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The legislation is intended to make small-scale solar generation available to renters and others who cannot install conventional rooftop solar systems. The devices, sometimes known as “balcony solar,” connect to a building’s electrical system and offset electricity consumed onsite.

Under the bill, a qualifying portable solar generation device could have a maximum combined alternating-current output of 1,200 watts per dwelling, comply with the latest national and California electrical codes, and receive certification from a nationally recognized testing laboratory, including certification of a safety feature that prevents electricity from flowing onto the utility grid during an outage.

SB 868 would exempt, until January 1, 2030, qualifying systems from interconnection requirements imposed by state law, the California Public Utilities Commission (CPUC), investor-owned utilities and publicly owned utilities.

Utilities could not require customers to:

• Obtain approval before installing or using a qualifying device.

• Pay a fee or charge related to the equipment or the electricity it supplies to the building.

• Install controls or equipment beyond the safety features incorporated into the device.

A utility could require a customer to submit a simple online registration form identifying the installation address and the device’s make, model and size. Registration, however, could not function as an approval requirement.

The interconnection exemption would expire at the beginning of 2030. At that point, California would prohibit the sale of plug-in photovoltaic devices that do not satisfy the bill’s electrical-code, equipment-certification, and anti-backfeeding requirements.

The Assembly approved the bill 73–0 on August 25, 2026. The Senate concurred in the Assembly amendments by a 36–4 vote on August 26, 2026. The measure was enrolled on August 28 and presented to Governor Gavin Newsom on August 31, 2026.

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The CPUC denied PG&E’s request to end contracts covering two of Ivanpah’s three generating units. The proposal had been developed in coordination with the U.S. Department of Energy, which holds a major loan guarantee tied to the plant’s construction. Commissioners said the plan raised concerns about grid reliability, long-term resource planning and the loss of existing clean-energy capacity.

Ivanpah, located in the Mojave Desert near the California-Nevada border, began operations in 2014 and was once promoted as the world’s largest concentrated solar power facility. Unlike photovoltaic solar plants, Ivanpah uses thousands of mirrors to focus sunlight onto towers, generating steam to produce electricity. While the technology was considered cutting-edge at the time, it has since been overtaken by cheaper solar and battery storage systems.

PG&E argued that continuing to purchase power from Ivanpah is no longer cost-effective for customers. In filings with the commission, the utility said exiting the contracts would reduce costs for ratepayers and allow the plant’s owners to retire older units and potentially redevelop the site with more modern technology. PG&E said the agreement it negotiated with Ivanpah’s owners was structured to protect customers while meeting regulatory requirements.

The Department of Energy supported the proposed contract terminations, according to CPUC records. Federal officials told state regulators that allowing the agreements to end would help facilitate repayment of the federal loan guarantee and could reduce environmental impacts associated with the facility’s operations, including concerns related to wildlife.

But in its decision, the CPUC said the proposal did not adequately account for California’s near-term electricity needs. Regulators cited forecasts showing rising demand driven by electrification, electric vehicle charging and data center growth. They also pointed to uncertainty surrounding the timing and availability of replacement resources.

The commission also noted that the Ivanpah facility is connected to transmission infrastructure that was built specifically to serve it. According to CPUC documents, hundreds of millions of dollars have already been invested in those transmission upgrades, and regulators expressed concern that early retirement of the plant could leave those assets underutilized.

Environmental and energy policy advocates have long debated Ivanpah’s role in California’s clean-energy transition. Supporters of retiring the plant say it is expensive to operate and no longer represents the most efficient use of ratepayer dollars. Critics have also raised concerns about operational challenges and impacts on desert wildlife.

Others argue that keeping existing renewable facilities online helps ensure reliability as California works toward its climate goals.

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The Supreme Court, in its August 7, 2025 decision in Center for Biological Diversity, Inc. v. Public Utilities Com, said a state appeals court was too deferential to the California Public Utilities Commission (CPUC) in reviewing its decision on the NEM 3.0 program.

The California Public Utilities Commission (CPUC) approved the new NEM 3.0 policy in December 2022. The NEM 3.0 plan, which took effect in April 2023, reduced by 75% how much credit solar customers receive when exporting their excess power to the grid. It also changed the electricity rate structure to provide greater incentives to install batteries to store their solar energy during the day and export it or use it in the evening.

In making its decision, CPUC found that NEM 2.0 benefitted program participants, but shifted the costs onto non-participating customers. Utility companies had argued that the credits rates they had to pay were higher than the cost of electricity on the wholesale market.

Opponents of the decision argued that this reasoning does not fully consider the benefits of rooftop solar. They also argued that the plan would reduce rooftop solar installations. They argued that the increase in the time it would take customers to recoup the costs of a rooftop solar would reduce the incentive to install the system.

The Center for Biological Diversity and other groups unsuccessfully challenged the rules in December 2023. The state court of appeals affirmed the CPUC decision, holding that “uniquely deferential standard of review is accorded the Commission because of its status as ‘a constitutional body with broad legislative and judicial powers.’”

In its recent ruling, the California Supreme Court noted that, while statutory law directed courts to uphold CPUC decisions unless the decision “fails to bear a reasonable relation to statutory purposes and language.” The state legislature, however, expanded judicial review of most CPUC decisions in the late 1990s. “We do not decide whether the court’s ultimate conclusion that the tariff is consistent with section 2827.1 is correct or incorrect — only that the Court of Appeal erred by applying an unduly deferential standard of review to reach that conclusion,” the court wrote.

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The bill would have required the California Public Utilities Commission (CPUC), by July 1, 2025, to revise electric rate tariffs for customers in multi-unit residential and nonresidential buildings and public schools with solar photovoltaic systems to allow for account-level netting. The bill would have given schools and apartment buildings the same right to “self-consumption” for solar that applies to single-family homes.

The law would have reversed CPUC’s November 2023 decision to eliminate the ability of these shared-solar programs to offset their electricity costs with rooftop solar and require them to sell all of their solar power to utilities at lower “avoided cost” rates.

In his veto message, Newsom said the bill:

would compound the challenge of electric bill affordability by overturning a key component of a recent CPUC decision adopting these alignment changes. Specifically, this bill would increase the amount that most customers would pay for their own electric service to provide a rate subsidy to certain customers, and public schools, that install solar PV systems on their property.

The CPUC instead expanded eligibility for disadvantaged communities to access the Disadvantaged Community Green Tariff Program and created a new community renewable energy program structured to avoid cost increases for nonparticipating ratepayers.

The CPUC said the current Green Access Program tariff options do not meet all the evaluation goals described in AB 2316, but the agency finds it efficient to modify and streamline existing tariffs to better meet these goals.

The CPUC also found it beneficial to ratepayers to adopt a community renewable energy program by layering a customer subscription model and a non-ratepayer-funded adder onto identified standard supply-side tariffs and contract mechanisms that meet the requirements of AB 2316 (2022)

The rejected NVBT plan would have compensated solar projects based on the value of the energy they produced. Supporters said it could have enabled up to 8 gigawatts of community solar and battery projects in California.

The Public Advocates Office expressed support, stating the decision strikes a balance between equity, energy, and environmental goals while positioning California to leverage more than $250 million in federal Solar for All funding.

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The changes provide a similar incentive framework as was implemented in the December 2022 decision to transition from net metering to a new net billing structure for single-family households and commercial customers. (See CPUC Revises Rooftop Solar Subsidy to Promote Battery Storage) These changes will apply to future customers only. The decision concludes the review of the net energy metering tariffs as required by AB 327 of 2013.

Virtual Net Billing

The decision changes the virtual net energy metering (VNEM) and Net Energy Metering Aggregation (NEMA) programs that allow properties with multiple electric meters to share one solar system’s electricity credits. It lowers compensation rates by adopting a virtual net billing tariff (VNBT) that provides retail export compensation rates based on “avoided cost” values. The decision also adopts an aggregation net billing subtariff, which mirrors the net billing tariff but maintains the credit and debit approach used in the existing net energy metering aggregation subtariff.

Under the VNBT, tenants and property owners receive electricity bill credits for the value the renewable system provides to the grid. The “avoided cost” value of the credit is based on the hour of the day that the energy is sent to the grid.

Customers with battery storage can store solar energy when it is readily available during the day and send it back to the grid when it is most needed. CPUC states that the VNBT will improve price signals to encourage multitenant property owners to install battery storage together with their solar systems. This, in turn, will improve grid reliability.

As part of the transition to the new system, residential multitenant properties will receive a monetary adder for nine years on top of the standard energy compensation rate for net generation. The adder is available to new customers for five years and steps down incrementally over that period.

Existing low-income multifamily VNEM tariffs related to the CPUC’s Solar On Multifamily Affordable Housing (SOMAH) Program and Multifamily Affordable Solar Housing (MASH) Program are maintained and slightly modified to improve customer experience and encourage storage.

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Sunnova planned to work with homebuilders to build and operate solar photovoltaic (PV) and storage microgrids for new home developments of up to 2,000 homes. The company proposed to operate as the state’s first “microutility” for each of these master-planned communities. This would have required rooftop solar and battery storage in each home, community solar and storage, backup generation, and microgrid infrastructure. Sunnova would have had ownership of the microgrid and been responsible for serving and billing. 

Sunnova was required to file an application with the CPUC, as Section 218 of the California Public Utilities Code requires that an entity that sells electricity to more than two neighboring properties or to any nonadjacent property must become an electrical corporation regulated by the CPUC.

California’s investor-owned utilities (Pacific Gas & Electric Co., San Diego Gas & Electric Co., and Southern California Edison) protested the plan. PG&E and SDG&E also raised opposition. The CPUC Public Advocates Office filed a motion to dismiss the application to allow the CPUC to continue its consideration of community microgrid issues required in its ongoing microgrid rulemaking process. (SB 1339, enacted in 2018, directs the CPUC to develop policies related to microgrids.) Sunnova argued for a public hearing on the proposal, stating that its application met CPUC requirements.

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The new plan reduces by 75% how much credit solar customers receive when exporting their excess power to the grid. It also changes the electricity rate structure to encourage people to store their solar energy during the day and export it or use it in the evening. Critics say the proposal could slow rooftop solar installations.

The NEM subsidy was implemented in 1997 and has helped rooftop solar growth in recent years. Utilities, however, argue that the amount solar customers pay does not cover their share of grid maintenance costs and this increases costs for non-solar customers. In December 2021, CPUC released a proposal that would have required monthly grid connection fees for new solar customers. The plan was rejected of public backlash. The new plan does not include the grid connection charges.

Proposal

The proposal provides extra credits to residential customer bills who adopt solar over the next five years. The proposed:

• Rate structure: Applies new residential rates to incentivize electricity use when it is most beneficial for grid reliability. These rates have significant differences between peak and off-peak prices to incent battery storage and load shifting from evening hours to overnight or midday hours. The rates promote technologies such as battery storage, electric vehicles, and heat pump water heaters, which are important for achieving carbon neutrality.

• Solar tariff: Credits solar and solar plus battery storage customers for the electricity they export to the grid based on its value, as determined by the avoided cost to their utility of buying clean electricity elsewhere. This will incentivize solar exports during the late afternoon and early evening hours, particularly in the summer, when the grid is the most stressed.

• Solar credits: Provides extra electricity bill credits to residential customers who adopt solar or solar paired with battery storage in the next five years, which are paid on top of the avoided cost bill credits. Customers lock in these extra bill credits for nine years.

• Additional low-income credits: Provides low-income customers more access to solar by providing a larger amount of extra bill credits to ensure the solar system payback is just as attractive as the payback for higher-income customers (nine years or less).

• Greater solar coverage: Allows solar systems to cover 150 percent of a customer’s electricity usage to accommodate future electrification of appliances and vehicles.

AB 327 (2013) requires the CPUC to reform the NEM program, as well as conduct rate reform and distribution planning activities.

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In 2014, AB 2188 required every city and county, including charter cities, to streamline their permitting processes for small residential rooftop solar energy systems. The law also limited local governments to administrative review of solar energy system permits. Local governments were not allowed to review permits based on standards other than health or safety.

SB 379 requires specified cities and counties, including charter cities, to implement an online, automated permitting platform for residential solar energy systems. The permitting system must issue permits in real time and issue permits for residential solar energy systems and residential energy storage systems that is compatible with SolarAPP+, which is an online platform for rapid permitting of solar energy systems and associated battery storage.

In opposing the bill, the California Contract Cities Association said it would “directly limit many cities' local policing powers over their own administrative processes of permitting solar panels in their jurisdictions.  Administrative practices are of very local concern – not often overseen by the State – and we believe cities are best suited to manage these activities.” The association also expressed concern that the law puts “too heavy a mandate on local cities without offering adequate resources – such as technical administrative support – to assist with implementation.”

The exclusion of solar energy from a property value reassessment is seen as a valuable incentive for increasing the deployment of solar energy properties. Solar is viewed as critical to meeting the state’s clean energy goals. Newsom, however, noted the costs of the tax exclusion, stating that he urges the legislature to “consider the impacts to local agencies before bringing forward another extension of this policy.

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Proposition 13 Exemption for Solar Energy

California property tax law classifies solar projects as real property. Under Proposition 13, the state constitution limits real property taxes to 1% of a property’s “full cash value” and limits annual property valuation increases to the lesser of inflation or 2% of its base year value. A reassessment of the property value is triggered when the property is “purchased, newly constructed, or a change in ownership has occurred.”

In 1980, California voters approved Proposition 7, which authorized the legislature to exclude the construction or addition of any active solar energy system from the definition of “newly constructed.” AB 1306 added Section 73 to the Revenue and Taxation Code to implement Proposition 7. The solar energy exclusion was modified and extended several times in the intervening decades. In 2014, SB 871 extended the exclusion through the 2023–24 fiscal year and extended the repeal date to January 1, 2025.

Active Solar Energy System

The law defines an “active solar energy system” as a system that is built as part of a new property, or the addition of a system to an existing property. The system must use solar line devices that are thermally isolated from living space or any other area where the energy is used to provide for the collection, storage, or distribution of solar energy. The system may be used for a domestic, recreational, or therapeutic uses, or for water heating, space conditioning, electricity production, process heat, or solar mechanical energy. The definition excludes swimming pool heaters or hot tub heaters.

Provisions on Local Reimbursements

The bill also excludes the extension from requirements that any bill extending an existing tax expenditure contain specified goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

The bill provides that if the Commission on State Mandates determines that the bill contains costs mandated by the state, the state would be required to reimburse local agencies and school districts according to the required procedures. The bill also provides that no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

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The Proposition 13 Exemption for Solar

California property tax law classifies solar projects as real property. Under Proposition 13, the state constitution limits real property taxes to 1% of a property’s “full cash value” and limits annual property valuation increases to the lesser of inflation or 2% of its base year value. New construction or a change in property ownership, however, triggers a property value reassessment.

Section 73 of the California Revenue and Taxation Code excludes the construction or addition of any “active solar energy system” from the definition of “newly constructed” through the 2023-24 fiscal year. An active solar energy system that qualifies for the exclusion before January 1, 2025 will continue to receive the exclusion until there is a subsequent change in ownership. SB 1340 would extend the exclusion through the 2025–26 fiscal year.

Solar Energy System

The law defines an “active solar energy system” as a system that is built as part of a new property, or the addition of a system to an existing property. The system must use solar line devices that are thermally isolated from living space or any other area where the energy is used to provide for the collection, storage, or distribution of solar energy. The system may be used for a domestic, recreational, or therapeutic uses, or for water heating, space conditioning, electricity production, process heat, or solar mechanical energy. The definition excludes swimming pool heaters or hot tub heaters.

Provisions on Local Reimbursements

The bill would also exclude the extension from requirements that any bill extending an existing tax expenditure contain specified goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

The bill would also provide that if the Commission on State Mandates determines that the bill contains costs mandated by the state, the state would be required to reimburse local agencies and school districts according to the required procedures.

The bill would also provide that no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

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Partnership Flip Transactions

A partnership flip transaction enables projects that receive production tax credits to finance a project through a tax equity investor and then transfer the property to the project developer after a target yield is achieved. Under SB 267, a “partnership flip transaction” must meet three requirements:

• (1) A developer of an active solar energy system and one or more unrelated parties enter into the financing arrangement;

• (2) as part of the initial transfer, the unrelated party or parties agree to provide a capital contribution, or a series of contributions, to a partnership or limited liability company in exchange for, on a cumulative basis, an interest in a majority of the tax attributes, such as federal tax credits, depreciation, and a majority of either, or both, the capital and profits of the entity; and

• (3) the unrelated party or parties receive the tax attributes until the party or parties achieve a preestablished yield or until after a preestablished period of time, at which time the tax attributes are reduced, and the developer obtains a majority of both the capital and profit interests of the partnership or limited liability company.

Solar Projects and Proposition 13

California property tax laws classify solar projects as real property. California’s Proposition 13 limits real property taxes to 1% of a property’s market value and limits assessments to no more than 2%. New construction or a change in ownership, however, triggers a reassessment. Section 73 of the California Revenue and Taxation Code excludes the construction or addition of any active solar energy system from the definition of “newly constructed” through the 2023-24 fiscal year. The law does not provide solar properties with an exclusion for a change in ownership.

Under California law, a change in ownership occurs when a person obtains more than 50% of the capital and more than 50% of the profits of a partnership or LLC, and it was unclear whether a partnership flip would be considered a “change in ownership.” Some county assessors have argued that a partnership flip constitutes a change in ownership under California law and triggers a property reassessment. The Assembly has already clarified the legislature's intent to preserve the solar exclusion in this type of transaction and previous BOE guidance on the issue. Senate Bill 267 provides that solar energy projects that change ownership as a result of a partnership flip transaction do not lose the property tax exclusion.

New Exception under Section 64.1

Under Section 64(a), a transfer of ownership interests in a legal entity is not generally considered a change in ownership of the legal entity’s real property. However, under Section 64(c)(1), if any person or entity obtains control of more than 50 percent of a legal entity, all real property owned by that legal entity is subject to reassessment.

SB 267 added Section 64.1, which provides an exception to this change in control provision for a legal entity that owns an active solar energy system pursuant to a partnership flip transaction. The exception provides that neither an initial transfer of a capital and profits interest in the legal entity, nor any subsequent change in the allocation of the capital and profits of the legal entity among the members, constitutes a transfer of control of, or of a majority interest in, the legal entity. Any other real property owned by the legal entity is deemed to undergo a change in ownership and subject to reassessment.

The exclusion is limited to the “initial transfer,” which is defined as a transfer or series of transfers of an interest in a partnership or limited liability company used to own the active solar energy system and that commence prior to the date that the active solar energy system is placed in service for federal income tax purposes. The exception does not apply to more than one partnership flip transaction with respect to any portion of an active solar energy system.

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The government announced the three projects in December 2021 under the Desert Renewable Energy Conservation Plan, which is a landscape-level plan focused on 10.8 million acres of public lands in the desert regions of seven California counties. The plan is part of the Biden administration’s plan to permit at least 25 gigawatts of solar, wind, and geothermal production on public lands by 2025.

The Arica Solar Project will generate up to 265 megawatts of renewable energy and the Victory Pass Solar Project will generate up to 200 megawatts of renewable energy. The projects together are on approximately 4,000 acres and will power approximately 132,000 homes.  The two projects, owned by Clearway Energy Group, will also add a combined 400 megawatts of battery storage.

The Oberon Solar Project will generate up to 500 megawatts of renewable energy that will power approximately 146,000 homes. The project, located on about 2,600 acres of land managed by the Bureau of Land Management, will also include 500 megawatts of battery storage. It is expected to be completed in late 2023. Intersect Power, LLC owns the project through its IP Oberon, LLC subsidiary.

The Interior Department also approved construction of the Ten West Link Transmission Line project, a 125-mile, 500-kilovolt transmission line that will connect existing substations near Tonopah, Arizona and Blythe, California. The project will provide transmission infrastructure to support the development of utility-scale solar energy resources. Scoping for the project began in March 2016 and the draft environmental impact statement was released in August 2018.

The region between Arizona and California is considered to have some of the highest potential for utility-scale solar photovoltaic energy development in the United States. According to the Bureau of Land Management, it is processing 64 proposed utility-scale clean energy projects on public lands in the western United States.