By Malena Carollo, CalMatters
The California Supreme Court today sided with environmental groups in a case seen as pivotal for the proliferation of rooftop solar power in California.
In a unanimous vote, justices told a lower court to revisit a ruling that upheld reduced payments to solar panel owners for selling excess power back to utility companies. The lower court “erred by relying on [a] highly deferential approach” to reviewing decisions by state utility regulators, Justice Leondra Kruger wrote in the decision. The lower court used a standard dating to before the state legislature expanded judicial review of the regulators’ decisions more than 25 years ago, she wrote.
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The lower court of appeal had upheld the California Public Utilities Commission’s 2022 decision to reduce “net energy metering” payments to panel owners by about 75%. Although the Supreme Court said that ruling relied on the wrong legal standard, the higher court did not not rule on the legality of the reduced payments, leaving that for the lower court to decide under a different standard.
“They basically said the lower court kind of punted on the whole substance of the [net metering] decision,” Bernadette Del Chiaro, vice president for California at the Environmental Working Group, said. “I do think they’re clearly stating this needs to be reviewed.”
The utility commission’s previous decision to change the net metering program was intended to help make bills affordable for all customers while still encouraging the adoption of renewable energy sources. Environmental groups argued in the case that the utility commission’s decision left out crucial considerations around benefits to customers and disadvantaged communities.
Under previous iterations of the program – “NEM 1” and “NEM 2” – utilities paid solar customers a retail rate for their extra energy, which is the same price the utilities would charge other customers when they resold that energy. This was changed under the current iteration of the program – “NEM 3.0” – which instead gives customers the “avoided cost,” which is how much utilities save by not buying that power on the wholesale market.
Customers who joined the program after mid-April 2023 receive the new rate, while customers under the prior two versions will continue to receive the old rate for the duration of their contracts, which is typically about 20 years.
Utility commissioners ruled in favor of power companies, which argued that older versions of the program created an unfair cost burden on customers. Those without rooftop solar, utilities said, have to pay more than their peers for routine maintenance to the grid. The groups bringing the lawsuit said this idea is overblown.
Environmental groups said this decision left out considerations around the benefits to low-income customers, as well as the benefits of having “millions of customer generation facilities providing power on hot summer days and preventing blackouts,” Malinda Dickenson, representative of the three environmental groups, said at a June hearing.
The fallout from the utility commission’s 2022 decision included an 82% drop in customers requesting connections for rooftop solar installations, and industry groups expected a loss of about 17,000 jobs during the first year of the change.
