In a significant legal battle over California’s rooftop solar policy, three environmental groups will present their case before the California Supreme Court in Los Angeles this Wednesday.
The organizations, including the Center for Biological Diversity, have long opposed a controversial decision made by the California Public Utilities Commission (CPUC) regarding compensation for rooftop solar customers.
Roger Lin, senior attorney for the Center for Biological Diversity, expressed optimism about the upcoming hearing, stating, “We’ve been working on this for a long time and we hope the court makes the right decision.”
This case focuses on the CPUC’s decision to alter how approximately 2 million rooftop solar customers are reimbursed for excess energy produced by their solar systems.
In December 2022, the CPUC unanimously approved the third version of the state’s Net Energy Metering program, known as NEM 3.0.
The extensive 260-page decision included new incentives aimed at promoting the combination of solar installations with battery storage solutions.
However, the most controversial aspect of the decision involved changes to how new customers would be compensated for surplus energy.
Previously, rooftop solar customers received compensation at the retail rate for the excess electricity generated.
Under NEM 3.0, the compensation rate was reduced to the “actual avoided cost,” a significantly lower rate.
The CPUC argued that these changes reflect more accurate price signals, promoting electrification across California.
Regulators noted that the former NEM rules were too generous and contributed to a “cost shift” that unfairly impacted non-solar customers, forcing them to shoulder a disproportionate share of system maintenance costs such as substations and infrastructure.
Opponents of the CPUC policy contest this cost-shift claim, asserting that it fails to adequately factor in the advantages of rooftop solar—such as diminishing the need for utilities to invest in further infrastructure.
Critics fear that the reduced compensation under NEM 3.0 may discourage potential customers from adopting solar energy, as the initial investment would take longer to recover.
After the CPUC’s ruling, the Center for Biological Diversity, the Environmental Working Group, and the San Diego-based Protect Our Communities Foundation took legal action to contest the new regulations.
When the CPUC rejected their request for a rehearing, the groups pursued their case in the California Court of Appeals.
In December 2023, however, the appeals court upheld the CPUC’s decision in a 40-page ruling, with Associate Justice Victor Rodríguez emphasizing the need to grant “great weight” to the CPUC’s interpretations of public utility laws.
Justice Rodríguez elaborated, explaining that the commission’s constitutional status warrants a particularly deferential standard of review.
Undaunted, the three organizations escalated their fight by petitioning the California Supreme Court to review the case, which the high court agreed to hear.
This Wednesday’s oral arguments will be presented before all seven justices of the California Supreme Court, marking a crucial moment for the future of rooftop solar policy in the state.
Lin highlighted the significance of the hearing, stating, “This case revolves around whether the Public Utilities Commission actually looked at the cost and benefits of rooftop solar, specifically.”
He referred to a legislative statute that mandates the CPUC to encourage the expansion of renewable energy sources in California.
The petitioners also assert that the appeals court was overly deferential to the CPUC and that its ruling did not sufficiently address the needs of disadvantaged communities.
A spokesperson from the CPUC has chosen not to comment on the litigation, citing its ongoing nature, but directed attention to the arguments presented in the appeals court’s ruling.
Analysts expect the Supreme Court’s decision will not be delivered immediately, with a ruling likely to come in about a month after the oral arguments.
California leads the nation with more than 2 million solar installations across homes, businesses, and other structures.
Current rules allow solar customers who installed their systems prior to NEM 3.0 to continue receiving compensation at the retail rate for a period of 20 years.
For instance, if a customer installed their solar system in 2018, they will receive the retail rate until 2038, after which they will transition to the lower NEM 3.0 rate.
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