Ctr. for Biological Diversity, Inc. v. Pub. Util. Comm'n

316 Cal. Rptr. 3d 464

CENTER FOR BIOLOGICAL DIVERSITY, INC., et al., Petitioners,

v.PUBLIC UTILITIES COMMISSION, Respondent;

Pacific Gas and Electric Company et al., Real Parties in Interest. A167721

Court of Appeal, First District, Division 3.

Filed December 20, 2023

As Modified December 21, 2023

As Modified on Denial of Rehearing

January 16, 2024

(Cal.P.U.C. Dec. No. 22-12-056)

Shute, Mihaly & Weinberger, Ellison Folk and Aaron M. Stanton, San Francisco, 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, San Francisco, 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, Los Angeles, 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, Irvine, for Real Party in Interest Pacific Gas and Electric Company.

San Diego Gas & Electric Company and E. Gregory Barnes, San Diego, for Real Party in Interest San Diego Gas & Electric Company.

Southern California Edison Company and Rebecca Meiers-De Pastino, Rosemead, for Real Party in Interest Southern California Edison Company.

Rodríguez, J.

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 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.

[1] 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, 217 Cal.Rptr. 43, 703 P.2d 381), 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, 149 Cal.Rptr. 692, 585 P.2d 491.) 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 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 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 electric- ity 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 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 non-participating 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 antici- pated NEM 2.0 would be subject 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...