Statutory interpretation of the Public Utilities Code now firmly in the hands of the courts
In a recent decision, Center for Biological Diversity, Inc. v. Public Utilities Commission, the California Supreme Court unanimously rejected the "uniquely deferential" standard of review previously given to California Public Utilities Commission ("CPUC") decisions interpreting the Public Utilities Code. In its place, the Court held that courts must apply the typical standard that governs review of an agency's statutory interpretation, under which courts must "independently judge the text of the statute." As the Court itself recognized, resolving the level of deference for CPUC decisions is one of "considerable statewide importance." The decision abandons the historical deference given to the CPUC's interpretation of the Public Utilities Code, making it easier for parties to challenge Commission decisions in court consistent with legislative amendments expanding the scope of judicial review.
Decades of Deference to the CPUC
For nearly a century, California courts applied a "uniquely deferential" standard when reviewing the CPUC's interpretation of the Public Utilities Code in its administrative decisions. Under this highly deferential standard, the Commission's interpretation was not "to be disturbed unless it fails to bear a reasonable relation to statutory purposes and language." (Greyhound Lines, Inc. v. Public Utilities Com. (1968) 68 Cal.2d 406, 410-411.)
However, in response to deregulation in the energy and other utility markets, in the mid-1990s the California Legislature revised the law to expand judicial review of Commission decisions. Public Utilities Code Sections 1757 and 1757.1 specify several bases on which a court may set aside a CPUC decision. (Section 1757 applies to a subset of specific Commission proceedings, while section 1757.1 applies to any proceedings not covered by Section 1757).
Under Public Utilities Code section 1757.1, a court must vacate a Commission decision (1) for "abuse of discretion"; (2) where the Commission "has not proceeded in the manner required by law"; (3) where the decision is "not supported by the findings"; (4) where the Commission exceeded its jurisdiction; (5) for fraud; and (6) for state or federal constitutional violations. (Public Utilities Code § 1757.1, (a)(1)-(a)(6).) Under Public Utilities Code section 1757, courts must vacate a Commission decision for the same reasons, in addition to where the findings are "not supported by substantial evidence" in light of the record. (Public Utilities Code § 1757(a)(4).)
Following these amendments, the lower courts remained divided on the level of deference to afford the CPUC's statutory interpretations. Some courts continued to apply the "uniquely deferential" standard, while others applied their independent judgment in analyzing the statutory meaning of the Public Utilities Code, without deference to the Commission's interpretation. The Supreme Court granted review to resolve this conflict among the lower courts.
Holding
When reviewing CPUC decisions involving the interpretation of the Public Utilities Code, courts must independently interpret the Code rather than "unduly" defer to the CPUC's interpretation.
Key Takeaways
- The decision abandons decades of deference to the CPUC's interpretation of the Public Utilities Code and makes clear that courts "remain the final arbiters of statutory meaning," not the agency. Undue deference to an agency raises constitutional separation of powers concerns because an agency, rather than a court, "is effectively given final responsibility for interpreting a statute."
- The decision aligns more closely with a U.S. Supreme Court decision (Loper Bright) that ended four decades of deference by courts to federal agency interpretations of ambiguities in statutes the agencies were charged with implementing.
- The decision aligns review of CPUC decisions with the normal standard for review of agency action, creating greater consistency and uniformity.
- The decision does not change the fact that litigants do not have an automatic right to appeal a CPUC decision in California appellate courts. Litigants may only obtain review through a writ petition, the review of which is within the appellate court's discretion. Nevertheless, we anticipate this decision will incentivize challenges to CPUC decisions involving an interpretation of the Public Utilities Code, provided that litigants can demonstrate that the decision should be vacated for abuse of discretion, lack of substantial evidence, or the other grounds specified in the Code.
- The decision does not reject deference to the CPUC altogether. Courts should respect the agency's interpretation of a statute and may in certain circumstances afford that interpretation "great weight." However, the Court clarified that rather than giving blanket deference to the CPUC, the agency's interpretation is simply "one among several tools available to the court."
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