Net energy metering (NEM) is the mechanism that determines how much a utility pays a solar homeowner for electricity exported to the grid. For homes sold in California, Arizona, Nevada, Hawaii, and a growing list of other states, the NEM rate a seller enjoys may not be the NEM rate the buyer receives — and that difference can make or break the financial case for owning the solar system at all. This article explains how NEM transfer works, where it fails, and what real estate professionals need to disclose to their clients.
What net energy metering is
When a solar system produces more electricity than a home uses in a given hour, the excess goes to the grid. Net energy metering determines what credit the homeowner receives for that export. Under legacy NEM programs, the credit was roughly equal to the retail electricity rate — meaning exported solar was worth approximately what the homeowner would have paid to buy that electricity from the utility.
Under current NEM programs (NEM 3.0 in California, updated rates in Arizona and Nevada), the export credit has been dramatically reduced. In California, the move to NEM 3.0 in 2023 reduced export credits by approximately 75% for most customers. A solar homeowner who received $0.30/kWh for exported electricity under NEM 2.0 now receives roughly $0.08/kWh for the same export under NEM 3.0.
This changes the financial model of solar ownership significantly. A system that paid back its cost in 7 years under NEM 2.0 may take 12–15 years under NEM 3.0 — and that's if the buyer can retain the legacy rate. If they can't, the economics may not work at all without a battery to self-consume the solar instead of exporting it.
Grandfathering: the key concept
Most states that changed their NEM rates grandfathered existing solar customers into the legacy rate for a period of time. A California homeowner who interconnected under NEM 2.0 before April 2023 is grandfathered into NEM 2.0 rates for up to 20 years from their interconnection date — not the sale date, not the buyer's name change date, but the original interconnection date.
The question for real estate is whether that grandfathering transfers to the buyer. The answer varies by state and utility, and in California specifically, it's conditional — the buyer gets the remaining years of the seller's grandfathering period only if the transfer is properly executed and certain conditions are met.
State-by-state NEM transfer rules
| State / Utility | Legacy NEM transfers? | Notes |
|---|---|---|
| California (IOUs) | Yes — up to 9 remaining years | Must be properly transferred with utility. New owner gets seller's remaining grandfathering up to 9 years from original interconnection. |
| Arizona (APS) | Partial | Legacy export rates may not transfer. Buyer may be placed on current tariff at meter name change. Verify with APS before listing. |
| Arizona (SRP) | Varies by plan | SRP has plan-specific transfer rules. Contact SRP directly with the account number. |
| Nevada (NV Energy) | Transfers for current term | NEM grandfathering transfers with the property but has a defined end date. Buyer inherits remaining term only. |
| Hawaii (HECO) | No — closed to new enrollment | Legacy NEM in Hawaii is closed. A buyer who takes ownership triggers a tariff review and is typically moved to the current (lower-compensation) program. |
| Texas | Varies by utility | Texas has no statewide NEM mandate. Rules vary entirely by local utility and co-op. |
| Florida | Transfers (for now) | Florida NEM currently transfers but the legislature has signaled potential rule changes. Verify at time of transaction. |
This table is accurate as of April 2026 but tariff rules change. Always verify the specific utility's current policy before representing NEM transfer status to a client.
Financial impact for buyers
The financial difference between inheriting legacy NEM and being placed on current rates can be substantial enough to change whether a buyer should value the solar system as an asset at all.
A 7 kW system in San Diego generating 10,500 kWh/year with 40% self-consumption and 60% export:
Under NEM 2.0 (legacy): 6,300 kWh exported at $0.30/kWh = $1,890/year in credits, plus $1,200 in avoided electricity costs = $3,090/year total value.
Under NEM 3.0 (current): 6,300 kWh exported at $0.08/kWh = $504/year in credits, plus $1,200 avoided = $1,704/year total value.
The annual value difference is $1,386 — or about $34,650 over the remaining 25-year system life. A seller who has been marketing the solar system as "saves $250/month on electricity" may be describing their experience under NEM 2.0. The buyer's experience under NEM 3.0 will be materially different.
This isn't fraud — it may be innocent — but it is a disclosure issue. Buyers should receive the utility account documentation showing the current rate plan and the actual 12-month export credit history, not an estimate from the seller.
Why a battery changes the calculus
A battery storage system changes the NEM math by enabling self-consumption of solar production instead of export. A home with a properly sized battery can self-consume 85–90% of its solar output, eliminating the export compensation problem almost entirely.
For buyers who cannot transfer the legacy NEM rate — or in markets like Hawaii where legacy NEM is unavailable — a battery retrofit often makes the solar system financially viable again. For agents representing buyers of solar homes in unfavorable NEM markets, the battery advisory is a meaningful service to offer.
What agents are required to disclose
Most state disclosure forms now include solar-specific questions about system ownership, lease status, and financing. NEM tariff status is less consistently required — but the general disclosure duty (material facts that affect value) almost certainly applies in any state where NEM rate changes materially affect the system's economics.
Best practice: request the seller's utility account documentation showing the current NEM tariff, rate plan designation, and the most recent 12 months of production and export credits. Provide this to the buyer as part of the disclosure package, not as a verbal representation.
If you don't know the seller's NEM status, ask. If the seller doesn't know, have them log into their utility account and pull the rate plan. In California, the PG&E, SCE, and SDG&E apps all display the NEM rate plan designation prominently.
Know the NEM tariff status on every solar listing
SolarDisclosure™ reports include NEM tariff status, export credit history, and the battery advisory — so your buyers know exactly what they're inheriting.
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