California Supreme Court Replaces Greyhound Deference For Public Utilities Commission's Interpretation Of Its Code With Less Deferential Yamaha Standard

Center for Biological Diversity v. Public Utilities Commission, ___Cal.5th___, Case No. S283614 (Aug. 7, 2025).

In its opinion in Center for Biological Diversity v. Public Utilities Commission the California Supreme Court overturned the First Appellate District's application of the highly deferential Greyhound standard of review to the Commission's decision lowering compensation for "customer-generators," with instruction to review the matter anew under the less-deferential Yamaha standard, consistent with significant legislation from the late 1990's.

Background

On August 7, 2025, the California Supreme Court issued its decision in Center for Biological Diversity, Inc. v. Public Utilities Commission (Cal., Aug. 7, 2025, No. S283614), 2025 WL 2253765). In this landmark ruling, the Court rejected decades of heightened deference afforded to the Public Utilities Commission ("CPUC") under Greyhound, opting instead to bring the agency under a more flexible, case-specific standard of review.

Context and Legislative History

California has long encouraged homeowners with solar panels to export excess energy to the state's energy grid. These "customer-generators" are compensated through a Net Energy Metering program overseen by the CPUC. In 2013, the California Legislature passed Public Utilities Code § 2827.1, directing the CPUC to adopt a successor tariff (to the previous NEM regime) intended to compensate customers who generate electricity (e.g. through rooftop solar) and export the excess to the grid.

In 2022, the CPUC adopted the successor Net Energy Metering 3.0 (NEM 3.0) program, slashing the compensation paid to customer-generators. The Center for Biological diversity and other environmental groups sued, arguing that the new program violated PUC § 2827.1 by failing to ensure that customer-generated renewable energy continues to grow sustainably and by failing to account for all of the benefits of renewable energy.

At the Court of Appeal

The Court of Appeal upheld the CPUC's interpretation of § 2827.1 under the Greyhound standard. But beyond solar policy, the case gave the California Supreme Court a chance to reexamine a core question in administrative law: What standard governs judicial review of agency statutory interpretations?

The Greyhound Standard

As mentioned above, the Court of Appeal had applied the highly deferential Greyhound standard to its review of CPUC's decision, which is different to the interpretation standard used for other agencies. Under Greyhound, courts would uphold an agency's interpretation of a statute as long as it was "reasonably related to the statutory purposes and language." (Greyhound Lines, Inc. v. Public Utilities Commission, 68 Cal.2d at pp. 406, 410 (1968).)

This meant that courts would not second-guess an agency's legal interpretations as long as they were plausible, even if a court believed a different interpretation would be better. In short, under Greyhound, the CPUC received significant deference for its decisions. This standard closely resembled the federal Chevron deference framework, which was recently overturned in Loper Bright v. Raimondo. (Loper Bright Enterprises v. Raimondo (2024) 144 S.Ct. 2244.)

The California Supreme Court's Decision— New Standard Emerges

The Court held that the "unique deferential" Greyhound standard differs from the standard generally applicable to agencies' statutory interpretations, and that the standard is no longer appropriate for evaluating CPUC's statutory interpretations. Instead, the court reaffirmed and adopted the more general approach established in Yamaha Corp. of America v. State Bd. of Equalization, 19 Cal.4th 1, 78 (1998).

Under the Yamaha standard, courts retain ultimate interpretive authority but may give respectful consideration to an agency's interpretation based on several factors, including:

• The consistency of the interpretation;
• The agency's expertise in the subject matter;
• Whether the interpretation was adopted formally (e.g., via quasi-legislative rulemaking) or informally (e.g., staff guidance); and
• Whether the statutory language is ambiguous.

The Yamaha Court distinguished between quasi-legislative regulations (which may be entitled to judicial deference) and statutory interpretations, which are subject to independent judicial review. For example, a formal regulation interpreting a technical statute within the agency's subject area may warrant some deference, while an informal memorandum interpreting a statute would not.

Conclusion and Implications

The California Supreme Court's decision in Center for Biological Diversity marks a major shift in how courts evaluate the CPUC's statutory interpretations. While the Court preserved the limited use of Greyhound deference for rate-setting decisions involving water corporations governed by Public Utilities Code § 1757.1, it brought the CPUC in line with other state agencies by applying the Yamaha framework.

Courts will now independently interpret statutes and afford deference to the CPUC's interpretation only if it is persuasive-based on factors such as the agency's expertise, the consistency of its interpretation, and the formality of its adoption.

Although this decision may not significantly change how most state agencies are reviewed—since Yamaha already governs them—it could lead to increased litigation against CPUC decisions by stakeholders. More broadly, the Center for Biological Diversity decision reflects a judicial trend toward limiting agency autonomy in statutory interpretation. It aligns with the U.S. Supreme Court's 2024 decision in Loper Bright Enterprises v. Raimondo, which overturned the federal Chevron doctrine. Together, these decisions signal a shift away from strong agency deference and toward a model of judicial textualism and control.

Originally published by California Water Law & Policy Reporter.

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