CA Supreme Court Clarifies Legal Standard of Review When Parties Appeal CPUC Decisions
On August 7, 2025, the California Supreme Court unanimously ruled that the California Public Utilities Commission (“CPUC”) was given undue deference in its 2022 decision (D.22-12-056, commonly referred to as “NEM 3.0"), which rolled back credits for rooftop solar customer-generators. The Supreme Court’s decision reverses the Court of Appeal’s 2023 decision and remands the inquiry back to the Court of Appeal to determine whether the challenged tariffs under the CPUC decision meets a higher standard of judicial review and deference.
Environmental groups challenged the CPUC decision, arguing that it did not ensure the tariff was based on the costs and benefits of the renewable electric generation facility as required in statute, and that the CPUC bears the responsibility to provide alternatives designed for residential customers in disadvantaged communities. The Court of Appeal ruled in favor of the CPUC in December 2023 under a “uniquely deferential standard of review,” also referred to in the decision as the Greyhound standard. This standard focuses on whether statute compelled or required the CPUC to adopt the environmental groups’ position, and whether the decision can be reasonably related to the statute’s purpose and language.
The California Supreme Court decision drew a distinction between quasi-legislative regulations adopted by an agency under powers provided to it by the Legislature, and an agency interpretation of a statute’s legal effect and meaning, applying the Yamaha standard. Where the inquiry concerns an agency interpretation of a statute’s legal effect, a reviewing court applies its judgment de novo, but should respect the agency’s interpretation and give weight to its underlying considerations. Quasi-legislative regulations are reviewed by inquiring into whether the rule was laid within the authority delegated by the Legislature. However, in either case, the California Supreme Court conducts an independent review on whether an agency has lawmaking authority even in circumstances where it may be appropriate to defer to an agency’s decision.
The Court concluded that an inquiry performed under Sections 1757(a) or 1757.1(b) should not employ the Greyhound standard, or the uniquely deferential standard of review. The Court’s decision also disapproves several other decisions which erroneously relied on the Greyhound standard. The Court’s decision remanded the inquiry back to the Court of Appeal to determine whether the CPUC’s decision regarding the challenged tariffs could be upheld under the Yamaha standard. While the impact of this decision on the NEM 3.0 decision remains to be seen, the standard of review applied to CPUC decisions could have farther reaching impacts on CPUC decision making.
Please contact Brian Biering or Clarissa Maloney if you have any questions about this important decision.