Reported / Citable
Background
The California Public Utilities Commission opened a multistage rulemaking to implement Senate Bill 1339 and encourage commercial microgrids—localized electric systems capable of operating independently from the larger grid. In the fifth track, the commission approved multi-property microgrid tariffs proposed by Southern California Edison, PG&E, and San Diego Gas & Electric.
Applied Medical Resources, a Southern California medical-device manufacturer, proposed changes to existing Edison tariff rules intended to facilitate a privately developed microgrid. After the commission rejected that approach and denied rehearing, the company sought appellate review, arguing that the decisions rested on unsupported statements and failed to follow governing law.
The Court’s Holding
The Court of Appeal affirmed. The PUC has broad constitutional and statutory power over utilities, and its quasi-legislative policy choices receive highly deferential review. The commission reasonably concluded that Applied Medical’s proposal could allow a private operator to distribute electricity for compensation in ways implicating the statutory definition of an electrical corporation and the commission’s regulatory responsibilities.
Senate Bill 1339 directed the commission to develop a microgrid framework, but it did not require adoption of Applied Medical’s specific tariff changes or any particular interconnection model. The commission could proceed incrementally and select the investor-owned utilities’ tariffs. The company’s late argument that the decisions categorically barred neighborhood microgrids was forfeited and unsupported; rejection of one proposal did not prohibit all privately developed microgrids.
Key Takeaways
- Courts give the PUC substantial latitude when reviewing industry-wide, quasi-legislative rulemaking.
- A statutory direction to facilitate commercialization does not compel the commission to adopt a participant’s preferred tariff.
- Private microgrid arrangements may trigger utility regulation when they involve owning or operating electric plant for compensation.
- Parties seeking review must preserve specific objections in their rehearing application and opening papers.
Why It Matters
Businesses exploring campus, multi-property, or neighborhood microgrids cannot assume that a private contractual structure avoids utility regulation. Project design, compensation, distribution across property, and interconnection terms all matter.
The ruling also underscores the practical importance of participating early in PUC rulemakings. A regulated entity should develop its evidentiary record and preserve every statutory objection before rehearing; courts ordinarily will not redesign the commission’s chosen framework on review.