Center for Biological Diversity v. Public Utilities Commission of the State of California

Center for Biological Diversity and two other organizations filed a petition in the California Court of Appeal challenging the Public Utilities Commission’s adoption of a successor to the Net Energy Metering (NEM) tariff. The petitioners alleged that the original NEM tariffs had allowed residents to earn a reasonable return on upfront investments in distributed energy resources and that NEM tariff “confers significant societal benefits, including reduced greenhouse gas emissions, resilience to extreme weather and power outages, and avoided land use impacts.” The new tariff reduces compensation for energy exported to the grid from rooftop solar and failed to include a program to ensure growth of distributed energy in disadvantaged communities. The petitioners alleged that the Commission failed to account for the total benefits and costs of distributed generation, including the societal benefits of avoided out-of-state methane leakage from reductions in the need for natural gas production in and transmission from out of state. The petitioners’ other arguments included that the Commission improperly elevated costs to non-participants over cost-effectiveness for the electrical system as a whole in its cost-effectiveness analysis and violated a statutory mandate to ensure continued robust growth of distributed generation.

In a proceeding in which environmental groups challenge the California Public Utilities Commission’s (PUC’s) adoption of a successor to the Net Energy Metering tariff governing compensation for exports of electricity to the grid from rooftop solar panels and other means by which utility customers generate their own power, the California Supreme Court ruled that the California Court of Appeal had erred by applying an “unduly deferential standard of review.” The environmental groups argue, among other things, that the PUC failed to take into account all the benefits of renewable energy when it established the new tariff. The Supreme Court held that amendments to the Public Utilities Code at the end of the 20th century reduced the degree of deference due to PUC determinations. The Supreme Court reversed the Court of Appeals judgment upholding the tariff and remanded for review of the tariff under the less deferential standard of review.