Appellate decision sends storm clouds to California solar panel customers

(CN) — California solar panel users won’t enjoy the sunny rates they once received under a prior credit system, a state appeals court panel ruled Monday.

The decision is the latest in a string of decisions by the appellate and state Supreme Court on the issue of net-energy metering and a tariff linked to it. That system, created over 30 years ago, provided credit to customers with solar panels, as they exported excess energy to the grid. However, the credit — at full-retail rate — gave them a substantial subsidy that shifted costs to customers without electrical generating facilities.

That led the California Legislature in 2013 to call for a “successor tariff” based on electrical system costs to ensure customers without solar panels didn’t bear a cost burden. A 2022 update to the tariff by the Public Utilities Commission — called net-energy metering 3.0 — reduced credits to solar panels owners by some 75%.

The Center for Biological Diversity and others challenged that change, which the First Appellate District upheld. However, the state Supreme Court last year questioned whether a 1968 case — Greyhound Lines, Inc. v. Public Utilities Commission, which gives a high level of deference to the Public Utilities Commission — was the proper legal foundation.

The high court determined Greyhound Lines didn’t provide that deference any longer, opting to reverse and remand the issue back to the appeals court. The lower court needed to decide whether a different legal pathway provided the necessary foundation for the updated tariff.

On Monday, the three-justice panel ruled that it did.

“In sum, we conclude the commission did not fail to proceed in the manner required … and did not otherwise err or abuse its discretion when it adopted the successor tariff,” Justice Victor Rodriguez, a Governor Gavin Newsom appointee, said in the unanimous decision.

According to the panel, the initial tariff provided a bill credit at the full retail rate, which included fixed costs and led to a large subsidy for customers with solar panels and a financial burden for those without them.

The next iteration of the tariff continued to provide a full retail credit rate, though it charged a one-time fee and other periodic fees. A study found that it disproportionately hurt low-income customers and those without solar panels, and wasn’t cost-effective.

That led to version 3.0, which the Center for Biological Diversity argued wasn’t consistent with the law.

However, the appeals panel said that, under the lens of a another decision — the 1998 case of Yamaha Corp. of America v. State Board of Equalization— a different standard exists. The court now looked at a spectrum, with quasi-legislative regulations created by an agency on one end to an agency determining the effect of the law on the other.

“We agree with the commission that its decision is a quasi-legislative administrative decision properly reviewed at that end of the Yamaha continuum,” Rodriguez said.

That meant the panel opted against favoring the center’s arguments, which would have required the commission to ensure its tariff preserved the subsidy, and the resulting cost shift which lawmakers wanted to fix.

The center also argued that the commission failed to account for the benefits of renewable energy generation, like resiliency, land-use impacts and transmission costs. The court determined that the commission’s decision was within its authority.

“In each of these instances, the commission considered but ultimately declined to include the purported benefit in the calculator because there was insufficient evidence at the time of its decision that there was an actual benefit to customers and/or the electrical system,” Rodriguez said.

Senior attorney Roger Lin, with the center, said the appeals court had fallen for a deceptive story told by the utility to justify a grab for profits.

“This decision favors the corporate utilities’ profit model to build the most expensive and brittle version of the grid and making ratepayers foot the bill which only worsens the affordability crisis,” he said in a statement. “At a time when California needs to accelerate local renewables to combat a federal obsession with fossil fuels, this is a huge step in the wrong direction.”

PG&E deferred comment to the Public Utilities Commission.

“The decision recognizes that the CPUC appropriately addressed its responsibility under state law to ensure that rooftop solar programs remain fair, sustainable, and aligned with California’s clean energy goals,” the commission said in a statement, adding: “By better aligning export compensation with the real value of electricity and supporting grid reliability, the updated tariff benefits all customers, including those without solar, by reducing cost shifts and supporting a more reliable and affordable electric system for California.”

The panel was rounded out by Presiding Justice Alison Tucher and Justice Ioana Petrou, both Governor Jerry Brown appointees.