The decision may come down within the next couple of months. But if the court of appeals wishes to hear oral arguments, the ruling will be issued later in the year.<\/p>\n
\u201cThere\u2019s a lot hanging on this one,\u201d said Roger Lin, senior attorney for the Center for Biological Diversity<\/a>, one of three environmental organizations that took their case to court against the public utilities commission, or CPUC.<\/p>\n The decision could overturn, make revisions or simply keep in place what\u2019s now on the regulatory books.<\/p>\n How we got here<\/p>\n The case stems from a decision the CPUC made a little more than three years ago regarding the third iteration of California\u2019s Net Energy Metering tariff program, colloquially known as NEM 3.0.<\/p>\n Under a net energy metering billing mechanism<\/a>, customers with rooftop solar receive credits that are applied to their utility bills when their systems produce excess power.<\/p>\n In December 2022, the\u00a0CPUC\u2019s five commissioners unanimously voted<\/a> to update the state\u2019s rooftop solar regulations. The complicated 260-page decision<\/a>\u00a0included incentives to encourage customers to pair their solar installations with battery storage systems.<\/p>\n But the new rules included a revision mandating that new rooftop solar customers will no longer be credited at the retail rate of electricity when their systems generated surplus energy. Instead, they get paid at the \u201cactual avoided cost,\u201d which is lower.<\/p>\n The CPUC\u2019s commissioners said the updated framework, which went into effect in April 2023, sends \u201cmore accurate price signals that encourage electrification\u201d across the state.<\/p>\n But opponents said reducing the rate of compensation undercuts the incentive for potential customers to put solar on their roofs because it will take longer to recoup the tens of thousands of dollars customers typically spend to install the systems.<\/p>\n The\u00a0Center for Biological Diversity<\/a>, the\u00a0Environmental Working Group<\/a>\u00a0and San Diego-based\u00a0Protect Our Communities Foundation<\/a> filed suit, challenging the new tariff rules.<\/p>\n Despite initially losing in the court of appeals, the environmental groups took their case to the California Supreme Court. And in August 2025<\/a>, all seven justices at the high court said the appeals court afforded the CPUC too much latitude when the commission passed NEM 3.0.<\/p>\n In its\u00a018-page decision<\/a>, the state Supreme Court said it was not concluding the new solar rules are \u201ccorrect or incorrect \u2014 only that the Court of Appeal erred in applying an unduly deferential standard of review to reach that conclusion.\u201d<\/p>\n The high court kicked the case back to a panel of three appeals court justices in San Francisco<\/a>, and that\u2019s where it now stands.<\/p>\n Both the CPUC and the environmental groups have submitted multiple briefs before the appeals court. So have the state\u2019s three big investor-owned utilities \u2014 Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison \u2014 who are listed as parties of interest on the side of the CPUC.<\/p>\n When will a decision come?<\/p>\n After receiving arguments and responses from each respective side by Jan. 12, the appeals court can issue a decision within 90 days \u2014 which means a ruling may come down any time between now and mid-April.<\/p>\n However, last week the environmental groups submitted filings that requested the panel conduct oral arguments before rendering a decision.<\/p>\n \u201cThis is a complex case,\u201d Lin said. \u201cThere are statutory interpretation questions that have to be discussed and we think it would be helpful for the court to have oral arguments.\u201d<\/p>\n If the justices agree to hear oral arguments, the 90-day clock gets re-set, possibly pushing a final decision back to as late as October.<\/p>\n The arguments of the opposing sides<\/p>\n Environmental groups point to the passage of 2013\u2019s Assembly Bill 327 by the state Legislature that includes a provision<\/a> directing that any NEM tariff put into place by the CPUC \u201censures that customer-sited renewable distributed generation continues to grow sustainably\u201d across California. That provision is also a statute in the Public Utilities Code<\/a>.\n<\/p>\n The petitioners say NEM 3.0 violates the statute and the Legislature\u2019s intent.<\/p>\n They also say it doesn\u2019t go far enough to encompass AB 327\u2019s directive that solar tariffs \u201cinclude specific alternatives designed for growth among residential customers in disadvantaged communities.\u201d<\/p>\n \u201cIt\u2019s a long-held tenet in the law that the courts have the last say on what a statute means,\u201d said Lin of the Center for Biological Diversity. \u201cAnd this case stands for making sure that keeps happening with this commission that, unfortunately, has turned out to be a runaway agency in recent times, especially for the utilities in regards to local generation opportunities like rooftop solar.\u201d<\/p>\n The CPUC\u2019s attorneys counter by saying the statute in the Public Utilities Code calls for the commission to weigh the pros and cons of any new rules.<\/p>\n \u201cThe Commission did exactly that,\u201d when it passed NEM 3.0, California Attorney General Rob Bonta and Deputy Solicitor General Mica Moore said in their supplemental response brief to the appeals court<\/a>. \u201cIt conducted a cost-benefit analysis for the successor tariff, and used the results to inform the design of the tariff.\u201d<\/p>\n The brief goes on to say the CPUC structured the tariff \u201cso that it allows customers who install rooftop solar to pay back the upfront cost of installation within about nine years.\u201d Notwithstanding the state Supreme Court\u2019s earlier ruling, \u201cthe Commission is entitled to significant deference\u201d and the \u201climited issues before the (appeals court panel) provide no basis to set aside\u201d the NEM 3.0 decision.<\/p>\n One of the major factors behind the NEM 3.0 tariff is the \u201ccost shift\u201d debate.<\/p>\n The investor-owned utilities have long argued that the growing number of rooftop solar installations leaves customers who don\u2019t have solar paying an unfair share of the fixed costs that come with maintaining the electric system \u2014 substations, transformers, poles and wires, etc.<\/p>\n In the runup to the NEM 3.0 decision, the Natural Resources Defense Council<\/a>, an environmental group, and some consumer groups, including the California Public Advocates Office<\/a>, the independent arm of the CPUC, said the cost shift issue needed to be fixed.<\/p>\n \u201cThe cost shift had grown to $3.4 billion per year\u201d when the CPUC started proceedings that led to the NEM 3.0 tariff, the brief by Bonta and Moore said.<\/p>\n Others dispute the cost-shift argument, saying it does not properly take into account the benefits of rooftop solar, such as reducing the need for utilities to spend ratepayer dollars on building more infrastructure.<\/p>\n![\"The](\"https:\/\/www.newsbeep.com\/us-ca\/wp-content\/uploads\/2026\/02\/SUT-L-CALIFORNIA-SUPREMECOURT-0604-01.jpg\")
The California Supreme Court hearing oral arguments on June 4, 2025 on a case regarding the California Public Utilities Commission’s decision in Dec. 2022 to revise Net Energy Metering rules for solar installations in the state. (Supreme Court of California webcast)<\/p>\n