Background
On August 7, 2025, the California Supreme Court issued its decision in Center for Biological Diversity, Inc. v. Public Utilities Commission (Cal., Aug. 7, 2025, No. S283614), 2025 WL 2253765 (Center for Biological Diversity). The case centers around the Net Energy Metering program, updated by the California Public Utilities Commission (CPUC) in 2022, also known as the NEM 3.0 program. The questions raised by the Center for Biological Diversity and other Petitioners centered around the NEM compensation. In the 2022 update to the program’s tariff, the CPUC dramatically reduced the payments made to customers with rooftop solar for the excess energy produced and exported to the electric grid. The Petitioners made three arguments: the CPUC ignored the larger societal benefits of solar energy, the NEM 3.0 program does not promote growth of rooftop solar in disadvantaged communities, and the new tariff does not comply with the statutory mandates under Public Utilities Code section 2827.1. The California Court of Appeal affirmed the CPUC’s decision to modify the NEM program by applying the “uniquely deferential” Greyhound standard. (Greyhound Lines, Inc. v. Public Utilities Commission (1968) 68 Cal.2d 406.)
The California Supreme Court did not address the substantive questions raised by Petitioners about the NEM 3.0 tariff. Instead, the Court addressed whether the Greyhound standard continues to apply to CPUC decisions interpreting statutes, or whether legislative reforms require courts to use the same standard of review used to review other administrative agencies’ decisions.
Greyhound Standard of Review
The California Court Appeal, in reviewing the Commission’s interpretation of the Public Utilities Code, applied the highly deferential Greyhound standard, which requires a reviewing court to determine whether the CPUC’s decision “bear[s] a reasonable relation” to the statutory language. (68 Cal.2d at pp. 406, 410.) However, the instant decision rejects the use of the Greyhound standard for most Commission decisions, given the legislative changes that took place in the 1990s and 2000s.
New Standard of Review
According to the Court, the legislative changes left the “‘regularly pursued its authority’” language in section 1757 to apply “‘solely to water corporations.’” (Center for Biological Diversity, 2025 WL 2253765, at *4 (quoting statute).) But for relevant Commission decisions pertaining to telecommunications, transportation, or energy, the statute tracks with the general administrative mandamus statute, Code of Civil Procedure section 1094.5. The inquiry in section 1094.5 is whether there was any prejudicial abuse of discretion. The Court interpreted this as the legislature’s intent to “conform judicial review of the Public Utilities Commission decisions . . . with judicial review of other state agencies.” (Id. at *5.) In the instant decision, the California Supreme Court relied on the Yamaha case (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1) to reach its conclusion that the Greyhound standard did not apply. In Yamaha, the court distinguished between quasi-legislative regulations adopted by an agency and an agency’s interpretation of a statute. Quasi-legislative regulations adopted by an agency are entitled to consideration and respect by the courts, but an agency’s interpretation of a statute is reviewed de novo. Accordingly, in its review, the court does not defer to the agency’s interpretation of whether the regulation is within the scope of the agency’s lawmaking authority.
Because the lower court relied on the “uniquely deferential” standard in Greyhound, the California Supreme Court reversed the Court of Appeal’s decision and remanded the case back to the Court of Appeal for further proceedings. The lower court will need to apply the standard outlined in the Yamaha case to answer the questions posed by the Petitioners.
