It’s no secret that solar has been a rapidly growing industry in California over the past decade. With the number of residentially owned solar systems increasing month to month, it has left energy utility companies, like SDG&E, scheming to implement new policies that make sure they continue to rake in the dollars. In June 2016, California was the first state to hit its net-metering cap and move to Net Energy Metering 2.0 (NEM 2.0). Now, SDG&E will be the first utility to start the shift to an evening time-of-use (TOU) period, which became effective on Dec. 1, 2017 and will start to be implemented early this year and completed by 2019.


First off, it is important to understand two key terms related to the changes SDG&E is making to your energy rates. These terms include: Time of Use (TOU) and Net Energy Metering (NEM).

What is Time of Use (TOU)? –

Time of Use (TOU) periods are spans throughout the day in which the utility charges higher rates. These higher rates occur during peak demand hours and lower rates occur during off-peak demand. Simply put, like movie tickets, in California, the cost of energy varies based on the time of day you use it.

Time of use plans also take into account the time of day you are using energy, which allows you two ways to save – by shifting your electricity use to lower cost hours of the day or to reduce your overall usage. Time Of Use plans, as well as tiered rate plans, are available through SDG&E right now, however, shortly every San Diego resident will be forced onto the new TOU peaks.

What is Net Energy Metering (NEM)?

NEM stands for Net Energy Metering, relates to solar clients, and is a two-way connection. NEM allows you to generate your own electricity to power your home or business. NEM connects you to your energy provider, SDG&E, who can provide you with energy if there isn’t enough generated by the sun. It is a two-way connection because you can also send energy back to SDG&E when your solar system generates an excess amount of energy, this energy can turn into credit towards your next energy bill.


The peak time of use, where energy is the most expensive is shifting. Currently, the on-peak window is from 11AM-6PM, and changed to 4PM-9PM in December 2017 in SDG&E’s territory. California is among the first states to make this type of utility rate structure mandatory for residential customers. According to Pacific Gas and Electric (PG&E), TOU rates help consumers save money by making the cost of energy low during the time when demand is low. However, with this new shift in peaks many experts are saying that these new rates will do the exact opposite.

It is important to keep in mind that Net metering and TOU are separate. If you are own a solar system it is important to contact your solar provider to discuss how these changes will affect you. Every system is different based on the time of installation and permission to operate (PTO).


The Duck Curve plays a major role in SDG&E’s decision to shift the on-peak windows. The Duck Curve is recognized as a graph of power production over the course of a day that shows the timing imbalance between peak demand and renewable energy production. It basically shows the effect solar has on the demand for utility electricity. For years energy utility companies have been able to predict the future demands of energy, however with the amount of residential and commercial solar growing everyday this demand has become much harder for companies like SDG&E to predict.

With residentially owned solar leading the renewable energy market, utilities no longer have to supply total demand. They have to supply total demand minus solar power. Total load minus solar power is known a “net load.”

With the dip on the duck curve lowering year after year it has greatly affected SDG&E’s ability to generate money. In addition, according to CAISO, “To maintain reliability the ISO must continuously match the demand for electricity with supply on a second-by-second basis.” As the demand becomes harder to predict, the energy companies have a harder time providing reliable and consistent energy.

Overall, SDG&E are shifting the TOU rates in order to flatten the duck curve and combat lost revenue.


SDG&E is offering San Diego solar customers (or Net Energy Metering customers) the option to be grandfathered into the current TOU schedule. SDG&E customers can continue to receive service under their current rate for up to five years after they received permission to operate their system. This will help maintain the economic output that was predicted when the original solar systems were designed using today’s rates. As long as your system is installed and has permission to operate by March 30, 2018 any new residential solar systems will be grandfathered in on the current rates for five years.


SDG&E states “Customers who receive Permission to Operate on or before 3/30/2018 (120 days after the 12/1/17 effective date of SDG&E’s 2016 GRC P2 TOU rates) will have the ability to: (1) Take service under a TOU rate that uses the new TOU Periods or (2) take service under tiered rates in effect at the time Permission to Operate was issued.”

The new TOU periods are supposed to help align rates more closely with the cost of service. The implementation of TOU rates should provide customers with the incentives to shift some of their peak usage to off-peak times of day.


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Net Energy Metering 3.0 (NEM 3.0) is the incoming law created by the California Public Utilities Commission (CPUC). The new tariffs and fees will impact both residential and commercial solar systems built in California. 

As this notice is posted in November of 2022, the Proposed Decision from the CPUC outlining the proposed NEM 3.0 terms is expected soon. This comes after a year’s delay. Once the new agreement is finalized and passed into law, there will exist a designation of the deadline under which new systems will continue to qualify for NEM 2.0 rates. 

The new NEM 3.0 rates will be designed to lower the value of electricity during the daytime hours, when solar is producing, and increase the value of electricity during the evening hours, when solar homes and businesses purchase electricity. In short, NEM 3.0 will create a “sell low, buy high” proposition to new solar system owners. 

To Californians looking to install a solar system on their home or commercial building, the NEM 2.0 rates will be preferred. As of this post, the solar industry does not know the details of how different the NEM 3.0 rates will be from the NEM 2.0 rates. 

Please use the HES Solar website as a resource to learn more, and please take our offer to speak with an HES Solar Energy Consultant at no obligation.

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Robert Laverty

Senior Energy Consultant, Residential

Robert Laverty joined the HES team in the summer of 2018, bringing his ten years of solar design experience and his Bachelor’s degree from the University of Puget Sound with him. Robert is dedicated to finding solutions to help families produce and store electricity in order to reduce their reliance on grid power as well as help reduce their household’s carbon footprint. Robert’s experience as a newspaper editor as well as his involvement with the sustainability-focused Rocky Mountain Institute drives him to constantly seek out innovative ways to meet energy needs through renewable resources as well as helps him share those ideas with Southern California homeowners. When not at work or volunteering time with his church or community, Robert spends time with his wife and two sons or pursues his passion of fly fishing.
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