Center for Biological Diversity v. Public Utilities Com. ( 2024 )

Filed 1/16/24 (unmodified opn. attached; second modification)
CERTIFIED FOR PUBLICATION
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
CENTER FOR BIOLOGICAL
DIVERSITY, INC. et al.,
Petitioners,
v. A167721
PUBLIC UTILITIES COMMISSION,
(Cal.P.U.C. Dec. No. 22-12-056)
Respondent;
PACIFIC GAS AND ELECTRIC ORDER MODIFYING OPINION
COMPANY et al., AND DENYING REHEARING
Real Parties in Interest. [NO CHANGE IN JUDGMENT]
THE COURT:
The published opinion, filed on December 20, 2023, and modified
December 21, 2023, is ordered further modified as follows:
The first two sentences of the second paragraph on page 18 are deleted
and replaced with the following sentence:
1
Petitioners take issue with the Decision’s discussion of the extent to
which the adoption of distributed energy shifts utility costs to nonowners.
This modification effects no change in the judgment.
The petition for rehearing and request for judicial notice are denied.
Dated: __1/15/2024_______ __Tucher, P. J.___________, P. J.
2
Shute, Mihaly & Weinberger, Ellison Folk and Aaron M. Stanton for
Petitioners Protect our Communities Foundation and Environmental
Working Group.
Roger Lin, Anchun Jean Su and Howard Crystal for Petitioner Center for
Biological Diversity, Inc.
Law Offices of Richard K. Bauman and Richard K. Bauman for Albion Power
Company, as Amicus Curiae on behalf of Petitioner Protect our Communities
Foundation.
Christine Jun Hammond and Edward Moldavsky for Respondent.
Munger, Tolles & Olson, Henry Weissmann and Andra Lim for Real Parties
in Interest Pacific Gas and Electric Company, San Diego Gas & Electric
Company, and Southern California Edison Company.
Pacific Gas and Electric Company Law Department and Ashley E. Merlo for
Real Party in Interest Pacific Gas and Electric Company.
San Diego Gas & Electric Company and E. Gregory Barnes for Real Party in
Interest San Diego Gas & Electric Company.
Southern California Edison Company and Rebecca Meiers-De Pastino for
Real Party in Interest Southern California Edison Company.
3
Filed 12/21/23 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
CENTER FOR BIOLOGICAL
DIVERSITY, INC., et al.,
Petitioners,
v. A167721
PUBLIC UTILITIES COMMISSION,
(Cal.P.U.C. Dec. No. 22-12-056)
Respondent;
PACIFIC GAS AND ELECTRIC
COMPANY et al.,
Real Parties in Interest.
ORDER MODIFYING OPINION
[NO CHANGE IN JUDGMENT]
THE COURT:
The published opinion, filed on December 20, 2023, is ordered modified
as follows:
The signature page on page 32 is modified to add Presiding Justice
Tucher’s signature under the words, “I CONCUR:”.
This modification effects no change in the judgment.
Dated: __December 21, 2023_ ______TUCHER, P.J.__, P. J.
1
Shute, Mihaly & Weinberger, Ellison Folk and Aaron M. Stanton for
Petitioners Protect our Communities Foundation and Environmental
Working Group.
Roger Lin, Anchun Jean Su and Howard Crystal for Petitioner Center for
Biological Diversity, Inc.
Law Offices of Richard K. Bauman and Richard K. Bauman for Albion Power
Company, as Amicus Curiae on behalf of Petitioner Protect our Communities
Foundation.
Christine Jun Hammond and Edward Moldavsky for Respondent.
Munger, Tolles & Olson, Henry Weissmann and Andra Lim for Real Parties
in Interest Pacific Gas and Electric Company, San Diego Gas & Electric
Company, and Southern California Edison Company.
Pacific Gas and Electric Company Law Department and Ashley E. Merlo for
Real Party in Interest Pacific Gas and Electric Company.
San Diego Gas & Electric Company and E. Gregory Barnes for Real Party in
Interest San Diego Gas & Electric Company.
Southern California Edison Company and Rebecca Meiers-De Pastino for
Real Party in Interest Southern California Edison Company.
2
Filed 12/20/23 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
CENTER FOR BIOLOGICAL
DIVERSITY, INC., et al.,
Petitioners,
v. A167721
PUBLIC UTILITIES COMMISSION,
(Cal.P.U.C. Dec. No. 22-12-056)
Respondent;
PACIFIC GAS AND ELECTRIC
COMPANY et al.,
Real Parties in Interest.
For nearly 30 years, California has used a net energy metering (NEM)
tariff to encourage public utility customers to install renewable energy
systems (renewable systems). In practical effect, the tariff requires utilities
to purchase excess electricity exported by renewable systems to the electrical
grid at the price paid by a utility’s customers for electricity. Utilities have
long been rankled by the tariff, contending it overcompensates owners of
renewable systems for their exported energy and thereby raises the cost of
electricity for customers without such systems.
In 2013, the Legislature responded to these concerns by enacting Public
Utilities Code section 2827.1 (undesignated statutory references are to this
code), which requires the Public Utilities Commission (Commission) to adopt
1
a successor tariff to govern utility billing of customers with renewable
systems. Among other objectives, section 2827.1 requires the successor tariff
to promote the continued sustainable growth of renewable power generation
while balancing costs and benefits to all customers. (Id., subds. (b)(1), (3),
(4).) In 2022, the Commission adopted a successor tariff, which significantly
reduces the price utilities pay for customer-generated power.
Petitioners Center for Biological Diversity, Inc., Environmental
Working Group, and The Protect our Communities Foundation (collectively,
petitioners) filed a petition for writ review of the successor tariff, contending
it fails to comply with various requirements of section 2827.1. Among other
claims, petitioners argue it does not take account of the social benefits of
customer-generated power, improperly favors the interests of utility
customers who do not own renewable systems, fails to promote sustainable
growth of renewable energy, and omits alternatives to promote the growth of
renewable systems among customers in disadvantaged communities.
In this writ matter, the scope of our review is “limited” (City and
County of San Francisco v. Public Utilities Com. (1985) 39 Cal.3d 523, 530),
and there’s a “strong presumption” in favor of the Commission decision’s
validity. (Toward Utility Rate Normalization v. Public Utilities Com. (1978)
22 Cal.3d 529, 537.) Applying the applicable deferential standard of review,
we conclude the successor tariff adequately serves the various — albeit
sometimes inconsistent — objectives of section 2827.1 and thus affirm.
BACKGROUND
The supply of power generated by renewable systems is neither
constant nor consistent. Residential solar power systems, for example,
generate electricity only when the sun shines, and the amount of power they
generate depends on the intensity of the sunlight. By contrast, the use of
2
electricity by a residence with a solar power system is independent of the
supply of sunlight. Such systems often produce more electricity than needed
by the residence during sunny days, and they produce no power after dark —
notwithstanding the residents’ continuing need for electricity. Utilities
remedy this imbalance. They supply supplemental electricity to customers
with renewable systems when the systems do not generate sufficient power to
meet the customers’ needs, and the power grid accepts and uses the excess
electricity available when a renewable system produces more power than
needed by the generating residence.
The NEM tariff governs the way that owners of renewable systems are
billed by their utility. The state’s first NEM tariff was created in response to
the enactment of section 2827 in 1995. (Stats. 1995, ch. 369, § 1.) The
purpose of the legislation was to clear regulatory hurdles to utilities’
purchase of excess power generated by residential solar power systems and to
create a regulatory structure for that purchase. (See Assem. Com. on
Utilities and Commerce, Analysis of Sen. Bill No. 656 (1995–1996 Reg. Sess.)
as amended June 7, 1995, at pp. 1–2 (Assem. Analysis).) The purchase of
excess energy was expected to “encourage private investment in renewable
energy resources” by helping to defray the then-substantial costs of solar
power system installation.1 (§ 2827, subd. (a); Assem. Analysis, at pp. 1–2.)
Under the original NEM tariff (NEM 1.0), residences with solar power
systems were allowed to install an electricity meter that measured the
1 Originally, the NEM tariff required by section 2827 applied only to
solar power systems operated by a utility’s residential customers. (Former
§ 2827, subd. (b).) The tariff now applies to any “renewable electrical
generation facility” with a total capacity of less than one megawatt operated
by a utility customer, regardless of the way the power is generated or the
nature of the customer. (§§ 2827, subd. (b)(4)(A); 2827.1, subd. (a).)
3
difference between the quantity of electricity supplied to the residence by the
utility and the quantity of electricity supplied to the grid by the residence —
thus the name, “net energy metering.” (Former § 2827, subds. (c), (d).) The
residence was charged only for this difference, which represented the
residence’s net use of electricity from the power grid. (Id., subd. (f)(2).) By
offsetting exported power against imported power, NEM 1.0 functionally
required utilities to purchase excess power generated by residential solar
power systems at the price paid by their customers for electricity.
Even prior to the enactment of section 2827, the proposed NEM tariff
was criticized as “provid[ing] an electric ratepayer subsidy to purchasers of
expensive residential photovoltaic systems.” (Assem. Analysis, at p. 3.) As
characterized in a contemporary bill analysis, the NEM tariff’s opponents
argued such an approach “assumes that [exported and imported power] have
the same value, when they [do] not. A kwh [kilowatt-hour of electricity]
delivered to a customer is a retail commodity while a kwh sold to the utility is
a wholesale commodity and the prices for the two commodities are different.
Instead of netting out kilowatt hours sold, opposition believes a more
accurate system would net out the relative prices of the commodities that
have been exchanged.” (Ibid.)
The 2013 enactment of section 2827.1 required the Commission to
adopt a successor tariff to replace NEM 1.0. (§ 2827.1, subd. (b); Stats. 2013,
ch. 611, § 11.) The Commission characterized the general purpose of the
legislation as granting it “the ability to ‘address current electricity rate
inequities, protect low income energy users and maintain robust incentives
for renewable energy investments.’ ” A bill analysis prepared by the Senate
Rules Committee explained a more specific purpose, observing that “[a]s
transmission and distribution costs are typically one-half to two-thirds of a
4
residential customer’s billing, full retail NEM offers a substantial subsidy to
NEM customers with the costs being shifted to non-NEM customers. . . . The
Legislature has in the past justified this subsidy as it stimulates the solar
industry, helps the state reach its renewable energy goals, and provides other
external benefits.” (Sen. Rules Com., Off. of Sen. Floor Analysis, 3d reading
analysis of Assem. Bill No. 327 (2013–2014 Reg. Sess.) as amended Sept. 3,
2013, pp. 6–7.)2 Under section 2827.1, however, “[t]he [Commission] would be
required to ensure that the [successor tariff] is based on the electrical system
costs and benefits received by nonparticipating customers and prevents a cost
shift to non-NEM customers.” (3d reading analysis, at p. 4.)
As an interim measure, the Commission adopted a revised tariff (NEM
2.0) in 2016 that sought to address some of the concerns surrounding NEM
1.0. NEM 2.0 continued to allow customers with renewable systems to offset
excess electricity generated by their systems against electricity used, but
these customers were charged a onetime interconnection fee and other
periodic “non-bypassable” fees. It was anticipated NEM 2.0 would be subject
2 Petitioners and real parties in interest Pacific Gas and Electric
Company, San Diego Gas & Electric Company, and Southern California
Edison Company have collectively filed three requests for judicial notice of
various Commission decisions, legislative history materials, and other state
agency documents. Finding such materials to be appropriate objects of
judicial notice (Evid. Code, § 452, subd. (c)), we grant the requests. We grant
judicial notice of exhibit 2 to the Commission’s request for judicial notice for
the same reason.
Given the extensive record of exhibits lodged by petitioners, we
declined to require the Commission to file an administrative record but
permitted the parties to request supplementation. We grant the
Commission’s request to supplement the administrative record with exhibit 1
to its request for judicial notice. Although petitioners contend this document
is not relevant, it appears to be appropriate for inclusion in the record. In
granting these various requests, we do not mean to suggest a view on the
relevance for our decision of any of the documents.
5
to Commission review in or after 2019, when a more permanent replacement
for NEM 1.0 would be adopted.
In 2020, the Commission initiated a proceeding to “revisit” NEM 2.0. It
ultimately adopted a successor tariff — which it calls a net billing tariff — in
Decision Revising Net Energy Metering Tariff and Subtariffs (2022) Cal.
P.U.C. Dec. No. D.22-12-056 (Decision). The “foundation” for the successor
tariff was the Net-Energy Metering 2.0 Lookback Study, January 21, 2021
(Lookback Study), an evaluation of NEM 2.0 by outside consultants Verdant
Associates, LLC, which concluded “NEM 2.0 participants benefit from the
structure, while ratepayers see increased rates.” (Lookback Study, at p. 1.)
Drawing on the Lookback Study, the Commission found the NEM tariff
“negatively impact[s]” utility customers who do not own renewable systems,
particularly low-income customers, and is not cost-effective for the utilities’
customers. (Decision at pp. 10, 39, 43, 207.) The Commission reasoned the
tariff allows owners of renewable systems to avoid paying their proportionate
share of the “infrastructure and other service costs” associated with electrical
service because these costs are “embedded in” the rates charged for
electricity.3 When owners of renewable systems reduce their purchase of
electricity from the grid, they necessarily reduce their payment of these costs.
(Id. at p. 208.) A portion of renewable system owners’ share of the utilities’
fixed costs is thereby shifted to customers without renewable systems. The
Commission found these shifted costs to be one of three drivers of high
electricity rates, along with costs of transmission and distribution and
wildfire mitigation. (Ibid.)
3 In addition to the costs of servicing customers and maintaining the
power grid, these costs include funding for various public policy programs,
such as those subsidizing utility service to low-income customers.
6
In addition, the Commission was concerned NEM takes no account of
the time of day and season when the owner of a solar power system imports
electricity. Yet the cost of electricity varies significantly with the time of its
use — peaking in late afternoon and early evening. By overriding these cost
variations, NEM fails to incentivize more efficient use of power by owners of
renewable systems. (Decision at pp. 217–218.) Further, the Commission
concluded, by equating the prices of imported and exported electricity, NEM
overcompensates owners of renewable systems for the electricity they
generate, effectively paying such owners at a rate from 3.8 to 5.4 times
greater than the benefit conferred on the grid by their exported power. (Id.
at p. 216.)
Based on these and other findings, the Commission adopted the net
billing tariff. The most fundamental change from a NEM tariff is that
charges for electricity under the successor tariff are no longer based on the
difference between the quantity of electricity imported by a customer and the
quantity exported. Instead, the meter of a residence owning a renewable
system will separately measure the power imported from and exported to the
grid. The value of the exported and imported energy is determined
independently, and customers are billed for the difference between the value
of the power imported and exported by the residence, rather than the
difference in quantity. (Decision at p. 237.) Imported and exported power, in
other words, are no longer treated as equivalent.
Under the successor tariff, the price paid for exported power is
determined by the “Avoided Cost Calculator” (calculator), an algorithm
developed earlier by the Commission that aims “to determine the primary
7
benefits of distributed energy resources [i.e., customer-generated power].”4
(Decision Adopting Changes to the Avoided Cost Calculator (2022) Cal. P.U.C.
Dec. No. D.22-05-002, at p. 3; Decision at p. 237.) As explained by the
Commission, the calculator “ ‘calculates seven types of avoided costs:
generation capacity, energy, transmission and distribution capacity, ancillary
services, Renewable Portfolio Standard, greenhouse gas emissions, and high
global warming potential gases.’ . . . [¶] [These] costs . . . are the utilities’
marginal costs of providing electric service to customers. Those costs can be
avoided when the demand for energy decreases because of distributed energy
resources, and are, thus, the benefits of using distributed energy resources.”
(Decision at p. 59.) In other words, the calculator estimates the cost to the
utilities of providing an additional increment of electrical power; this is the
cost “avoided” when a customer’s renewable system supplies that increment.
Under the successor tariff, this avoided cost is the price paid by the utilities
for exported energy.
The successor tariff determines charges for imported electricity under
“[h]ighly differentiated time-of-use rates” specified in the Decision. (Decision
at p. 239.) By imposing time-of-use rates, the successor tariff is intended to
encourage renewable system owners to purchase batteries that permit excess
energy generated during times of low power demand to be stored and
subsequently used by the customer or exported to the grid during times of
higher demand. The use of renewable system batteries is also incentivized by
the calculator, which grants a higher price for energy exported during periods
of peak demand. The successor tariff also includes a so-called “glide path,” a
4 Customer-generated renewable energy is sometimes referred to as
“distributed energy resources,” presumably because the generating systems
are decentralized.
8
five-year transition period during which more generous terms are granted to
the owners of renewable systems. (Id. at p. 237.)
When fully implemented, these changes will cause a noticeable increase
in the energy bills of utility customers who own renewable systems. Peak
period electricity rates can be more than double the price during morning and
nighttime hours, and the price paid for exported power determined by the
calculator is typically less than one-third of the retail price. Despite these
changes, the Commission concluded the purchaser of a residential solar
power system will still see energy bill savings of $100 a month, which will
repay the cost of system installation within nine years.
Petitioners sought leave to challenge the Decision by filing a petition
for a writ of review in this court. (§ 1756, subd. (a).) We granted the petition.
Answers in support of the successor tariff were filed by the Commission and
real parties in interest.
DISCUSSION
“[T]he PUC is not an ordinary administrative agency, but a
constitutional body with broad legislative and judicial powers.” (Wise v.
Pacific Gas & Electric Co. (1999) 77 Cal.App.4th 287, 300.) The scope of our
review of its decision is “limited.” (City and County of San Francisco v.
Public Utilities Com., supra, 39 Cal.3d at p. 530.) “There is a strong
presumption favoring the validity of a Commission decision.” (Toward Utility
Rate Normalization v. Public Utilities Com., supra, 22 Cal.3d at p. 537.)
Under section 1757, judicial review of a Commission decision “shall
not extend further than to determine, on the basis of the entire
record . . . whether” the Commission “acted without, or in excess of, its
powers or jurisdiction”; failed to proceed “in the manner required by law”;
rendered a decision unsupported by the findings; made findings unsupported
9
by substantial evidence; rendered a decision that “was procured by fraud or
was an abuse of discretion”; or issued an order or decision that violates the
petitioner’s state or federal constitutional rights. (Id., subds. (a)(1)–(6).) “We
do not conduct a trial de novo, nor weigh nor exercise independent judgment
on the evidence. [Citations.] The Commission’s findings of fact ‘ “are not
open to attack for insufficiency if they are supported by any reasonable
construction of the evidence.” ’ ” (Southern California Gas Co. v. Public
Utilities Com. (2023) 87 Cal.App.5th 324, 339 (SoCalGas).)
When, as here, the Commission is charged with interpreting a
provision of the Public Utilities Code, “[w]e give great weight to the
Commission’s interpretation.” (SoCalGas, supra, 87 Cal.App.5th at p. 339.)
We will disturb the Commission’s interpretation only if “ ‘it fails to bear a
reasonable relation to statutory purposes and language.’ ” (Southern
California Edison Co. v. Peevey (2003) 31 Cal.4th 781, 796.) “This judicial
deference acknowledges a role for the Commission’s administrative expertise:
‘[W]e give presumptive value to a public agency’s interpretation of a statute
within its administrative jurisdiction because the agency may have “special
familiarity with satellite legal and regulatory issues,” leading to expertise
expressed in its interpretation of the statute.’ ” (Pacific Gas & Electric Co. v.
Public Utilities Com. (2015) 237 Cal.App.4th 812, 839.)
Section 2827.1, the statute at issue here, requires the Commission to
“develop a standard contract or tariff, which may include net energy
metering,” for utility customers owning noncommercial renewable systems.
(§§ 2827.1, subds. (a), (b); 2827, subd. (b)(4)(A).) The statute sets out seven
requirements for the tariff. (§ 2827.1, subds. (b)(1)–(7).) As relevant here,
the successor tariff “shall do all of the following” (id., subd. (b)): (1) ensure
renewable system installation “continues to grow sustainably” (id.,
10
subd. (b)(1)); (2) include “specific alternatives designed for growth among
residential customers in disadvantaged communities” (ibid); (3) be based on
“the costs and benefits of the renewable electrical generation facility” (id.,
subd. (b)(3)); and (4) equalize the “total benefits” and “total costs” of the tariff
“to all customers and the electrical system” (id., subd. (b)(4)).
I.
Petitioners first contend the successor tariff fails to satisfy the
requirement of section 2827.1 that it balance various costs and benefits
because the calculator fails to take account of all the benefits of renewable
energy, particularly those conferred on society generally. In particular,
petitioners contend the calculator fails to take account of (1) the value of
resiliency, (2) avoided out-of-state methane leakage, (3) avoided land use
impacts, and (4) certain avoided transmission costs. In addition, petitioners
contend the Commission “improperly dismisse[d]” an alternative test for
determining the benefits of distributed power, the “Societal Cost Test.”
Section 2827.1, subdivision (b), contains several requirements. Two
subdivisions, (b)(3) and (4), respectively require the Commission to consider
“the costs and benefits of the renewable electrical generation facility” and to
ensure “the total benefits of the [successor tariff] to all customers and the
electrical system are approximately equal to the total costs.” (Ibid.)
Petitioners argue the use of the definite article “the” in the phrase “the costs
and benefits” in subdivision (b)(3) “means that the clause refers to all costs
and benefits. . . . [¶] The failure to properly account for the costs and
benefits of distributed generation . . . constitutes legal error requiring that
the Decision be set aside.”
Although petitioners characterize their argument as challenging the
omission of various purported benefits of renewable energy, it is more
11
generally an attack on the Commission’s approach to valuing exported energy
from renewable systems by means of the calculator. As previously explained,
the Commission chose — through the calculator — to value exported energy
by the marginal cost to utilities of providing power. This marginal cost, in
turn, is measured by the various costs the utilities need not incur because of
their use of exported energy. (Decision at p. 59.) Petitioners effectively argue
section 2827.1 requires the Commission to take all of the benefits of
renewable energy generation into account when valuing exported energy,
rather than merely the economic costs avoided by the use of customer-
generated power.
We must give “great weight” to the Commission’s interpretation of
provisions of the Public Utilities Code. (SoCalGas, supra, 87 Cal.App.5th
at p. 339.) In light of the Commission’s expertise in energy regulation, we are
permitted to overturn its interpretation of a statutory mandate only if the
interpretation “ ‘fails to bear a reasonable relation to statutory purposes and
language.’ ” (Southern California Edison Co. v. Peevey, supra, 31 Cal.4th
at p. 796.) Further, “[t]here is a strong presumption favoring the validity of
a Commission decision.” (Toward Utility Rate Normalization v. Public
Utilities Com., supra, 22 Cal.3d at p. 537.) This uniquely deferential
standard of review is accorded the Commission because of its status as “a
constitutional body with broad legislative and judicial powers.” (Kerman
Telephone Co. v. Public Utilities Com. (2023) 94 Cal.App.5th 920, 931.)
We conclude the successor tariff adopted by the Commission bears a
reasonable relation to the statutory purposes and language. Petitioners
argue the statute requires the Commission to “properly account for the costs
and benefits of distributed generation” in formulating the successor tariff.
Notably, neither section 2827.1, subdivision (b)(3) nor subdivision (b)(4)
12
refers to the costs and benefits of “distributed generation.” Subdivision (b)(3)
requires the Commission to base the successor tariff on “the costs and
benefits of the renewable electrical generation facility.” The meaning of this
subdivision is not wholly clear; its reference to the costs and benefits of
“the . . . facility” appears to require the tariff to be based on the costs and
benefits of renewable systems. In any event, the language certainly does not
compel the Commission to consider the costs and benefits of renewable
energy generally.
Similarly, section 2827.1, subdivision (b)(4) requires the Commission to
ensure “the total benefits of the standard contract or tariff to all customers
and the electrical system are approximately equal to the total costs.” Again,
there is no reference to the costs and benefits of distributed generation.
Instead, the statute speaks of the costs and benefits of the “standard contract
or tariff” — that is, the successor tariff — to “all customers.” In accord, the
Commission strove to ensure the successor tariff is fair to both owners and
nonowners of renewable systems. Although some of the benefits of renewable
energy presumably factor into that calculus — and certainly did factor into
the Commission’s formulation of the calculator — we find nothing in the
statutory text that indisputably requires the Commission to take account of
“all costs and benefits” of “distributed renewable generation.”
The Commission’s decision to base the price of exported energy on the
marginal cost of energy to the utilities serves this goal of equity between
generating and nongenerating customers. Generating customers are
compensated for the economic benefit they confer on the grid — and thereby
on their fellow utility customers — by supplying excess energy. On the other
side of the ledger, nongenerating utility customers are no longer required to
subsidize generating customers by purchasing excess energy at a premium
13
above its economic value. As directed by the Legislature, the calculator
compensates generators for the benefits they confer on “all customers and the
electrical system” (§ 2827.1, subd. (b)) by supplying excess energy without
burdening ratepayers with additional costs — such as compensating system
owners for the purported benefits conferred on society at large, as advocated
by petitioners.5
The Commission presumably could have elected to adopt some version
of petitioners’ approach by compensating customers who export energy to the
grid for the social, as well as economic, benefits conferred by the distributed
generation of power. Indeed, the Commission’s counsel conceded as much at
oral argument. But of course, it’s a zero-sum game; such an approach
necessarily would have lessened the extent to which the successor tariff
reduced the cost shift targeted by section 2827.1. By requiring utilities to
factor social benefits into the price paid for exported power, petitioners’
approach would effectively require customers who do not own renewable
systems to compensate owners of the systems for the value of these social
benefits, as well as for the economic benefits conferred on the grid. It can be
debated whether this approach would better satisfy the Legislature’s
command to balance the equities among all customers, but we needn’t choose
5 Petitioners rely primarily on Ctr. for Biological Diversity v. Nat’l
Highway Traffic Safety Admin. (9th Cir. 2008) 538 F.3d 1172, which holds
that, when an administrative agency is directed to evaluate the costs and
benefits of a regulatory action, “it cannot put a thumb on the scale by
undervaluing the benefits and overvaluing the costs” of the action. (Id. at
p. 1198.) In that case, the administrative agency was found to have “assigned
no value to the most significant benefit” of the regulatory action when
making its cost-benefit analysis. (Id. at p. 1199.) As the statute did not
compel the Commission to consider societal costs and benefits, we find this
case inapposite.
14
a side. Plainly, the successor tariff adopted by the Commission bears a
reasonable relation to statutory purposes and language.
Accordingly, we find no error in the Commission’s decision to restrict
the calculator to economic benefits conferred on the grid by exported power.
Because two of the specific benefits cited by petitioners are manifestly
social — the avoidance of methane leakage in other states that occurs when
the utilities’ need for out-of-state natural gas is reduced by the export of
excess power and the reduced use of land for utility infrastructure made
possible by distributed generation — they need not be discussed further. Nor
did the Commission err by selecting an approach that excluded the two other
benefits cited by petitioners, nor by deciding not to use the Societal Cost Test.
Petitioners first contend the Commission erred in failing to give
renewable system owners credit for the “benefits of increased resiliency—that
is, the ability to maintain power during a blackout or other grid disruption—
and reliability conferred by distributed renewable generation.” The
Commission considered and rejected the suggestion that the calculator, in
valuing excess power, should take account of the purported increased
resilience of the energy grid afforded by renewable energy. The Commission
explained proponents had not provided “convincing evidence” the benefits
of resiliency accrued to the grid, rather than to the owners of renewable
systems. This is a finding of fact we must accept if supported “ ‘ “by
any reasonable construction of the evidence.” ’ ” (SoCalGas, supra,
87 Cal.App.5th at p. 339.) We find no reason to question the Commission’s
conclusion. Although petitioners claim the benefits of resiliency accrue “not
just to individual participants,” the only examples they cite are the type of
owner benefits to which the Commission referred: the ability of a renewable
system owner to generate power during a heat wave, system owners’
15
avoidance of food spoilage due to loss of refrigeration, and the ability of
households with a renewable system to participate in educational activities
during a power outage. Because these benefits are not conferred on utilities
or the electrical system from the export of excess energy, but instead are
benefits realized by generating customers from their installation of a
renewable system, there was no statutory basis compelling their
incorporation into the calculator.
Petitioners also contend the calculator fails to take full account of the
transmission costs avoided because of exported energy. For the three major
public utilities, the calculator projects a total expenditure of over $481
million for transmission costs during the period 2021–2025. A Commission
report in the record, however, states that a regulatory category called
“transmission revenue requirements” for the three utilities exceeded $4
billion in 2021. Characterizing the latter figure as “actual transmission
spending,” petitioners argue the real avoided transmission costs must be
much greater than accounted for in the calculator. The calculator does not,
however, include all “actual transmission spending.” Rather, it includes only
transmission spending that is avoided — that is, rendered unnecessary — by
the export of electricity by owners of renewable systems. Petitioners make no
attempt to demonstrate that the transmission revenue requirements listed in
the report represent avoided costs. Moreover, an examination of the
Commission report makes clear that the category sweeps much broader than
avoided transmission costs, including, for example, “wildfire mitigation work,
including enhanced inspections and vegetation management efforts.” These
are the type of ordinary overhead costs that are unaffected by the export of
energy from renewable systems. Given the uncertain relationship between
transmission revenue requirements and avoided transmission costs,
16
petitioners’ argument fails to convince that the calculator’s estimate of
avoided transmission costs is not supported by substantial evidence.
Petitioners also quibble with the Commission’s accounting for avoided
transmission costs in the calculator, citing various items of evidence in the
record to argue transmission costs avoided by use of exported energy are
greater than the value assigned in the calculator. Having reviewed the
arguments, we are not persuaded the Commission’s chosen value is not
supported by substantial evidence.
Finally, petitioners contend the Commission erred in failing to adopt
the Societal Cost Test — an evaluative tool under development by
Commission — as a measure of the benefits of renewable energy use. The
Commission rejected a request to use the test in connection with the
successor tariff as “premature because the evaluation to determine the final
details of the test has not been completed.” (Decision at p. 66.) Contrary to
petitioners’ claim, there was nothing “improper[]” in the Commission’s refusal
to use a test that was not fully developed. (Of course, the Commission might
revisit the issue if and when it deems the Societal Cost Test fully developed.)
To the extent petitioners are arguing more generally that the Commission
erred in basing the successor tariff on the costs and benefits of renewable
power to generators and ratepayers, rather than the costs and benefits to
society at large, we find the Commission’s approach to bear a reasonable
relation to its statutory mandate. Our standard of review allows for no
further inquiry.6
6 This argument is followed in petitioners’ brief by an extended
criticism of the Commission’s use of the calculator in this context. The
discussion, which mentions neither our standard of review nor the statutory
language, appears to be premised on the assumption that we can reverse or
17
II.
Petitioners next contend the Decision fails to properly account for the
costs of renewable energy because it treats reduced energy usage by owners
of renewable systems as a cost rather than a benefit. The argument arises in
the context of the successor tariff’s attempt to address the long-standing
criticism that the NEM tariff permits owners of renewable systems to shift a
disproportionate share of the fixed costs of energy supply to customers who
lack such systems. The shift occurs because the utilities’ fixed costs are
recovered through the rates charged for energy use. Every utility customer
pays a portion of the fixed costs through their monthly bill, with the amount
of the payment proportional to the amount of energy the customer uses. To
the extent self-generated power reduces owners’ use of energy from the grid,
these customers necessarily reduce their payment of the utilities’ fixed costs;
the utilities’ remaining customers must collectively pay the portion avoided
by renewable system owners. The NEM tariff magnifies this effect by
permitting renewable system owners to offset their exported energy against
imported energy, thereby further reducing their purchase of energy. As
noted, the Legislature anticipated in enacting section 2827.1 that the
successor tariff would mitigate this shift, and the statute’s instruction in
subdivision (b)(4) to equalize costs and benefits of the successor tariff to all
customers effectuates that intent.
Petitioners do not dispute this cost-shifting effect of a NEM tariff.
Rather, they take issue with a more general discussion in the Decision of the
extent to which the adoption of distributed energy shifts utility costs to
nonowners. Petitioners contend the Commission should have treated the
modify the Decision merely because we find another approach to be
preferable. We cannot.
18
reduction in energy purchases as a benefit of renewable energy — rather
than a cost — because reduced demand for utility-generated energy
represents a social good. They point out that customers’ efforts to reduce
energy consumption through conservation are not treated as a cost, even
though these reductions similarly result in reduced purchases of energy from
the grid, thereby shifting costs to those who do not conserve.
Petitioners’ arguments about the proper treatment of reduced energy
use are legally immaterial because they are not pertinent to the successor
tariff. Contrary to petitioners’ claim, the successor tariff does not charge, or
otherwise penalize, renewable system owners when they reduce their use of
imported electricity by substituting self-generated power. Owners are billed
only for the energy they actually import, regardless of the degree to which
they reduce their use of imported energy by generating power. In this way,
the successor tariff makes no attempt to address any shift of costs that
results solely from the reduction in renewable system owners’ use of imported
energy. Rather, it remedies only the cost shift that occurs when the NEM
tariff permits renewable system owners to avoid paying for imported energy
by offsetting exported energy against it. Because this approach is consistent
with the statutory language and clearly serves the statutory purpose of
equalizing the successor tariff’s costs and benefits to all customers, it
provides no basis for challenging the Decision.
With this understanding of the role of cost shift in the successor tariff,
it is clear petitioners’ argument regarding energy conservation misses the
point. It is true, as petitioners contend, that customers who do not own
renewable systems are not penalized when they reduce their purchases of
energy through conservation. But owners of renewable systems are not
penalized when they reduce their purchases of energy either — whether
19
those reductions result from conservation or energy generation. There is no
inconsistency in the tariff’s treatment of reduced energy consumption by
owners and nonowners.
Petitioners also argue the utilities’ charges for electricity imported by
owners of renewable systems should be based on the actual cost of serving
such customers, rather than on ordinary service rates. Although this was
presumably a viable option for the Commission to consider, it was by no
means required by the statutory language. The Commission rejected the
suggestion as inconsistent with prior precedent. Because the Commission’s
chosen approach represents a proper application of the statutory language,
our standard of review does not permit the type of regulatory second-guessing
petitioners advocate.
III.
Petitioners contend the Decision’s “focus on addressing the purported
cost shift” improperly placed the interests of customers who do not own
renewable systems over “cost-effectiveness to the electrical system as a
whole.” According to petitioners, section 2827.1, subdivision (b)(4), which
requires the Commission to “[e]nsure that the total benefits of the [successor
tariff] to all customers and the electrical system are approximately equal to
the total costs,” requires the successor tariff to be premised on “cost-
effectiveness for the system as a whole, not effects on one ratepayer group.”
We find no error in the Commission’s interpretation of its statutory
mandate. Contrary to petitioners’ characterization, the Commission’s
decision to reduce the subsidy provided to renewable system owners did not
constitute an improper focus on one ratepayer group. The statute directs the
Commission to ensure the costs and benefits of the successor tariff to all
customers and the electrical system are approximately equal. The
20
implication of that language, honored by the Commission in formulating the
successor tariff, is to ensure the successor tariff does not grant unwarranted
benefits or impose unwarranted costs on any particular group of ratepayers.
In evaluating the successor tariff’s satisfaction of that requirement, it is
important to remember the successor tariff was formulated in the shadow of
the NEM tariff, which is generally recognized as granting an economically
unwarranted subsidy to owners of renewable systems by shifting a
disproportionate share of the utilities’ fixed costs to nonowners. The
successor tariff’s reduction of the benefits to system owners — decried by
petitioners as a focus on the interests of nonowners — was inevitable because
the statutory command to equalize the costs and benefits of the successor
tariff required reducing the subsidy granted to renewable system owners by
NEM 1.0 and NEM 2.0. Even if this is characterized as a “focus” on the
interests of nonowners, it was not improper. It occurred only because the
NEM tariffs favored renewable system owners.
In short, although one of the primary differences between NEM 2.0 and
the successor tariff was a mitigation of the cost shift imposed by a NEM
tariff, that does not mean the Commission placed the interests of nonowners
over those of system owners or the entire electrical system. On the contrary,
the “primary test” (Decision at p. 65) used by the Commission to evaluate the
cost-effectiveness of existing and proposed tariffs, the “Total Resource Cost”
(TRC) test, considered the costs to the system as a whole. (Decision at
pp. 62–63 [“the TRC test has the ability to indicate whether a demand side
program is cost-effective to the grid relative to other resource options”].) The
Commission simply concluded accomplishing the directive of section 2827.1,
subdivision (b)(4) to equalize costs and benefits both to all customers and to
the electrical system required reducing the costs disproportionately shifted to
21
nonowners by the NEM tariff. This was a reasonable and proper
interpretation of the statute.
IV.
Petitioners argue the Decision fails to satisfy the directive of section
2827.1, subdivision (b)(1), that the successor tariff “ensure[] that customer-
sited renewable distributed generation continues to grow sustainably.”
Petitioners point out the successor tariff “is specifically designed to decrease
bill savings and increase payback periods” for renewable systems, thereby
making the systems less financially attractive. Petitioners also note similar
efforts to reduce the financial advantages of renewable systems in other
states have led to a substantial decline in the rate of installation of renewable
systems.
There are two answers to petitioners’ contention. First, the directive of
subdivision (b)(1) is one of several requirements imposed on the successor
tariff by section 2827.1. The Commission is directed by the statute to “do all
of the following” (§ 2827.1, subd. (b)), leaving the Commission to decide how
best to accomplish the seven aims articulated by the Legislature. To the
extent those objectives are in tension, it was left to the Commission to decide
how to satisfy the conflicting demands. As the Commission observed, “[i]t is
the Commission’s responsibility to balance the multiple and, sometimes,
conflicting requirements of the statute.” (Decision at p. 108.) In adopting the
successor tariff, the Commission affirmed it intended to “balance the multiple
requirements of the Public Utilities Code and the needs of the electric grid,
the environment, participating ratepayers, as well as all other ratepayers.”
(Id. at p. 2.)
At the time section 2827.1 was enacted, the NEM tariff had long been
recognized to confer a financial benefit on owners of renewable systems and
22
impose a disproportionate burden on nonowners. Remedying this inequity
necessarily required the Commission to adopt a successor tariff making the
installation of renewable systems less financially attractive to utility
customers.7 Subdivision (b)(1) cannot be interpreted, as petitioners insist, to
require the successor tariff to preserve the financial benefit conferred on
system owners by a NEM tariff. When it directed the Commission to devise a
successor tariff equalizing the treatment of owners and nonowners, the
Legislature was aware the successor tariff would make renewable systems
less remunerative. Necessarily, the Commission’s task was not to preserve
existing advantages for owners of the NEM tariff, but to reduce those
advantages without halting the adoption of renewable systems. The mere
fact that the successor tariff reduces the financial advantages of renewable
system installation does not alone place it in violation of section 2827.1.
Petitioners argue the Commission was not empowered to balance the
demands of the statute’s potentially conflicting requirements because the
Legislature directed the Commission to “do all of the following.” (§ 2827.1,
subd. (b).) The Legislature, of course, could direct the Commission to have its
cake and eat it too; regrettably, the Commission has no such power. The
statute’s instruction to do all of the following must be understood as
requiring the Commission to take into consideration all of the listed
objectives in formulating the successor tariff. To the extent those objectives
are in tension, it was for the Commission to decide how best to balance the
7 Petitioners argue it was not necessary for the Commission to remedy
the inequities inherent in a NEM tariff to equalize the costs and benefits
because the Commission could have considered the “full” — i.e., social —
benefits of renewable systems. Whatever the merits of this argument, the
Commission was not obligated to adopt this approach.
23
demands. We are not persuaded the Commission’s decision in this respect
constituted an abuse of its discretion.
Second, petitioners’ argument is based on a misreading of the language
of section 2827.1, subdivision (b)(1). Petitioners assert “continue” means “ ‘to
maintain without interruption a condition, course, or action’ ” and argue,
based on this definition, “the Legislature directed that any successor tariff
may not materially reduce the continued uptake of” renewable systems.
Subdivision (b)(1), however, requires continued “growth” of renewable
energy — that is, continued installation of new renewable systems. It does
not require continued growth at the same pace. That the rate of adoption of
renewable systems will slow under the successor tariff does not mean
adoption will cease. Rather, it will simply grow more slowly than it would
have under a NEM tariff.
As noted, we assume the Legislature understood its instruction to
reduce the inequity of the NEM tariff would result in a successor tariff less
advantageous to renewable system owners. Thus, section 2827.1, subdivision
(b)(1) was presumably intended to ensure the successor tariff is not so
financially disadvantageous as to make installation of such systems
uneconomic. The successor tariff satisfies that requirement. After its
implementation, customers who install a renewable system will recover their
investment within nine years; after that time, owners will see an energy cost
savings for the remaining life of the system. That financial incentive,
combined with the environmental benefits of renewable energy, presumably
will ensure the continued growth of renewable energy, as required by
subdivision (b)(1).
24
V.
Petitioners next contend the successor tariff fails to “include specific
alternatives designed for growth among residential customers in
disadvantaged communities,” as required by section 2827.1, subdivision
(b)(1). Not so.
The Commission designed the successor tariff to satisfy this
requirement in two ways. First, the Lookback Study concluded low-income
customers were less likely to install renewable systems not only because of
the upfront cost of such systems, but also because such customers also
received lower bill savings, contributing to a longer payback period. To
mitigate this disincentive, low-income and other disadvantaged customers
are eligible under the successor tariff to receive a higher rate of compensation
for energy exported to the grid, a benefit designed to ensure they can pay
back the upfront costs of a system within nine years. (Decision at pp. 175–
176, 238.) Second, the successor tariff eliminates a discount applied by NEM
2.0 to the compensation paid for exported energy to customers participating
in two programs — California Alternate Rates for Energy and Family
Electric Rate Assistance — providing discounted energy rates to low-income
customers. (Id. at p. 176.)
In addition to these provisions of the successor tariff, the Commission
had earlier adopted a series of three programs to make renewable systems
more accessible to low-income customers. (See Alternate Decision Adopting
Alternatives to Promote Solar Distributed Generation in Disadvantaged
Communities (2018) Cal. P.U.C. Dec. No. D.18-06-027, at pp. 2–4.) The
Disadvantaged Communities–Single-family Solar Homes program, for
example, subsidizes the purchase of renewable systems by low-income
homeowners. (Id. at pp. 2–3, 27–30.) The other two programs provide low-
25
income customers with access to renewable energy and bill discounts.
(Id. at pp. 3–4.) The Commission expressly adopted these programs, which
will be funded through utility revenues, to satisfy the statutory requirement.
(Id. at pp. 6, 30–31, A-1.)
Petitioners fault the Commission’s efforts to stimulate adoption of
renewable systems in disadvantaged communities because (1) the
Commission failed to adopt a proposed “Equity Fund,” (2) the Commission’s
calculation of the higher rate for exported energy was based on an
underestimate of the cost of solar installation for low-income households, and
(3) the Commission improperly deferred consideration of the benefits of
renewable systems that particularly accrue to low-income customers. Before
addressing these arguments, we note the Commission’s compliance with
section 2827.1, subdivision (b)(1) must be measured by what it did rather
than by what it chose not to do. The fact that, as petitioners argue, these
efforts might be imperfect does not demonstrate the Commission failed to
comply with the Legislature’s direction. As noted, the Commission modified
the tariff applicable to low-income customers to increase the compensation for
exported energy, thereby making renewable systems more financially
attractive. Further, it adopted three programs that directly subsidize the
cost of solar installation or provide access to renewable energy for such
customers. All of these constitute “specific alternatives designed for growth
among residential customers in disadvantaged communities.” Petitioners fail
to demonstrate (or even try to demonstrate) the benefits provided by these
efforts are illusory or so inadequate as to disqualify their consideration. On
the contrary, we conclude these efforts bear a reasonable relation to statutory
purposes and language and satisfy the requirements of section 2827.1,
subdivision (b)(1).
26
Petitioners contend these earlier-adopted programs cannot be
considered because the requirements of section 2827.1 apply only to the
successor tariff. Necessarily, however, the successor tariff itself can be of
limited use in meeting the goal of subdivision (b)(1) to stimulate “growth [of
renewable energy adoption] among residential customers in disadvantaged
communities.” Any benefits of the successor tariff accrue only after a system
is installed; the tariff cannot directly overcome the primary barrier to the
growth sought by the statute — the initial cost of solar system installation.
Given this limitation, we find the Commission’s conclusion that subdivision
(b)(1) can be satisfied in part by programs subsidizing system installation
and promoting renewable energy use among low-income customers to bear a
reasonable relation to the statutory purposes and language because these
programs provide access to the successor tariff for low-income customers.
Again, we find petitioners’ arguments about the inadequacy of the
Commission’s efforts to make renewable system adoption more affordable to
be largely beside the point. Petitioners first argue the Commission should
have created an “Equity Fund,” which would use a billing surcharge imposed
through the successor tariff to assist low-income customers in acquiring
renewable systems. The Commission decided against such a fund because
the Legislature enacted, shortly before issuance of the Decision, Assembly
Bill No. 209, which created a state program to provide incentives for the
installation of solar generation and storage systems. (§ 379.10, subds. (a), (b);
Decision at pp. 178–179.) At the time, 70 percent of the funds appropriated
for this program were earmarked for low-income residents; an amendment of
section 379.10 enacted after issuance of the Decision now appears to require
all of the funds in the new program to be so allocated. (Former § 379.10,
subd. (a); Stats. 2023, ch. 52, § 6.) Although petitioners fault the
27
Commission’s rationale in deciding against the equity fund, they cite no
statutory authority requiring its adoption. Further, of course, the programs
adopted separately by the Commission serve the same purpose as the
suggested equity fund. Because, as noted, the Commission’s efforts to satisfy
section 2827.1, subdivision (b)(1) are sufficient, it did not err in electing not to
implement an equity fund.
Second, petitioners contend the augmented rate for exported energy
applicable to disadvantaged customers will not promote their adoption of
renewable systems because the Commission did not accurately estimate the
cost of solar installation. As a result, they argue, the additional payments
will not pay back the cost of installation within the intended nine years.
Even if this criticism was well founded, the augmented rate was only one of
the methods by which the Commission sought to satisfy section 2827.1,
subdivision (b)(1). Its incentives for solar growth must be considered together
with those other methods. Further, the augmented rate, even if insufficient
to recoup installation costs within nine years, will still provide an incentive
for system installation. Finally, the Commission expressly considered
petitioners’ argument and rejected it, concluding the higher cost figure was
derived from a materially different program. (Decision at pp. 83–84.) This
factual finding is supported by substantial evidence.
Third, petitioners contend the Commission improperly deferred
consideration of promoting the installation of solar systems serving entire
communities. Assuming, as petitioners argue, that “[w]ell-designed
community solar and storage programs could realize considerable grid and
ratepayer benefits,” that alone did not mandate their adoption. Section
2827.1, subdivision (b)(1) does not require the Commission to adopt any
particular “specific alternatives” to ensure growth of renewable energy in
28
disadvantaged communities, and the steps it has taken are adequate to meet
its statutory obligation. The Commission’s explanation that consideration of
community solar is “premature” because such programs are the subject of
other ongoing Commission proceedings fully justifies their omission.
(Decision at p. 188.)
VI.
Petitioners finally argue the modifications of the NEM tariff for
nonresidential customers effected in the successor tariff are “based on
erroneous and unsupported findings.” We disagree.
The Lookback Study found, based on the TRC test, that the NEM 2.0
tariff was cost-effective for nonresidential customers.8 The tariff’s average
TRC score was 1.25, where a score of 1.00 represents no net cost or benefit.
Yet the Commission declined to adopt this conclusion because the NEM tariff
for nonresidential customers performed poorly on the “Ratepayer Impact
Measure” (RIM) test, earning an average score of .57, suggesting costs
predominated over benefits. That test “is useful for examining whether
disproportionate impacts occur on non-participants” (Decision at p. 50), a
measure of cost-effectiveness particularly pertinent to the requirement of
section 2827.1, subdivision (b)(4) that the successor tariff should balance
costs and benefits for all customers. Citing its conclusion that “the use of
retail rates as a foundation for compensating customers for exporting
electricity to the grid [has] no connection to the actual costs of the exports or
the benefits the exported electricity provide to customers and the grid,” the
Commission elected to use the calculator to determine the price paid to
nonresidential customers for exported energy, just as it did for residential
8 The TRC test measures cost-effectiveness of a program for the entire
electrical grid. (Decision at p. 62.)
29
customers. (Decision at pp. 107–108.) In effect, the Commission applied the
successor tariff to both residential and nonresidential customers, although
nonresidential customers were not afforded the benefit of the phase-in
granted to residential customers. (Id. at p. 238.)
Petitioners fault the Commission’s conclusion that NEM 2.0 is not cost-
effective for nonresidential customers. Petitioners note the Commission
designated the TRC test as the primary test to determine the cost-
effectiveness of the successor tariff for the electrical system. Accordingly,
they argue, the Commission committed “legal error” when it “determined the
NEM tariff for [nonresidential] sectors is not cost-effective based on its RIM
test scores alone.”
By treating cost-effectiveness as a single concept, petitioners distort the
nature of the Decision. As petitioners argue, the TRC test is a measure of the
cost-effectiveness of the tariff for the electrical system. Section 2827.1,
subdivision (b)(4), however, does not require the successor tariff to be cost-
effective only for the electrical system. Instead, it requires the Commission
to ensure the costs and benefits of the successor tariff “to all customers and
the electrical system” are approximately equal. As the Commission found,
the RIM test is a better measure of cost-effectiveness for all customers
because it measures the impact of a policy on nonparticipants. The
Commission was therefore faced with test results suggesting that, while the
nonresidential NEM 2.0 tariff conferred a fairly small net benefit on the
electrical system, it failed, to a substantial degree, to equalize the costs and
benefits among customers. As discussed above, it was for the Commission to
balance the various legislative objectives expressed in section 2827.1. We
find no abuse of discretion, and certainly no legal error, in the Commission’s
30
decision to strike a balance in favor of rectifying a substantial inequity
among its customers.9
VII.
In section 2827.1, the Legislature specified several general objectives
for a successor to the NEM tariff, leaving the Commission — in the exercise
of its institutional expertise — to strike an appropriate balance among the
many important — but sometimes conflicting — public policy interests. 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. To the contrary, in recognition of the Commission’s unusual
standing as a constitutional body, our review is limited to ensuring that the
successor tariff bears a reasonable relation to the statute’s purpose and
language and that the Commission did not otherwise err under section 1757.
For the reasons discussed above, this deferential standard of review leaves no
basis for faulting the Commission’s work. In reaching this conclusion, we
mean to express no views about the Commission’s resolution of the policy
issues implicated, except that the Decision is properly sensitive to — and
consistent with — the objectives established by the Legislature.
DISPOSITION
The decision of the Commission is affirmed. The Commission and real
parties in interest shall recover their costs in this proceeding.
9 Petitioners also argue nonresidential customers were required under
the NEM 2.0 tariff to pay higher utility bills than the cost for the utilities to
provide them service. The intended legal significance of this argument is
unclear. Section 2827.1 directed the Commission to devise a successor tariff
balancing costs and benefits among all customers, but it did not require the
Commission to ensure no customers were charged more by the utilities than
the cost to serve them.
31
_________________________
Rodríguez, J.
I CONCUR:
_________________________
Petrou, J.
A167721
32
TUCHER, P. J., Concurring.
With the following additional observations, I concur in the court’s
opinion.
The Legislature established, as the first requirement for the successor
tariff, that it “ensure[] that customer-sited renewable distributed generation
continues to grow sustainably.” (Pub. Util. Code, § 2827.1, subd. (b)(1), italics
added.) If petitioners’ worst fears are realized, and the successor tariff
devastates solar adoption rates instead of fostering sustainable growth, the
Commission will have to course correct when it revisits its work. The
Legislature intended for the Commission to “revise the . . . tariff as
appropriate to achieve [statutory] objectives” (§ 2827.1, subd. (b)), and the
Commission has already committed to studying the performance of the
successor tariff after its first three years.
When the Commission undertakes this study, it may choose to look
closely at its Societal Cost Test or at some other measure that fully accounts
for the environmental detriments of conventional electricity generation. In
adopting the successor tariff, the Commission determined it was “premature”
to apply the Societal Cost Test, as the test was still under development. But
when complete, that test may turn out to be a more refined and appropriate
measure of the total benefits of customer-sited generation than the avoided
cost calculator that the successor tariff currently incorporates. Section
2827.1 allows for a tariff that captures the noneconomic benefits of renewable
electricity. The Commission understands this, as evidenced by its actions in
adopting and defending NEM 2.0 and its counsel’s response to questions at
oral argument. And once a tariff is able to capture the full spectrum of costs
avoided with renewable energy, it would seem optimal that it do so.
1
But the issue before the court today is, as the majority notes, not
whether the Commission has chosen the best possible tariff. Rather, we are
asked simply to decide whether the Commission has chosen a course that
complies with the law and is reasonably supported by the evidence. (See maj.
opn. ante, at pp. 9–10.) Given the limited scope of our review, I agree that
the decision of the Commission must be affirmed.
_________________________
Tucher, P. J.
2
Shute, Mihaly & Weinberger, Ellison Folk and Aaron M. Stanton for
Petitioners Protect our Communities Foundation and Environmental
Working Group.
Roger Lin, Anchun Jean Su and Howard Crystal for Petitioner Center for
Biological Diversity, Inc.
Law Offices of Richard K. Bauman and Richard K. Bauman for Albion Power
Company, as Amicus Curiae on behalf of Petitioner Protect our Communities
Foundation.
Christine Jun Hammond and Edward Moldavsky for Respondent.
Munger, Tolles & Olson, Henry Weissmann and Andra Lim for Real Parties
in Interest Pacific Gas and Electric Company, San Diego Gas & Electric
Company, and Southern California Edison Company.
Pacific Gas and Electric Company Law Department and Ashley E. Merlo for
Real Party in Interest Pacific Gas and Electric Company.
San Diego Gas & Electric Company and E. Gregory Barnes for Real Party in
Interest San Diego Gas & Electric Company.
Southern California Edison Company and Rebecca Meiers-De Pastino for
Real Party in Interest Southern California Edison Company.
3