A NEM True-Up is the annual settlement statement California’s investor-owned utilities send to net energy metering customers, reconciling a full twelve months of solar exports and grid consumption into a single final bill. Instead of settling your energy balance each month, the utility carries charges and credits forward across the year and tallies the net result on your True-Up anniversary. If you pulled more from the grid than your panels sent back, you owe the difference. If your system outproduced your home over the full year, you may qualify for a small surplus payment.
When Your True-Up Arrives
The cycle runs for exactly twelve months, but it doesn’t follow the calendar. Your clock starts on the date your utility granted Permission to Operate after your system passed inspection, and it resets on that same date every year.1Pacific Gas and Electric Company. Solar Bill
The twelve-month window exists because solar output swings hard between seasons. A well-sized system can bank significant credits in June and July, and those credits cushion the shorter, cloudier days of December and January when production falls short of demand. A monthly settlement would leave you with brutal winter bills and summer surpluses you couldn’t apply against them.
Some utilities will allow a one-time change to your anniversary date. If yours falls at an awkward point in the year, it’s worth asking, because the timing genuinely affects what you owe at settlement.
What You Pay Each Month Before the True-Up
During the first eleven months of the cycle, your statement doesn’t look like a traditional power bill. Energy charges and credits accumulate on a running tally rather than coming due.2Southern California Edison. Understanding Your NEM Bill You do, however, owe certain charges every month no matter how much your panels produce.
- Non-bypassable charges (NBCs) are small per-kilowatt-hour fees funding public programs, wildfire mitigation, and nuclear decommissioning. Solar export credits cannot offset them, so they show up even in months when you exported more than you imported.2Southern California Edison. Understanding Your NEM Bill
- A base service or minimum delivery charge covers grid maintenance, billing, and customer programs. At PG&E this rose to roughly $24 per month starting in March 2026, replacing the older minimum electric charge, and generation credits cannot offset it.1Pacific Gas and Electric Company. Solar Bill
Those fixed charges add up quietly and are often the real source of a confusing True-Up. A customer whose panels produced “enough” electricity can still owe several hundred dollars at the end of the year in accumulated service charges alone.
How the Final Statement Is Calculated
At the end of month twelve, the utility totals the monetary value of everything you pulled from the grid and compares it against the monetary value of everything your panels exported. The net difference is your True-Up balance.1Pacific Gas and Electric Company. Solar Bill
California Public Utilities Code Section 2827 sets the structure. If you consumed more than you produced over the cycle, the net kilowatt-hours are billed at the rates that would apply under your tariff schedule, meaning the same rates a non-solar customer on that plan would pay.3California Legislative Information. California Code PUC 2827 – Private Energy Producers
The balance must be paid to close out the cycle. Once settled, your ledger resets to zero and the next twelve-month tracking period begins. If paying the whole amount at once is a problem, PG&E lets customers make advance payments against accumulating charges at any point during the cycle, so you can chip away at the balance before the statement arrives.4Pacific Gas and Electric Company. How Can I Pay My True-Up Bill in Advance
Why You Can Export More Than You Import and Still Owe
Most California solar customers are on time-of-use rate schedules, and this is where the True-Up math catches people off guard. Under TOU pricing, electricity costs more during peak hours in the late afternoon and evening, and less during off-peak midday and overnight hours. Your panels generate the most power during midday, which under current TOU schedules is not the most expensive time of day.
The result is a mismatch. Credits earned by exporting at midday can be valued at a lower per-kilowatt-hour rate than the charges you accumulate pulling from the grid during evening peak hours. Your account can show more kilowatt-hours exported than imported and still carry a dollar balance, because the electricity you consumed was worth more per unit than the electricity you sent back.1Pacific Gas and Electric Company. Solar Bill
This dynamic is why battery storage changes the economics. A home battery stores midday production and discharges it during peak evening hours, so you avoid buying expensive peak electricity and extract more value from each kilowatt-hour your panels produce.
NEM 2.0 Versus the Net Billing Tariff
Which rules apply to your True-Up depends on when you interconnected. Systems installed before April 2023 are almost certainly on NEM 2.0, where export credits are valued at full retail rates. Every exported kilowatt-hour offsets one you would otherwise buy at the same price, and both charges and credits roll forward for twelve months until the True-Up settles everything at once.5California Public Utilities Commission. Net Energy Metering and Net Billing
Systems interconnected after April 2023 fall under the Net Billing Tariff, sometimes called NEM 3.0. Export credits are no longer valued at retail. They’re based on the CPUC’s Avoided Cost Calculator, which reflects what the utility actually avoids paying when your panels feed the grid. Those values are usually lower than retail, though they can spike above retail during late summer evenings when grid demand peaks.5California Public Utilities Commission. Net Energy Metering and Net Billing
The other structural change: under the Net Billing Tariff, bill charges are due monthly rather than deferred to the annual True-Up. Credits still roll forward, but you’re paying as you go. The annual True-Up still happens, though it’s less likely to produce a surprise balance.5California Public Utilities Commission. Net Energy Metering and Net Billing
NEM 2.0 customers keep legacy status for a defined period. At PG&E, customers who complete final electrical clearance before April 15, 2026, can still qualify. Expanding an existing system can trigger a move to the newer tariff, so check before adding capacity.6Pacific Gas and Electric Company. Net Energy Metering 2 Sunset FAQ
If You Produced a Surplus Over the Year
If your panels produced more total kilowatt-hours than your home consumed across the full twelve months, you qualify for Net Surplus Compensation. The math is humbling. Credits earned during the year were valued at retail or avoided-cost rates depending on your tariff, but any leftover surplus at the True-Up is valued at the wholesale market price of electricity, no matter which tariff you’re on.5California Public Utilities Commission. Net Energy Metering and Net Billing
The NSC rate is a rolling average of daytime wholesale prices across your cycle. PG&E’s published rates for early 2026 land around $0.03 per kilowatt-hour.7Pacific Gas and Electric Company. Net Surplus Compensation Rates for Energy Compare that to California’s average residential retail rate of roughly 33 cents per kilowatt-hour and you can see why oversizing a system to chase a surplus payment rarely pencils out. A kilowatt-hour that saved you 33 cents by offsetting your own usage is worth about a penny on the dollar once it becomes surplus.
You have two options for the compensation. You can receive a direct payment, subject to a $1 minimum, or you can roll the dollar amount forward against charges in your next cycle. If you want the payment, you have to tell the utility.8California Public Utilities Commission. Adopting Net Surplus Compensation Rate to Assembly Bill 920 One boundary worth knowing: systems deliberately sized larger than the customer’s actual electrical needs are not eligible for NEM or NSC in the first place.
On taxes, the IRS has not issued specific guidance on how to treat residential NSC payments. Some utilities issue a Form 1099-MISC or 1099-NEC for these payments, particularly above certain reporting thresholds. If you receive one, report the payment on your return. The amounts for most residential customers are small, often under $50, but the reporting obligation can still exist. Talk to a tax professional if your surplus payments are substantial.
Ways to Lower What You Owe
The most effective strategy is shifting heavy electricity use into daytime hours when your panels are generating. Running the dishwasher, laundry, and pool pump at midday lets you consume your own solar production directly instead of exporting it at a lower credit rate and buying grid power at a higher one in the evening. For TOU customers, timing matters more than raw production.
- Add battery storage so midday surplus can be dispatched during peak evening hours, reducing both grid imports and the TOU rate mismatch.
- Keep panels clean and unshaded. Dirty panels or new tree growth can quietly cut output by 10 to 25 percent. If your True-Up jumped with no change in habits, check for physical obstructions first.
- Read your monthly statement. It shows whether you’re trending toward a credit or a balance. Don’t wait a full year to catch a problem.
- Pay ahead. If a balance is clearly building, partial payments during the cycle avoid a single large bill at the end.4Pacific Gas and Electric Company. How Can I Pay My True-Up Bill in Advance
Increased household consumption is the most common reason for a surprising True-Up. Adding an EV, a hot tub, or a new HVAC system can push usage well past what your original solar design was sized to cover. If your lifestyle has changed since installation, your system may simply be undersized for the home you have now.
What Happens to Credits If You Sell or Close the Account
Accumulated credits are tied to your utility account, not the property. If you sell before your True-Up anniversary, banked credits stay with your account and don’t transfer to the buyer. The utility processes a final settlement when you close the account, reconciling whatever charges and credits have accumulated. Any net surplus at that final settlement is paid at the wholesale NSC rate rather than retail.
If you’re moving within the same utility’s service territory, ask whether a remaining credit balance can be applied to your new account. Some utilities handle this case by case. For the buyer, a new NEM agreement begins at their own interconnection date; they don’t inherit your billing history or your tariff. If the home was on NEM 2.0, whether the new owner keeps that legacy status depends on utility-specific rules, so buyers should confirm their tariff assignment before closing.