Sam Ribakoff

SAN FRANCISCO (CN) — Environmentalists contested a new rule affecting solar panel owners on Wednesday in front of a panel of judges in San Francisco, saying that it removes financial incentives for installing renewable energy infrastructure and violates the state Public Utilities Commission's legal requirements.

“The requirement that the commission value the benefits of customer sided generation has been on the book for 10 years, it was adopted in 2013, and yet the commission has repeatedly refused to value the societal or non-energy benefits of customer sided generation,” said Ellison Folk, an attorney for The Protect Our Communities Foundation, one of the plaintiffs in the case, in front of a panel of First Appellate District judges in San Francisco on Wednesday.

The Center for Biological Diversity, the Protect Our Communities Foundation and the Environmental Working Group are challenging the California Public Utilities Commission’s new rules that revolve around “net energy metering,” a tariff created for people with solar panels which allows them to give energy they don't use to the grid. For that, customers are given credit on their electrical bills.

In late 2022, the utilities commission updated the tariff that bolsters incentives provided by the federal government from the Inflation Reduction Act for solar and battery storage. The agency also added more electricity bill credits to people who put in solar and solar battery storage in the next few years, including low-income people and members of Native American tribes. Most controversially, though, the commission adopted a rate change for homeowners who install rooftop solar panels for the first time.

The commission touts the changes as ways to encourage people to use electricity when it’s most beneficial for grid reliability, put in battery storage and to shift load demand from evening hours to overnight or midday hours.

But the environmentalists groups say the new tariffs will slash what rooftop solar owners get from sharing their excess energy by 75% to 80%, making solar less financially beneficial.

The groups say the commission ruined a successful program that helped provide 7% of the state’s total electricity supply in 2019, and that the new tariffs will dramatically reduce the growth of rooftop solar and other distributed, renewable, generation of energy.

According to the groups, this means the commission is violating a number of legal requirements the Legislature put down for the net energy metering tariff successor, including a requirement to produce policies that continually grow rooftop solar and distributed generation.

“I just want to point out that rooftop solar is going to play a critical role in California’s ability to meet its greenhouse gas reduction and climate goals. California needs more, not less distributed generation, particularly rooftop solar. It’s relying on it, and that is a societal benefit,” Folk said at Wednesday’s hearing.

Edward Moldavsky, the commission's attorney, argued that’s not what the Legislature requires them to do.

“The statue does not require the commission to take into consideration societal benefits,” Moldavasky said. Instead, the commission interprets the statute to require a traditional cost benefit analysis of its tariff, while taking into account the opinions of its various stakeholders, including the environmental groups challenging their new solar power rules.

When asked by Presiding Justice Alison M. Tucher, who was appointed by Governor Gavin Newsom, if it seemed like the commission skipped over analyzing whether or not they were allowed to address societal benefits of their rules, and decided that their own test to gauge societal benefits just wasn’t ready yet, Moldavasky said that was a rough approximation of their process.

“If the Legislature had wanted the commission to consider externalities, it could have done so through clearer language in the statute saying ‘you must consider this, benefits must include,'” Moldavasky said, adding that the Legislature left how to interpret what the commission does up to the commission itself.

“Our agency’s expertise allows us to take that step and have that interpretation, and that should be accorded deference,” he said, adding that the commission is working on a societal cost test, but he couldn’t commit the commission will use it.

Earlier in the hearing, Associate Justice Victor Rodriquez, a Newsom appointee, asked if Moldavasky was saying that the Legislature wrote an unclear statute that maybe even the commission was having difficulty parsing.

"Reasonable minds can differ about whether it did the best policy choice, whether it had the right interpretation, but that it did it’s best and we should differ to its interpretation in the form of the successor tariff because that bears as good a reasonable relationship to the statutory language as any other interpretation we’ve been discussing? Is that a fair encapsulation of your position?,” he asked.

Moldavasky said it was generally true.