-up balance.

These factors directly influence whether you end up with a balance due or credits during the true-up process.

True-Up Timing: Monthly or Annual Utility Billing?

Annual Net Billing Explained

With an annual true-up, your energy costs and solar production are balanced once a year. This means you don’t receive regular monthly bills based on your energy usage. Instead, you’ll get one large statement at the end of the year showing your total electricity consumption and how much you owe (or how much you’re credited) based on your solar energy production.

Annual true-ups work well for homeowners who prefer to adjust their usage and receive one comprehensive bill for the year, rather than managing month-to-month costs.

Monthly Net Billing Explained

A monthly true-up works similarly, but instead of waiting for a year-end statement, your energy usage and credits are calculated monthly. This gives you real-time insight into how much solar energy you’re producing and how much energy you’re pulling from the grid.

Monthly true-ups offer better tracking, so if you see higher energy use in a particular month, you can adjust your consumption accordingly.

Annual vs. Monthly True-Up: Pros and Cons

Annual True-Up Benefits

1. Flexibility:
   You don’t have to worry about monthly fluctuations in your bills. Everything is reconciled at the end of the year.
2. Larger Credits:
   If your system produces more energy than you use, you’ll get a larger credit at the end of the year.
3. Good for Fluctuating Energy Use:
   If your energy usage varies significantly throughout the year, annual billing can help smooth out those changes.

Annual True-Up Drawbacks

• Big Year-End Bill:
  If your energy use exceeds your solar production, you could end up with a large bill at the end of the year.

Monthly True-Up Benefits

1. Real-Time Tracking:
   You’ll know every month how much energy you’re using and producing.
2. Easier Budgeting:
   Monthly billing helps you manage and adjust energy use to avoid surprises.
3. Quick Adjustments:
   If your energy use increases, you can make changes to conserve energy faster.

Monthly True-Up Drawbacks

• Smaller Adjustments:
  Instead of one larger credit or bill, you’ll see smaller, more frequent adjustments.

Annual True-Up Timing and Setting Your NEM 3.0 True-Up Date.

Spring True-Up (March – May)

Pros:

• Start solar credit accumulation: Right after the true-up, you head into the high-production months of spring and summer, building up energy credits quickly.
• Avoid big winter bills: You’ve already passed the period of low solar production, reducing the risk of large winter bills.

Cons:

• Possible winter deficit: If winter usage was high, you might owe more at the true-up before you start gaining credits again in spring.

Summer True-Up (June – August)

Pros:

• Maximizing solar production: Your true-up falls in the middle of high solar production, meaning you likely have accumulated a lot of energy credits by the time of your true-up.
• Lower immediate costs: Likely no large bill due at true-up because solar production is peaking.

Cons:

• Winter shortfall risk: After summer, you head into fall and winter with lower production, which could result in a deficit before the next true-up.
• Harder to budget: High energy usage in the winter and lower production could create budgeting challenges later in the year.

Fall True-Up (September – November)

Pros:

• Moderate bills: Fall is a time of moderate energy usage and production, meaning you’re less likely to owe a lot or have a large credit at true-up.
• Balanced use: You’ve balanced out the high production of summer and low production hasn’t kicked in fully yet.

Cons:

• Winter deficits looming: You’re about to head into winter, so after true-up, you could start seeing deficits if your production is low and usage is high.
• Less solar credit buildup: Fall has shorter days and lower solar production, limiting credit accumulation.

Winter True-Up (December – February)

Pros:

• Smooth budgeting: You go through the high-usage winter months without worrying about a large bill until true-up.
• Spring credits right after: You hit the true-up just before the high solar production months of spring, giving you time to start building up credits again.

Cons:

• Winter deficit: By late winter, your production is typically low, and you may owe more at true-up if your usage was high during this period.

Recommendation:

A late winter true-up (February or March) is often considered the best option because it balances winter’s high usage with the start of solar credit accumulation in the spring.

Changing Your Annual Net Energy Metering Date

In most cases, you can request to change your true-up date, but it depends on your utility provider and their policies. Here’s a brief overview of how this typically works:

How to Change Your True-Up Date:

1. Contact Your Utility Provider: You’ll need to reach out to your utility company (e.g., Southern California Edison, PG&E, SDG&E) and request a change in your true-up date. Each provider may have different rules about how often you can change the date.
2. One-Time Change: Most utilities allow you to change your true-up date once after your solar system is installed. After that, they might restrict how often you can adjust it.
3. Timing Restrictions: Some utilities may only allow the true-up date to be changed within specific windows of the year (e.g., before or after the current true-up cycle).

Things to Consider Before Changing Your Net Metering Schedule:

• Billing Cycle Reset: Changing your true-up date resets your billing cycle, so be prepared for a longer or shorter first cycle after the change, depending on when the new date falls.
• Effect on Solar Credits: If you change your true-up date mid-cycle, any solar credits or deficits may roll into the new billing cycle, so be aware of the timing.

How to Check:

Contact your utility provider’s customer service or visit their website to confirm if, when, and how you can request a true-up date change.

Choosing between an annual or monthly true-up depends on your energy consumption, budgeting preferences, and solar production.

Both options have their pros and cons, but with NEM 3.0, it’s more important than ever to manage your energy usage wisely.

At New Day Solar, we’re here to guide you through NEM 3.0 and help you choose the best option for your home. Whether you opt for annual or monthly billing, our goal is to help you save money while using clean, renewable solar energy.