Environmental groups ask state high court to overturn PUC rule slashing rooftop solar credits

The state Supreme Court will consider arguments next week in a challenge by environmental groups to a Public Utilities Commission decision that decreased compensation paid by utilities to customers who install rooftop solar systems.

A 1st District Court of Appeal panel affirmed the PUC decision in December 2023, applying a deferential standard to the commission's decision.

The dispute pits environmental organizations, which argue the commission wrongly adopted a new rule that will discourage solar power and the role it plays in meeting California's greenhouse gas mandates, against the state and public utilities, which say the program overcompensates wealthy consumers who can afford to install rooftop panels.

But the questions before the justices are narrow: What standard of review should apply to PUC decisions that interpret the Public Utilities Code, and did the PUC follow that standard?

The 1st District sided with the PUC, and the environmental groups appealed.

"In reviewing the Decision, we may neither second-guess the Commission's balancing of those interests nor substitute our own view of the optimal policy outcome," Justice Victor A. Rodriguez wrote for the panel.

But Roger Lin -- an Oakland attorney with the Center for Biological Diversity, one of the environmental groups challenging the PUC decision -- said in a Thursday phone interview and in court papers that Rodriguez relied on an "outdated" 1968 decision that has since been superseded by 1998 amendments to the Public Utilities Code.

"The court's erroneous application of a 'uniquely deferential' standard of review prejudiced the outcome of its decision and warrants reversal," wrote Ellison Folk, a partner with Shute, Mihaly & Weinberger LLP who represents two other environmental organizations, in her brief. Center for Biological Diversity et al. v. Public Utilities Commission, S283614 (Cal. S. Ct., filed Jan. 29, 2024).

But Henry Weissman, a partner with Munger, Tolles & Olson LLP who represents three California utility companies, said owners of rooftop solar -- who tend to have higher incomes -- were getting an unfair subsidy.

The old system "has overcompensated customers with rooftop solar at the expense of other customers, especially low-income customers," he wrote on behalf of Pacific Gas and Electric Co., San Diego Gas & Electric Company, and Southern California Edison Company.

A key question is whether the outcome should be controlled by a 1968 state Supreme Court decision, Greyhound Lines, Inc. v. Public Utilities Commission (1968) 68 Cal.2d 406, 410.

Deputy Solicitor General Mica L. Moore says yes, arguing that Greyhound Lines "directs courts to defer to the commission's interpretation of the Public Utilities Code so long as it 'bear[s] a reasonable relation' to statutory text and purpose.'"

She added that the commission's decision attempts to strike a balance between encouraging rooftop solar installation without shifting too much of the cost to lower-income electricity consumers.

Folk, who represents The Protect Our Communities Foundation and Environmental Working Group, argued in her brief that the 1998 amendments significantly expanded the scope of judicial review beyond Greyhound Lines.

"The Legislature directed the courts to apply the same standard of review to Commission decisions that the courts apply to other agencies in determining whether they proceeded in the manner required by law," she wrote. "That standard -- the standard that applies in this case -- requires that courts review agency decisions de novo and apply their independent judgment to questions of law."