AB 942 Explained: The Bill That Could Change Solar for Millions of Homeowners
California’s solar homeowners face major changes starting Jan 1, 2026, with AB 942. This bill modifies the state’s Net Energy Metering (NEM) program, reducing financial incentives for solar users. Here’s what you need to know:
Key Changes:
New homeowners must adopt the less favorable NEM 3.0 tariff when buying a solar-equipped home.
The annual California Climate Credit for solar customers will end.
Nonbypassable charges will apply immediately, with no transition period.
Impact on Solar Users:
Compensation for excess solar energy drops by 75%, from $0.29/kWh to just $0.05–$0.06/kWh.
Existing agreements for systems installed before April 2023 may be voided upon property sale.
Home values and solar investment returns are at risk.
Why It’s Happening:
Supporters argue AB 942 addresses an $8.5 billion annual “cost shift” from solar to non-solar customers, saving Californians an estimated $423 million in 2026.
Critics claim it undermines consumer trust, clean energy goals, and long-term solar agreements.
Bottom Line: AB 942 could reshape California’s solar landscape, impacting affordability, property values, and clean energy progress. Homeowners should explore battery storage and self-consumption strategies to protect their investments.
What AB 942 Changes for Solar Homeowners
AB 942 Background and Purpose
Assembly Bill 942, introduced by Assemblymember Lisa Calderon, focuses on California's Net Energy Metering (NEM) program to address electricity costs for non-solar customers. The bill has successfully passed the California State Assembly and is now under review in the California State Senate.
At its core, the legislation seeks to address what proponents call "ratepayer equity." This refers to the financial impact that solar customers can have on non-solar ratepayers. According to the Public Advocates Office, the cost shift caused by NEM increased dramatically - from $3.4 billion in 2021 to $8.5 billion in 2024. To balance this, the bill introduces exemptions for public schools and agricultural customers, recognizing their distinct energy requirements.
Below, we break down the three major changes AB 942 proposes for solar homeowners.
Main Changes Proposed by AB 942
AB 942 introduces three key adjustments that reduce the financial advantages for solar homeowners:
Property Transfer Requirements: If a home with solar panels is sold, the new owner must adopt the current NEM tariff structure, which is NEM 3.0. This means buyers will no longer benefit from the previous homeowner's agreement, and they will be subject to lower compensation rates for excess solar energy.
"The contract says that if you signed up for solar before April 15, 2023, if you signed up for solar before that the state's contract says that you can stay in that system you can stay on NEM 1 or NEM 2 for 20 years and that system can stay on NEM 1 and NEM 2 for 20 years even if the home is sold and what the amended bill does is it breaks the contract if the home is sold and forces that home onto NEM 3 when the buyer takes over." – Dave Rosenfeld, executive director with the Solar Rights Alliance
Climate Credit Elimination: Starting January 1, 2026, NEM customers will no longer receive the annual California Climate Credit.
Nonbypassable Charges: Solar customers will immediately begin paying nonbypassable charges when compensation rates change, with no transitional period. This removes financial buffers that previously helped homeowners adjust.
Under NEM 3.0, the export rates for selling electricity back to the grid are significantly lower, slashing compensation by 75% compared to earlier versions. Excess energy is now compensated at only 5 to 6 cents per kilowatt hour, a sharp drop from the former 1:1 exchange rate. This shift directly impacts the long-term financial value of residential solar investments.
When AB 942 Takes Effect
The timing of AB 942’s implementation will affect solar homeowners differently:
January 1, 2026: The California Climate Credit will no longer be available for all NEM customers within investor-owned utility territories.
July 2026: The amended bill proposes to sunset existing net metering contracts, including those for systems installed before April 2023.
Immediate Impact on Home Sales: Once AB 942 is enacted, any home sale involving a solar system will require the new owner to switch to NEM 3.0, regardless of the original installation date.
Proponents of AB 942 estimate that these changes could save 10 million Californians $423 million in the first year and $3.6 billion over the next two decades. However, these savings come at the expense of reduced benefits for solar homeowners, especially those looking to sell their properties. This legislation introduces new challenges for solar users, making it essential to carefully consider how to protect your solar investment.
Why AB 942 Was Created
The Cost Shift Claim Explained
Proponents of AB 942 argue that California's Net Energy Metering (NEM) program unfairly shifts billions in costs from solar users to non-solar customers. Between 2021 and 2024, subsidies ballooned from $3.4 billion to $8.5 billion, reallocating 11% to 20% of fixed grid costs. This shift adds an estimated $200 to $400 annually to the bills of non-solar customers. Solar customers, meanwhile, receive full retail credits, which include unrelated costs like wildfire mitigation and grid access. Utilities claim this forces them to purchase energy at above-market prices.
Stern from the CPUC's Public Advocates Office highlights the issue:
"Solar customers' bills drop dramatically because of the subsidy, often near to zero, even though they still rely on the grid to benefit them and the subsidy. Those customers need to pay their fair share."
In 2022, 10 million non-solar customers subsidized 1.6 million rooftop solar users, with the cost shift now comprising up to 27% of a non-solar customer's electricity bill. These financial concerns are a driving force behind the push for AB 942, as explored further below.
Who Supports AB 942 and Why
The financial strain caused by the current system has united a diverse coalition in favor of AB 942. Major investor-owned utilities in California, along with groups focused on ratepayer fairness, are leading the charge. Supporters include organizations such as the Utility Reform Network, the California Wind Energy Association, the Energy Transition Collective, and labor groups like the Coalition of California Utility Employees and the California State Association of Electrical Workers.
Assemblymember Lisa Calderon, who introduced the legislation, emphasizes the need to tackle the state's affordability crisis. She explained:
"As Californians experience electricity bill increases, AB 942 aims to minimize the cost shift on non-solar ratepayers from existing solar-panel subsidy programs. Our energy bills are becoming increasingly unaffordable, and we must address this ratepayer inequity."
Advocates believe AB 942 strikes a balance by preserving the benefits of rooftop solar while distributing costs more fairly. They project the bill could save Californians $423 million in 2024 and $3.6 billion by 2043. With electricity rates climbing, the urgency to address these inequities is growing.
California's Rising Electricity Costs
Beyond the cost shift, California's skyrocketing electricity rates add fuel to the debate. Residential electricity prices in the state have surged by 47% between 2019 and 2023, with customers of the three largest utilities now paying about twice the national average for power. The combined revenue requirement for Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric hit $54 billion in 2024 and is expected to rise by another 5% to 9% in 2025.
Supporters of AB 942 argue that the current rooftop solar subsidy system worsens these affordability challenges by transferring billions of dollars in costs to non-solar customers. However, critics warn against oversimplifying the issue. Energy economist Ahmad Faruqui points out:
"California has a very aggressive net-zero goal. It also wants to end the sale of gasoline vehicles by 2035. None of those will happen if rates keep going up. And the CPUC's answer - that rates are going up because of solar - is BS, plain and simple."
Environmental and community groups echo this sentiment:
"California must focus on what's really wrong with our energy system: uncontrolled utility spending and record utility profits. We'll never control rates or meet our goals for clean, reliable energy if we don't get at these roots of the problem."
Despite these differing views, supporters of AB 942 argue that addressing the solar cost shift is a necessary step to making energy more affordable while keeping California on track to meet its ambitious climate goals.
Arguments For and Against AB 942
Why Supporters Back the Bill
Supporters argue that the current Net Energy Metering (NEM) system unfairly shifts costs onto non-solar customers. According to Pacific Gas & Electric, households without solar panels pay an additional $200–$400 annually due to subsidies for solar users.
Assembly member Lisa Calderon, who introduced AB 942, emphasizes the need to address this disparity:
"Solar power is an important part of our state's renewable energy grid, but we have to reevaluate how our current solar subsidy programs impact Californians who may not be able to afford solar-panel systems. Our energy bills are becoming increasingly unaffordable, and we must address this ratepayer inequity."
Proponents also highlight the bill's potential to save Californians a substantial amount - an estimated $423 million in the first year and $3.6 billion by 2043. They argue that NEM rates are not permanent contracts but regulatory frameworks that can be adjusted. Rachel Koss, an attorney for the Coalition of California Utility Employees, explains:
"The NEM rate structure was created by the CPUC. They have complete jurisdiction over it and they can change it at anytime."
The Utility Reform Network echoes this perspective, pointing out:
"Recognizes the desire of legacy [net energy metering] customers to retain 20 years of tariff protection, the high costs of these protections are borne entirely by the general body of customers."
These arguments center on fairness and cost savings, but the opposing side sees things very differently.
Why Opponents Fight the Bill
Opponents of AB 942 argue that the legislation undermines long-term agreements made with over two million solar-powered households. Jeremy Nicholson, CEO of Sunergy, voices this concern:
"People made substantial investments to put solar on their roofs, with guaranteed paybacks because of these agreements. Changing that midstream would be a huge disservice. It completely erodes consumer confidence. Whatever agreements you have in place, you need to ride out to the finish line."
The financial stakes for homeowners are significant. Installing a rooftop solar system typically costs around $35,000 upfront, with total expenses reaching up to $50,000 when interest and fees are included. Critics also worry about the impact on home values. The California Association of Realtors warns:
"Instead of bringing down electricity costs to Californians, AB 942 will slice into the value of many working-class families' home equity improvements involving solar."
Brad Heavner, executive director of the California Solar and Storage Association, adds:
"A lot of homeowners are selling solar as a positive feature, which makes perfect sense. It's a valuable asset. Cutting the value of that system at the time of sale reduces value for the seller."
Opponents also challenge the claim that NEM programs shift costs unfairly. A representative from Solar United Neighbors states:
"The utility's cost shift claim is false. Research on the issue concludes that rooftop solar more often provides a net benefit to all ratepayers."
Steve Campbell of Vote Solar frames the bill as a blow to consumer rights:
"AB 942 is a direct attack on California families who made long-term investments in solar with the promise of fair, 20-year Net Energy Metering agreements - guarantees that were clearly outlined in the state's own consumer protection documents."
Environmental and community groups argue that the real issue lies with utility practices, not solar subsidies:
"California must focus on what's really wrong with our energy system: uncontrolled utility spending and record utility profits. We'll never control rates or meet our goals for clean, reliable energy if we don't get at these roots of the problem."
Side-by-Side Comparison of Arguments
Issue | Supporters' Position | Opponents' Position |
|---|---|---|
Cost Impact | Non-solar customers face extra costs of $200–$400 per household and $8.5 billion annually. | Rooftop solar provides a net benefit to all ratepayers. |
Projected Savings | Expected to save $423 million next year and $3.6 billion by 2043. | Could lead to higher rates and limit consumer choice. |
Contract Rights | NEM rates are regulatory structures, not binding contracts. | Breaks 20-year agreements affecting over two million homeowners. |
Property Values | Promotes ratepayer equity and affordability. | Reduces home equity and complicates real estate transactions. |
Consumer Impact | Seeks to address affordability for non-solar customers. | Undermines consumer confidence and penalizes early solar adopters. |
Clean Energy Goals | Aims to balance solar benefits with fairness. | Risks slowing clean energy progress and discouraging solar adoption. |
The debate over AB 942 highlights a clash between addressing immediate financial concerns and honoring commitments to clean energy and consumer trust. While supporters focus on reducing costs for non-solar customers, opponents emphasize the risk of undermining confidence in solar investments. Proponents cite an $8.5 billion annual cost shift, while critics argue that NEM programs have delivered $1.5 billion in savings for all customers.
How AB 942 Affects Solar Homeowners
With the introduction of AB 942, many California homeowners are seeing a sharp reduction in the financial benefits of solar energy. This legislation forces new homeowners to switch to NEM 3.0, slashing compensation for excess solar energy to just 5–6 cents per kWh - barely a quarter of the current retail rate of $0.29/kWh. For those who invested in solar systems under the promise of long-term rate protection, this change can feel like a breach of trust.
Dave Rosenfeld, executive director of the Solar Rights Alliance, highlights the issue:
"The contract says that if you signed up for solar before April 15, 2023, if you signed up for solar before that the state's contract says that you can stay in that system you can stay on NEM 1 or NEM 2 for 20 years and that system can stay on NEM 1 and NEM 2 for 20 years even if the home is sold and what the amended bill does is it breaks the contract if the home is sold and forces that home onto NEM 3 when the buyer takes over."
This shift doesn’t just impact monthly savings; it also affects property values. Potential homebuyers may hesitate to purchase solar-equipped homes if they’re locked into less favorable terms, which could lead to higher monthly bills and reduced appeal.
Option One Solar's Custom Solutions
Option One Solar steps in with tailored strategies to help homeowners navigate these challenges. Their focus is on creating custom energy solutions that align with each homeowner’s needs while addressing the realities of AB 942.
One of the most impactful solutions they offer is battery backup systems. By installing custom battery storage, homeowners can store excess energy instead of selling it back to the grid at the drastically reduced NEM 3.0 rates. This approach ensures homeowners retain more value from their solar production, even when compensation drops to 5–6 cents per kWh.
Option One Solar handles everything from the initial consultation to system activation, including permits and installation. Their 25-year warranty provides peace of mind, ensuring homeowners are protected against future regulatory shifts. Additionally, their lifetime customer support means systems can be adjusted as needed to keep pace with changing policies.
For properties with unique needs, the company also offers solar carports and ground-mounted systems, providing flexibility for homeowners who want to expand their solar capacity or optimize performance under new rate structures.
Getting the Most from Solar After AB 942
To safeguard solar savings under AB 942, homeowners need to rethink how they use energy. The key is to maximize self-consumption - using as much solar power as possible during the day when panels are generating electricity.
Battery storage is central to this strategy. For example, a Tesla Powerwall 3, which costs around $15,600, allows homeowners to store daytime solar energy for use in the evening. This reduces reliance on the grid and avoids the low buyback rates under NEM 3.0. Plus, it provides backup power during outages.
Another effective tactic is load shifting - running appliances like dishwashers, washing machines, and pool pumps during peak solar production hours. This simple adjustment minimizes reliance on grid electricity and offsets the impact of reduced export credits.
Understanding the time-of-use rate structure is also crucial. Under NEM 3.0, solar buyback rates vary by the hour based on avoided energy costs. By timing energy use and battery charging to align with these rates, homeowners can optimize their savings.
For those planning to sell their homes, it’s essential to disclose NEM contract details during the sale process. Option One Solar can assist with documenting system benefits and obligations, ensuring transparency for both sellers and buyers.
Ultimately, the goal is to reduce dependence on the grid. Homeowners who can directly use 80% or more of their solar production will see the greatest financial benefits, regardless of export rate changes. Option One Solar’s custom designs focus on achieving this self-sufficiency through carefully sized solar arrays and strategic battery placement.
"It is the dumbest policy I have seen get a bill number put behind it…"
Conclusion
AB 942 represents a major shift in California's approach to solar energy. By mandating that new homeowners transition to NEM 3.0 - where compensation for exported electricity drops by about 80% - the bill reshapes the financial appeal of solar ownership. It also disrupts nearly two million existing solar agreements that Californians counted on when making their investment decisions.
California's goal of achieving 100% clean electricity by 2045 could face a setback if AB 942 slows the adoption of rooftop solar. Rewriting 20-year net metering agreements raises concerns about consumer trust and sets a precedent that could undermine confidence in future renewable energy policies.
The bill also challenges assumptions about cost equity and subsidies. Proponents argue that non-solar customers subsidize solar users by $8.5 billion annually. However, independent studies suggest that rising electricity costs are more closely tied to utility infrastructure upgrades and wildfire mitigation efforts. Over 100 advocacy groups have voiced concerns about the bill’s potential to harm California’s leadership in clean energy.
For homeowners, staying informed about these changes is critical. Working with experienced solar providers like Option One Solar can help navigate these shifting policies while preserving energy independence and cost savings. Their expertise ensures that your solar system adapts to new regulations without compromising its benefits.
The debate surrounding AB 942 highlights a broader national challenge: how to integrate distributed energy resources while balancing grid reliability and affordability. The outcome of this legislation will not only influence California’s renewable energy future but could also shape the trajectory of rooftop solar adoption across the United States.
FAQs
How could AB 942 impact the resale value of California homes with solar panels?
AB 942 and Its Potential Impact on Solar Homes in California
AB 942 could have a major impact on the resale value of homes with existing solar systems in California. The bill suggests that new homeowners would need to transition to the latest, less favorable Net Energy Metering (NEM) tariff, rather than sticking with the original agreement tied to the property. This change could slash the financial benefits of owning solar panels, with potential income from solar energy dropping by as much as 75%.
Such a shift might make homes with solar panels less appealing to potential buyers. If the financial perks and long-term savings associated with solar systems are significantly reduced, the return on investment for these installations could take a serious hit.
How can solar homeowners reduce the financial impact of AB 942 and NEM 3.0 changes?
To navigate the financial changes brought by AB 942 and the shift to NEM 3.0, solar homeowners can take steps to make the most of their systems and savings. One effective approach is to invest in energy storage systems, like home batteries. These allow you to store any extra solar energy generated during the day, so you can use it later when the sun isn’t shining. This reduces your dependence on the grid and limits the impact of lower compensation rates for energy you send back to the grid.
Another smart move is adopting advanced energy management systems. These systems can schedule your energy usage to align with peak solar production times, ensuring you’re using your solar power when it’s most efficient and valuable.
By pairing energy storage solutions with smart energy management, homeowners can better manage their energy needs, keep their savings strong, and adjust smoothly to the updated net metering policies.
Why do supporters of AB 942 believe it’s necessary to address the cost shift from solar to non-solar customers, and how could it impact energy bills?
Supporters of AB 942 argue that the current Net Energy Metering (NEM) program places an unfair burden of $8.5 billion on non-solar customers. They point out that this system forces those without solar panels to shoulder higher electricity costs, effectively subsidizing solar users.
Proponents of the bill believe that by reducing these subsidies and requiring new solar homeowners to follow updated rate structures, AB 942 can create a more balanced energy cost system. They see it as a way to lower bills for non-solar customers while still aligning with California’s renewable energy goals.
