Filed 8/25/26 (unmodified opinion attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
APPLIED MEDICAL RESOURCES
CORPORATION,
Petitioner, G065804
v. (Cal. P.U.C. Dec. Nos.
24-11-004, 25-06-067)
PUBLIC UTILITIES COMMISSION,
ORDER GRANTING
Respondent. PETITION FOR
MODIFICATION AND
SOUTHERN CALIFORNIA EDISON MODIFYING OPINION; NO
COMPANY et al., CHANGE IN JUDGMENT
Real Party in Interest.
The Real Parties in Interest have filed a petition to modify the
opinion filed on August 4, 2026. The petition is GRANTED and it is ordered
the opinion be modified as follows:
1. On page 5, delete the second full paragraph, which begins with
“Section 218, subdivision (b) (section 218(b)) as relevant here,” and replace it
with the following:
Section 218, subdivision (b) (section 218(b)), as relevant here,
states: “‘Electrical corporation’ does not include a corporation or person
employing cogeneration technology or producing power from other than a
conventional power source for the generation of electricity solely for any one
or more of the following purposes: [¶] (1) Its own use or the use of its tenants.
[¶] (2) The use of or sale to not more than two other corporations or persons
solely for use on the real property on which the electricity is generated or on
real property immediately adjacent thereto, unless there is an intervening
public street constituting the boundary between the real property on which
the electricity is generated and the immediately adjacent property and one or
more of the following applies: [¶] (A) The real property on which the
electricity is generated and the immediately adjacent real property is not
under common ownership or control, or that common ownership or control
was gained solely for purposes of sale of the electricity so generated and not
for other business purposes.”
2. On page 29, delete the first full paragraph and the second
paragraph, which continues onto page 30 for two lines, and replace them with
the following single paragraph:
AMR contends the PUC misinterpreted section 218 by finding
that an entity selling electricity to more than two contiguous parcels or across
a street must become a regulated electrical company. AMR argues that
“[b]ecause AMR’s proposal was expressly limited to microgrids that do not
sell electricity or otherwise violate Section 218, nothing in Section 218
justified rejecting the proposal. But assuming the PUC did misinterpret
section 218 in that respect, AMR has failed to show the error was prejudicial.
(Community Choice, supra, 103 Cal.App.5th at p. 860 [PUC decisions may be
set aside if its failure to proceed in the manner required by law resulted in
prejudice].) The PUC’s conclusion that AMR’s proposal violated section 218
was not based on whether AMR or another microgrid operator sells
electricity, but upon the potential for the proposed rule changes to allow an
unregulated microgrid operator to control a regulated utility’s distribution
infrastructure. In addition, as we shall discuss, the PUC’s decisions were
based on other factors, including sections 399.2 and 451 and the need to
ensure system, worker, and public safety. In light of those factors, it is not
reasonably probable the PUC would have reached a result more favorable to
AMR in the absence of the presumed error. (Cassim v. Allstate Ins. Co. (2004)
33 Cal.4th 780, 800.)
It is hereby ORDERED that the opinion filed on August 4, 2026
be further modified as follows:
1. In the caption, delete the period after “Respondent” and
replace with a semicolon so it reads: “Respondent;”
3
2. Throughout the opinion, including the caption, delete the
initial letter “D.” preceding the Public Utility Commission decision numbers.
3. On page 2, in the first sentence of the first paragraph under
“INTRODUCTION,” between “Senate Bill No. 1339” and “(Stats. 2018, ch.
566),” add “(2017-2018 Reg. Sess.)” so the sentence reads:
This writ of review1 proceeding arises out of a rulemaking2
instituted by the California Public Utilities Commission (the PUC) to begin
the creation of a policy framework for facilitating the commercialization of
microgrids under Senate Bill No. 1339 (2017-2018 Reg. Sess.) (Stats. 2018,
ch. 566), Public Utilities Code section 8370 et seq.
4. On page 8, the last full paragraph, which begins with “The
PUC disputes” replace “PUC” with “SCE” so the sentence reads:
SCE disputes AMR’s claim that it denied AMR’s request without
legal bases and believed it had unfettered discretion to do so.
5. On page 10, first paragraph, lines 7 through 11, delete “(3)
SCE, PG&E, and SDG&E to ‘each form a new microgrid tariff for their
respective service territories’; (4) SCE, PG&E, and SDG&E to ‘jointly develop
a Microgrid Incentive Program’; and (5) SCE, PG&E, and SDG&E ‘to develop
pathways for the evaluation and approval of low-cost, reliable electrical
isolation methods’” and replace it with the following:
(3) SCE, PG&E, and SDG&E to (a) “each form a new microgrid
tariff for their respective service territories” (b) “jointly develop a Microgrid
4
Incentive Program” (c) “to develop pathways for the evaluation and approval
of low-cost, reliable electrical isolation methods.”
6. On page 14, the last full paragraph, first two sentences
starting with “The CUE,” delete the word “The” so the sentences read:
CUE also submitted comments to AMR’s tariff proposals. CUE
asserted that any proposal that allowed a nonutility to control the power grid
was “totally and unequivocally unacceptable” because “[t]o ensure that
‘system, public, and worker safety are given the highest priority,’ regulated
utilities absolutely must operate and control their distribution grid, including
microgrids serving multiple properties that connect to or disconnect from
larger portions of the grid.” (Fn. omitted.)
7. On page 18, first full paragraph, delete the word “that” after
“the statutory requirements of section 8371 and” so the sentence reads:
As to AMR’s second ground for rehearing, the PUC found it had
satisfied the statutory requirements of section 8371 and “AMR fails to point
to any provision of section 8371 that mandates the adoption of its proposal.”
(Boldface omitted.)
8. On page 23, the second full paragraph, replace the word “arise”
with the word “arose” so the paragraph reads:
It is not entirely clear whether AMR’s grievance against SCE
arose from its denial of an interconnection request or of a request to
accommodate a connection between AMR’s two properties independently of
SCE’s distribution system.
5
9. On page 24, the first full paragraph, second sentence replace
“the mistake is” with “the mistakes are” so the paragraph reads:
But even if the PUC misstated the record in the way AMR
describes, the mistakes are immaterial because the supposedly misstated
facts were unnecessary to the PUC’s decisions. In track 5 the PUC was
neither determining whether AMR’s project should go forward nor
adjudicating the dispute between AMR and SCE. The issue before the PUC
was whether to adopt AMR’s proposed rule changes, and those changes were
not limited in application to AMR’s project or its dispute with SCE. Those
proposed rule changes were of universal application and do not stand or fall
on the specific facts relating to AMR and its microgrid project.
10. On page 41, in the signature block, delete “ACTING” after
“MOTOIKE” so the signature line reads:
“MOTOIKE, P. J.”
There is no change in the judgment.
SANCHEZ, J.
WE CONCUR:
MOTOIKE, P. J.
MOORE, J.
6
Filed 8/4/26 (unmodified opinion)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
APPLIED MEDICAL RESOURCES
CORPORATION,
Petitioner,
v.
G065804
PUBLIC UTILITIES
COMMISSION, (Cal. P.U.C. Dec. Nos.
D.24-11-004, D.25-06-067)
Respondent.
OPINION
SOUTHERN CALIFORNIA
EDISON COMPANY et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS; petition for a writ of review of
decisions by the California Public Utilities Commission. Decisions affirmed.
Request for Judicial Notice. Granted.
Knobbe, Martens, Olson & Bear, Mark D. Kachner, Ben Shiroma
and Stephen C. Jensen for Petitioner.
Christine Hammond, Sophia J. Park, C. Willie Duhart and
Shanna Foley for Respondent.
Munger, Tolles & Olson, Henry Weissmann and Jeffrey Y. Wu for
Real Parties in Interest Southern California Edison Company, Pacific Gas &
Electric Company and San Diego Gas & Electric Company.
Adams Broadwell Joseph & Cardozo, Rachael E. Koss and Darion
N. Johnston for Real Party in Interest Coalition of California Utility
Employees.
* * *
INTRODUCTION
This writ of review 1 proceeding arises out of a rulemaking 2
instituted by the California Public Utilities Commission (the PUC) to begin
the creation of a policy framework for facilitating the commercialization of
microgrids under Senate Bill No. 1339 (Stats. 2018, ch. 566), Public Utilities
Code section 8370 et seq. The rulemaking proceeded in five tracks. In track
five, the PUC issued decision No. D.24-11-004 adopting the multi-property
microgrid tariffs 3 submitted by Southern California Edison (SCE), Pacific
1 “A petition for a ‘writ of review’ is the procedural device for
obtaining judicial review of final decisions of the Agricultural Labor Relations
Board, Alcoholic Beverage Control Appeals Board, Public Utilities
Commission, and Workers’ Compensation Appeals Board.” (Superior Court v.
Public Employment Relations Bd. (2018) 30 Cal.App.5th 158, 169, fn. 4; see
generally Pub. Util. Code, § 1756, subd. (a).)
2 A rulemaking is a quasi-legislative proceeding which
establishes rules affecting an entire industry. (Pub. Util. Code, § 1701.1,
subds. (a), (d)(1).)
3 Tariffs set forth the terms and conditions of service to a utility’s
customers and may refer to a utility’s individual rates, tolls, rentals, charges,
classifications, special conditions, and rules. (Cal. Pub. Util. Com. General
Order 96-B, General Rule 3.15; see Pub. Util. Code, § 489, subd. (a); Bullseye
Telecom, Inc. v. Public Utilities Com. (2021) 66 Cal.App.5th 301, 317, fn. 17;
Cal. Pub. Util. Com., Tariff Filing Requirements
2
Gas & Electric (PG&E), and San Diego Gas & Electric (SDG&E). In that
decision, the PUC also declined to adopt a proposed tariff by Applied Medical
Resources Corporation (AMR), which had sought to amend three of SCE’s
existing tariff rules. The PUC later denied AMR’s application for rehearing in
PUC decision No. D.25-06-067.
AMR brought a petition for writ of review to challenge PUC
decision Nos. D.24-11-004 and D.25-06.067. We directed the issuance of a
writ in order to review those decisions.
AMR contends the PUC decisions must be reversed because the
PUC made statements unsupported by the record and failed to proceed in the
manner required by law. We conclude otherwise. The PUC’s decisions are
consistent with controlling law, most notably Public Utilities Code sections
218 and 8371, 4 and are not arbitrary, capricious, or lacking in evidentiary
support. Accordingly, we affirm the PUC’s decisions.
THE PARTIES
The petitioner is AMR, a California corporation with its principal
place of business in Rancho Santa Margarita. AMR makes “high quality
medical devices in cutting edge manufacturing facilities in Southern
California.”
The respondent is the PUC, a state agency created by article XII
of the California Constitution. (Cal. Const., art. XII, §§ 1, 2.)
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[as of Aug. 4, 2026], archived at:
4 Further code references are to the Public Utilities Code unless
otherwise indicated.
3
Real parties in interest SCE, PG&E, and SDG&E are public
utilities under section 216, subdivision (a)(1) and subject to PUC regulation
under section 701. (See Cal. Const., art. XII, § 3.) SCE, PG&E, and SDG&E
refer to themselves collectively as the Investor-Owned Utilities or IOU’s. We
shall do the same.
Real party in interest Coalition of California Utility Employees
(CUE) is a coalition of labor unions that represent workers employed by the
IOU’s.
BACKGROUND LAW
The PUC’s Authority
“‘The Constitution confers broad authority on the [PUC] to
regulate utilities, including the power to fix rates, establish rules, hold
various types of hearings, award reparation, and establish its own
procedures.’” (San Diego Gas & Electric Co. v. Superior Court (1996) 13
Cal.4th 893, 914–915, citing Cal. Const., art. XII, §§ 2, 4, 6.)
In addition to the PUC’s constitutional powers, the Legislature
has authorized the PUC to “supervise and regulate every public utility” in
California and to “do all things, whether specifically designated in [the Public
Utilities Act] or in addition thereto, which are necessary and convenient” in
the exercise of its jurisdiction over public utilities. (§ 701, italics added.) The
PUC’s authority is therefore to be liberally construed. (Southern California
Edison Co. v. Peevey (2003) 31 Cal.4th 781, 792.)
Sections 216 and 218
Sections 216 and 218 are of particular importance to this matter.
Section 216, subdivision (a) defines the term “‘Public utility’” to include
“every . . . electrical corporation . . . where the service is performed for, or the
commodity is delivered to, the public or any portion thereof.”
4
Section 218, subdivision (a) (section 218(a)) defines “‘Electrical
corporation’” to include “every corporation or person owning, controlling,
operating, or managing any electric plant for compensation within this state,
except where electricity is generated on or distributed by the producer
through private property solely for its own use or the use of its tenants and
not for sale or transmission to others.” SCE, PG&E, and SDG&E are
electrical corporations under section 218(a).
Section 218, subdivision (b) (section 218(b)) as relevant here, also
defines an electrical corporation as not including a corporation which
produces power from other than a conventional power source for generating
electricity for at least one of the following purposes: 1. “[The corporation’s]
own use or the use of its tenants”; 2. “The use of or sale to not more than two
other corporations or persons solely for use on the real property on which the
electricity is generated or on real property immediately adjacent thereto.”
(§ 218, subd. (b)(1), (2).) As to the second purpose, if there is an intervening
public street constituting the boundary between the real property on which
the electricity is generated and the immediately adjacent property, then the
corporation is not deemed to be an electrical corporation if “[t]he real
property on which the electricity is generated and the immediately adjacent
real property is not under common ownership or control, or that common
ownership or control was gained solely for purposes of sale of the electricity
so generated and not for other business purposes.” 5 (Id., subd. (b)(2)(A).)
5 There are two other factors determinative of whether the
corporation would be an electrical corporation in the case of an intervening
public street, but they are not relevant here.
5
Senate Bill No. 1339
Recognizing the potential benefits of microgrids, the Legislature
in 2018 enacted Senate Bill No. 1339 (Stats. 2018, ch. 566, § 2), which added
sections 8370, 8371, and 8372 to the Public Utilities Code. (See Historical and
Statutory Notes, 57C West’s Ann. Pub. Util. Code (2026 supp.) foll. § 8370,
p. 31.) Section 8371 directed the PUC, in consultation with the Energy
Commission and the Independent System Operator, to undertake certain
specified actions by December 1, 2020 “to facilitate the commercialization of
microgrids for distribution customers of large electrical corporations.”
(§ 8371, subd. (a).) Those actions included “develop[ing] methods to reduce
barriers for microgrid deployment” and “develop[ing] separate large electrical
corporation rates and tariffs, as necessary, to support microgrids, while
ensuring that system, public, and worker safety are given the highest
priority.” (Id., subds. (b), (d).)
A microgrid is statutorily defined as “an interconnected system of
loads and energy resources, including, but not limited to, distributed energy
resources, energy storage, demand response tools, or other management,
forecasting, and analytical tools, appropriately sized to meet customer needs,
within a clearly defined electrical boundary that can act as a single,
controllable entity, and can connect to, disconnect from, or run in parallel
with, larger portions of the electrical grid, or can be managed and isolated to
withstand larger disturbances and maintain electrical supply to connected
critical infrastructure.” (§ 8370, subd. (d).) 6
6 A simpler definition of microgrid is found in the June 27, 2018
Assembly Committee on Utilities and Energy Analysis of Senate Bill No.
1339: “Generally, a microgrid is understood to be a self-contained, small,
electricity system with the ability to manage critical customer resources,
disconnect from the electric grid when the need arises, and provide the
6
The term “‘[d]istributed energy resource’” is defined to mean “an
electric generation or storage technology” that complies with State Air
Resources Board emissions standards. (§ 8370, subd. (b).)
BACKGROUND FACTS
This proceeding arises out of a dispute between AMR and SCE
over electrically connecting a microgrid between two AMR-owned properties
that are separated by a public street. In its petition for review, AMR alleged
it “generates electricity solely for its own consumption on its properties using
private resources and does not export or sell electricity to others. . . . AMR
employs these microgrids at several of its properties that are interconnected
to [SCE]’s distribution grid.” 7
According to AMR, since June 2015 “AMR has been attempting to
build a microgrid, by utilizing private facilities, i.e., its own resources and
equipment, not utility-owned facilities, to electrically connect two AMR-
owned properties across a public street.” AMR’s goal was to electrically
connect its two properties using an “AMR-owned distribution line” or “private
distribution facilities.”
AMR also intended its microgrid to be interconnected to SCE’s
distribution grid using facilities installed and owned by SCE. AMR thus
customer with different levels of critical support.” (Assem. Com. on Utilities
and Energy, Analysis of Sen. Bill No. 1339 (2017–2018 Reg. Sess.) as
amended June 11, 2018, p. 2.)
7 AMR refers to its connection to SCE’s distribution grid as an
“interconnection.” According to AMR, its proposed electrical connection
between its two properties is not an interconnection because the connection
would not go through SCE’s distribution grid. SCE also uses the term
interconnection to refer to “the interconnection of a generating facility to
SCE’s electrical grid.” We shall follow the same distinction between
interconnection and connection.
7
alleged, “[a]though AMR endeavors to generate enough power to be self-
sustaining for most days, at times its load exceeds its generation capabilities,
and an additional power source is needed. At these times, AMR relies on
interconnection to [SCE]’s distribution grid for supplemental power.” (Fn.
omitted.)
In filings with the PUC, AMR claimed that “[d]espite AMR
obtaining the necessary local approvals and acknowledging there were no
Section 218 issues applicable to AMR’s microgrid proposal, SCE declined to
take further action to support AMR’s microgrid deployment arguing that it
had unfettered discretion to decline to add any facilities to its system or make
any adjustments to its facilities to effectuate AMR’s microgrid—even if AMR
agreed to pay for all such facilities.” AMR also argued to the PUC that “SCE
apparently believes it can refuse to interconnect AMR’s Section 218
compliant microgrid and refuse to identify any specific basis for the refusal.”
AMR alleged in its petition for writ of review that since 2018 “SCE has
denied without legal basis AMR’s requests to . . . electrically connect AMR’s
two properties using AMR’s privately owned equipment.” Such electrical
connection, AMR claimed, was necessary for it to most efficiently utilize its
microgrid.
The PUC disputes AMR’s claim that it denied AMR’s request
without legal bases and believed it had unfettered discretion to do so. In
comments filed as part of the PUC rulemaking, SCE stated it had denied
AMR’s request for these reasons: “AMR[’s] . . . project, which sought to
distribute electricity to eight of its 14 buildings, would require electric
connections that travel under public streets pursuant to SCE’s franchise
agreement. To enable this, AMR’s proposal would result in SCE’s existing
facilities beyond the meter, including underground cables, transformers, and
8
related equipment being sold to AMR, removed, or abandoned in place. As
SCE currently uses those facilities to serve other customers, as well as AMR,
it would impair SCE’s abilities to service those customers or require
construction of new facilities to serve them and could make those SCE
customers more vulnerable to an outage or other electrical event. Under state
law and [ ]PUC regulation, the utility is the entity responsible for the safe
operation of the grid, and it is therefore appropriate for the utility to have
discretion to decline to accept an added facilities proposal or decline to accept
a proposal that requires the abandonment, sale, and/or replacement of
existing assets.”
PROCEDURAL HISTORY
I.
PUC’s Rulemaking Proceeding to Facilitate
Commercialization of Microgrids, Tracks 1-4
In September 2019, the PUC issued an order instituting
Rulemaking 19-09-009 to begin creating “a policy framework surrounding the
commercialization of microgrids” with a “focus on implementation of Senate
Bill (SB) 1339.” The scope of the rulemaking extended to “all microgrid policy
framework issues,” including “programs, rules, and rates related to
microgrids that will help accomplish the state’s broader policy goals.”
The PUC divided the rulemaking into five tracks. Track 1
addressed “the [PUC]’s goal of deploying resiliency planning in areas that are
prone to outage events and wildfires, with the goal of establishing key
microgrid and resiliency strategies as soon as possible.” The PUC issued its
track 1 decision (No. D.20-06-017) in June 2020.
In track 2, the PUC was required “to implement microgrid
standards, protocols, guidelines, methods, rates, and tariffs as well as reduce
9
barriers to microgrid deployment statewide.” The PUC issued its track 2
decision (No. D.21-01-018) in January 2021. In that decision, the PUC
adopted “microgrid rates, tariffs, and rules for large investor owned electrical
corporations.” The PUC directed (1) SCE “to revise its Rule 2 to permit
installing added or special facilities microgrids”; (2) SCE and PG&E “to revise
their Rule(s) 18, and [SDG&E] to revise its Rule 19, to allow microgrids to
serve critical customers on adjacent parcels”; (3) SCE, PG&E, and SDG&E to
“each form a new microgrid tariff for their respective service territories”;
(4) SCE, PG&E, and SDG&E to “jointly develop a Microgrid Incentive
Program”; and (5) SCE, PG&E, and SDG&E “to develop pathways for the
evaluation and approval of low-cost, reliable electrical isolation methods.”
Following the decision on track 2, the PUC proceeded to track 3.
In its decision on track 3 (No. D.21-07-011), issued in July 2021, the PUC
directed PG&E, SCE, and SDG&E “to provide rate schedule(s) that suspend
the capacity reservation component of their standby charge for eligible
microgrids that meet the California Air Resources Board air pollution
standards for generation.”
Track 4 proceeded in two phases. In its decision on the first phase
of track 4 (No. D.21-12-004), issued in December 2021, the PUC adopted
“enhanced summer 2022 and summer 2023 requirements” for PG&E and
SDG&E. In its decision on the second phase of track 4 (No. D.23-04-034),
issued in April 2023, the PUC adopted implementation rules for the
Microgrid Incentive Program, which was intended to encourage renewable
microgrid development. The PUC announced that “issues pertaining to the
microgrid multi-property tariff” would be resolved in track 5.
10
II.
Track 5: Development of a Microgrid Multi-Property Tariff
A. Scope of Track 5
The purpose of track 5 was to develop a tariff for multi-property
microgrids. In the scoping memorandum for track 5, 8 issued in July 2023, the
PUC identified the issues for determination, which included, “[w]hat guiding
principles should the [PUC] adopt to assist in the development of a microgrid
multi-property tariff?” and “[w]hether PG&E should modify its Community
Microgrid Enablement Tariff.”
In August 2023, the assigned administrative law judge (ALJ)
issued a ruling directing the IOU’s to prepare and submit a draft pro-forma
standard multi-property microgrid tariff based upon PG&E’s Community
Microgrid Enablement Tariff. The ALJ directed the IOU’s to follow certain
requirements when forming those tariffs, including to “[c]omply with Section
218,” to “[a]ddress and prioritize safety and system reliability, including but
not limited to, public and worker safety, utility system protection, and
cybersecurity,” and to “[a]llow for the utility to always maintain control of its
distribution system.”
In October 2023, the ALJ modified the scoping memorandum to
allow stakeholders, which included AMR, to submit draft proposed microgrid
multi-property tariffs of their own. The ALJ directed the stakeholders to
follow the same requirements imposed on the IOU’s for forming those tariffs.
8 A scoping memorandum “sets forth the issues, need for hearing,
schedule, category, and other matters necessary to scope this proceeding.”
11
B. SCE’s Proposed Tariff and AMR’s Proposed Tariff for Track 5
In October 2023, SCE, on behalf of the IOU’s, submitted a
proposed tariff based on a revised version of the Community Microgrid
Enablement Tariff. AMR and other stakeholders submitted comments on the
IOU’s proposed tariff, tariff proposals of their own, and reply comments.
Motivated by its experience with SCE, AMR submitted a
proposed tariff in order “to remove barriers to the commercialization of multi-
property microgrids pursuant to Public Utilities Code Sec. 8371.” According
to AMR, SCE had claimed it had “unfettered discretion” under SCE Rules 2
and 16 of its tariff books9 “to decline to take any action to help AMR develop
its microgrid.” To eliminate any such discretion, AMR proposed three
“focused modifications” to SCE Rules 2, 16, and 18. SCE Rule 2 is entitled
“Description of Service,” SCE Rule 16 is entitled “Service Extensions,” and
SCE Rule 18 is entitled “Supply to Separate Premises and Use by Others.”
(Capitalization omitted.)
The following are portions of SCE Rules 2, 16, and 18, with
AMR’s proposed rule changes bracketed and in italics.
SCE Rule 2.H.1: “Added Facilities. [¶] 1. Where an applicant
requests and SCE agrees to install facilities which are in addition to, or in
9 The IOU’s request we take judicial notice of SCE rules 2, 16,
and 18 of its tariff books pursuant to Evidence Code section 451, subdivision
(a). We grant this unopposed request. “A public utility’s tariffs filed with the
PUC have the force and effect of law.” (Dollar-A-Day Rent-A-Car Systems,
Inc. v. Pacific Tel. & Tel. Co. (1972) 26 Cal.App.3d 454, 457, citing Dyke
Water Co. v. Public Utilities Com. (1961) 56 Cal.2d 105, 123 [Once a tariff is
published and filed with the PUC, it has “the force and effect of a statute”].)
SCE Rules 2, 16, and 18 are directly relevant to this writ of review
proceeding. We are therefore required by Evidence Code section 451,
subdivision (a) to take judicial notice of the SCE tariff rules 2, 16, and 18. We
refer to an SCE tariff rule as “SCE Rule” followed by the number.
12
substitution for the standard facilities SCE would normally install, the costs
thereof shall be borne by the applicant. [Where the customer seeks to develop a
microgrid that is compliant with Section 218, SCE shall agree to install
facilities which are in addition to, or in substitution for the standard facilities
SCE would normally install, and that meet nationally recognized safety and
reliability standards, the costs thereof shall be borne by the applicant.] Unless
otherwise provided by SCE’s filed tariff schedules, these added facilities
(special facilities) will be installed, owned and maintained or allocated by
SCE solely as an accommodation to the applicant.” 10
SCE Rule 16.F.2.b: “Applicant Convenience. Any relocation or
rearrangement of SCE’s existing Service Facilities at the request of Applicant
(aesthetics, building additions, remodeling, etc.) and agreed upon by SCE
shall be performed in accordance with Section D above except that Applicant
shall pay SCE its total estimated costs. [Where the customer seeks to develop a
microgrid that is compliant with Section 218, SCE shall agree to relocate or
rearrange SCE’s existing facilities in a manner that meets nationally
recognized safety and reliability standards, the costs thereof shall be borne by
the applicant.]”
SCE Rule 18.C: “Other Uses or Premises. A customer shall not
use electricity received from SCE upon other Premises for other purposes
than those specified in the customer’s application or in the rate schedule
applied except: [¶] 1. For SCE’s Operating Convenience as defined in SCE’s
Rule 1, or [¶] . . . [¶] 2. Where, pursuant to Decision 21-01-018, behind-the-
10 The term “Added Facilities” is defined in SCE Rule 2.H.1 to
include “all types of equipment normally installed by SCE in the development
of its electrical transmission and distribution systems and facilities or
equipment related to SCE’s provision of service to a customer . . . .”
13
meter microgrids owned by public agencies or a third-party that primarily
serves a facility operated by, or on behalf of, a public agency are permitted to
supply electricity to a critical facility. . . . (Fns. omitted.) [[3.] Where a
customer operates a microgrid that serves the customer’s other Premises but
that otherwise complies with Public Utilities Code Section 218].”
C. Comments to AMR’s Proposed Rule Changes
In comments to AMR’s proposed rule changes, SCE stated:
“[AMR’s] project, which sought to distribute electricity to eight of its 14
buildings, would require electric connections that travel under public streets
pursuant to SCE’s franchise agreement. To enable this, AMR’s proposal
would result in SCE’s existing facilities beyond the meter, including
underground cables, transformers, and related equipment being sold to AMR,
removed, or abandoned in place. As SCE currently uses those facilities to
serve other customers, as well as AMR, it would impair SCE’s abilities to
service those customers or require construction of new facilities to serve them
and could make those SCE customers more vulnerable to an outage or other
electrical event.”
SCE also asserted it is responsible for safe grid operation and “it
is therefore appropriate for the utility to have discretion to decline to accept
an added facilities proposal or decline to accept a proposal that requires the
abandonment, sale, and/or replacement of existing assets.” SCE added that
AMR could bring its particular case to the PUC for determination, as any
complainant could do in a tariff dispute.
The CUE also submitted comments to AMR’s tariff proposals.
The CUE asserted that any proposal that allowed a nonutility to control the
power grid was “totally and unequivocally unacceptable” because “[t]o ensure
that ‘system, public, and worker safety are given the highest priority,’
14
regulated utilities absolutely must operate and control their distribution grid,
including microgrids serving multiple properties that connect to or disconnect
from larger portions of the grid.” (Fn. omitted.)
In response to SCE’s comments, AMR asserted the PUC “has a
defined process to administer necessary facility transfers and valuations
allowing the [PUC] to discharge the requirements of Public Utilities Code
Sec. 851.” Therefore, AMR claimed, “[r]emoving or transferring redundant or
unnecessary facilities as part of an interconnection should not operate as a
barrier to AMR’s planned microgrid.” AMR described as “vague and
uncertain” SCE’s fears that its microgrid project “would require deployment
of new facilities to avoid impairment to SCE’s continued service to its other
customers.” As to CUE’s comments, AMR asserted there was “no factual
basis” for the assumption that private distribution facilities are unsafe and
that local authorities would ensure that AMR’s microgrid meets applicable
safety standards.
III.
The PUC’s Decision on Track 5
The PUC issued its decision for track 5, No. D.24-11-004, in
November 2024. In its decision, the PUC adopted, with some modifications,
the multi-property microgrid tariffs submitted by the IOU’s. The PUC
declined to adopt various stakeholder recommendations that would have
“effectively exempt[ed] private microgrids that own, control, operate, or
manage distribution grid assets or other electrical infrastructure from [PUC]
jurisdiction.”
The PUC made 92 findings of fact, including the following,
generally applicable, findings: “13. To ensure system, public, and worker
safety are given the highest priority, a regulated utility must control and
15
operate a multi-property microgrid if the multi-property microgrid uses the
regulated utility’s distribution system. [¶] . . . [¶] 15. Worker safety and grid
reliability are absent from the stakeholder proposals. [¶] 16. Regulated
control of the distribution system is essential to public and worker safety and
grid reliability. [¶] 17. After any outage, crews must perform restoration work
to ensure that it is safe to reenergize the electric utility’s grid. [¶] 18. An
unregulated third party cannot decide when a microgrid may begin actively
discharging to the electric utility’s grid while utility employees may be
working on the grid. [¶] 19. To ensure system, public, and worker safety are
given the highest priority, regulated entities must operate and control their
electric distribution grid.”
The PUC declined to adopt AMR’s proposed rule changes. The
PUC found that “AMR’s proposed tariff focuses on a narrow set of priorities
and does not fit within the contours of Section 218” and “circumvents Section
218.” The PUC concluded: “1. The multi-property microgrid tariff proposals of
AMR. . . should be rejected because each of the proposals fail[s] to comply
with numerous statutory requirements of the California Public Utilities Code
and the [PUC]’s regulatory authority established in the California
Constitution. [¶] 2. AMR’s proposal should not be adopted because it does
[not] comply with Section 218.”
IV.
AMR’s Application for Rehearing
AMR applied for rehearing of the PUC’s decision. As relevant
here, AMR’s grounds for rehearing were: (1) AMR’s proposals were limited to
microgrids that were compliant with section 218 and therefore the PUC erred
by finding those proposals were an attempt to circumvent section 218 and
(2) the PUC’s decision violated section 8371.
16
The PUC denied AMR’s application for rehearing in its decision
No. D.25-06-067. As to AMR’s first ground for rehearing, the PUC found:
“AMR’s proposal involves delivering electricity between two AMR-owned
properties separated by a public street, using SCE-owned infrastructure. . . .
AMR’s proposed changes to [SCE] [R]ules 2, 16, and 18 were to enable AMR
to carry out its specific, localized project, and interconnect its properties
across public streets without investor-owned utility (IOU) interference.
[¶] The Decision found that AMR’s proposal, which would allow an
unregulated private party to control utility infrastructure and operate a
multi-property microgrid independently, violates section 218. . . . The [PUC]
also held that exclusive operational control over a microgrid, particularly the
ability to enter islanding mode without prior authorization from the
incumbent IOU, constitutes utility service requiring Commission
oversight. . . . [¶] Indeed, AMR’s proposed configuration raises both legal and
regulatory issues. The microgrid’s layout and ownership structure would
effectively allow AMR to function as a de facto utility without being subject to
the statutory and regulatory obligations imposed on electrical
corporations. . . . In this context, the crossing of public streets is significant
because it implicates utility franchise rights and easements and extends the
microgrid beyond the boundaries typically associated with private electric
systems.”
The PUC also found: “AMR’s proposal assigns full operational
and maintenance responsibilities for the microgrid to AMR, bypassing
standard utility safety protocols and oversight. . . . This raises concerns under
section 451, which requires that all public utility practices and infrastructure
maintain standards of safety, reliability, and service quality in the public
interest. If the IOU were no longer able to exercise discretion over whether
17
and how a microgrid interconnection operates, it could affect the IOU’s ability
to ensure compliance with those standards.”
As to AMR’s second ground for rehearing, the PUC found it had
satisfied the statutory requirements of section 8371 and that “AMR fails to
point to any provision of section 8371 that mandates the adoption of its
proposal.” (Boldface omitted.)
V.
AMR’s Petition for Writ of Review
AMR filed its petition for writ of review to obtain judicial review
of PUC decision Nos. D.24-11-004 and D.25-06-067. AMR’s petition sought
review of two issues: 1. “Whether the California Public Utilities Commission
failed to proceed in the manner required by law when it interpreted Section
218 in a manner that conflicts with the plain language of the statute?” and
2. “Whether the California Public Utilities Commission failed to proceed in
the manner required by law when it found that ‘The Commission has already
satisfied the requirements of section 8371’ with ‘Decisions 20-06-017 and 21-
01-018, which satisfied all requirements of the statute, prior to the December
1, 2020 deadline’?”
After receiving answers from the PUC, the IOU’s, and CUE, and
a reply from AMR, we directed the issuance of a writ. The record was
certified by the PUC pursuant to section 1756, subdivision (a), and the
parties filed supplemental briefs.
STANDARD OF REVIEW
Sections 1757 and 1757.1 specify the bases upon which a
reviewing court may set aside a decision of the PUC. (Center for Biological
Diversity, Inc. v. Public Utilities Com. (2025) 18 Cal.5th 293, 303 (Center for
Biological Diversity).) “Section 1757 applies to complaint and enforcement
18
proceedings and ratemaking and licensing decisions that are ‘addressed to
[specific] parties,’ while section 1757.1 applies in any proceedings not covered
by section 1757.” (Ibid.) Here, the PUC decisions being challenged are
rulemaking decisions, not a complaint and enforcement proceeding or
ratemaking and licensing decision, and therefore are subject to section
1757.1. The parties agree.
Section 1757.1, subdivision (a) limits review of a PUC rulemaking
decision to the determination whether: “(1) The order or decision of the
commission was an abuse of discretion. [¶] (2) The commission has not
proceeded in the manner required by law. [¶] (3) The commission acted
without, or in excess of, its powers or jurisdiction. [¶] (4) The decision of the
commission is not supported by the findings. [¶] (5) The order or decision was
procured by fraud. [¶] (6) The order or decision of the commission violates any
right of the petitioner under the Constitution of the United States or the
California Constitution.” Section 1757.1 does not authorize a substantial
evidence review of the PUC’s findings. (California Community Choice Assn. v.
Public Utilities Com. (2024) 103 Cal.App.5th 845, 853–854 (Community
Choice).)
An appellate court independently determines whether the agency
prejudicially abused its discretion by failing to proceed in the manner
required by law, such as by failing to comply with required procedures,
applying an incorrect legal standard, or committing some other error of law.
(Environmental Protection Information Center v. California Dept. of Forestry
& Fire Protection (2008) 44 Cal.4th 459, 479; City of Marina v. Board of
Trustees of California State University (2006) 39 Cal.4th 341, 355.)
Because the PUC decisions being challenged are rulemakings,
they are deemed to be quasi-legislative. (§ 1701.1, subd. (d)(1).) “Quasi-
19
legislative regulations . . . are subject to a substantially narrower scope of
review: ‘If satisfied that the rule in question lay within the lawmaking
authority delegated by the Legislature, and that it is reasonably necessary to
implement the purpose of the statute, judicial review is at an end.’” (Center
for Biological Diversity, supra, 18 Cal.5th at p. 305.) Quasi-judicial rules are
nonetheless reviewed “‘independently for consistency with controlling law,’”
and the reviewing court independently reviews “whether an agency has
lawmaking authority, even if it may be appropriate to defer to an agency’s
reasonable exercise of any such authority.” (Id. at pp. 305–306.)
The party challenging a PUC quasi-legislative decision on the
ground the decision constituted an abuse of discretion bears the burden of
showing the decision was “‘arbitrary, capricious, or entirely lacking in
evidentiary support.’” (Community Choice, supra, 103 Cal.App.5th at p. 856.)
The question whether agency action is entirely lacking in evidentiary support
is not the same as a substantial evidence test. (American Coatings Assn. v.
South Coast Air Quality Management Dist. (2012) 54 Cal.4th 446, 461.)
DISCUSSION
I.
Overview
AMR does not challenge any aspect of the microgrid multi-
property tariff approved by the PUC. AMR challenges only the PUC’s
decisions rejecting its proposed changes to SCE Rules 2, 16, and 18. AMR
contends the PUC erred on the grounds that (1) The PUC’s rehearing decision
was based on statements that were not supported by any findings of fact and
were inconsistent with the record (§ 1757.1, subd. (a)(4)) and (2) the PUC did
not proceed in the manner required by law (id., subd. (a)(2)).
20
We address the first ground in subsection II below. We conclude
that the challenged PUC statements are not entirely wrong and, if they are,
the mistakes were unnecessary to the PUC’s decisions and therefore
harmless.
As to the second ground, AMR argues the PUC did not proceed in
the manner required by law by misinterpreting and misapplying sections 218
and 8371. In subsection III below, we address AMR’s arguments regarding
section 218. We conclude the PUC did not err by concluding AMR’s proposed
rule changes did not comply with section 218 because those changes could
lead to an unregulated entity being able to control and compel modifications
to a regulated utility company’s distribution system. In subsection IV, we
address statutes other than section 218 which support the PUC’s decision.
We conclude sections 399.2 and 451, as well as the priority given to safety
considerations expressed in section 8371, also support the PUC’s decisions.
In subsection V below, we address AMR’s arguments regarding
section 8371. We conclude the PUC correctly found it had satisfied the
requirements of section 8371, the PUC’s decisions are consistent with both
section 8371’s direction to facilitate commercialization of microgrids and
section 8371’s legislative history, and AMR forfeited its claim regarding
neighborhood-type microgrids.
II.
If the PUC Misstated the Facts, the Error
Was Immaterial
In the rehearing decision, the PUC stated that “AMR’s proposal
involves delivering electricity between two AMR-owned properties separated
by a public street, using SCE-owned infrastructure” and that “[t]he Decision
found that AMR’s proposal, which would allow an unregulated private party
21
to control utility infrastructure and operate a multi-property microgrid
independently, violates section 218.” AMR contends those statements were
unsupported by the PUC’s factual findings and are incorrect because under
the proposed rule changes, “AMR would not use or control SCE’s utility
infrastructure.”
To assess AMR’s contentions, some background information is
necessary. We have explained at footnote 7 on page 7, the difference between
connection and an interconnection. In this writ proceeding, AMR places great
emphasis on its claim that it intended only to connect its two properties using
privately owned equipment. AMR asserts its goal was to electrically connect
its two properties that are divided by a public street by using an “AMR-
owned distribution line” or “private distribution facilities.” In its petition for
writ of review, AMR alleged it made its proposed rule changes “because SCE
previously denied AMR’s request to allow AMR’s planned electrical
connection despite SCE admitting it had no legal basis to do so.” (Italics
added.)
But in its tariff proposal, AMR asserted that its proposed changes
to SCE Rules 2 and 16 were necessary to allow AMR to interconnect its
microgrid to SCE’s distribution system. AMR stated in its tariff proposal that
“where Added Facilities are required to allow the IOU to interconnect the
microgrid safely and reliably, [SCE] Rule 2 can be triggered” and “in
situations where an IOU must reconfigure its system to support the safe
deployment of a customer microgrid [SCE] Rule 16 can be triggered.” (Italics
added.) AMR also asserted that SCE abused its discretion when it “decline[d]
AMR’s request to interconnect its section 218 microgrid.” (Italics added.) AMR
argued that “[SCE] Rules 2 and 16 should be modified to explicitly state that
IOU[’]s do not have unfettered discretion to decline to either add facilities to
22
their system or modify their system to support deployment of customer
microgrids.”
In the application for rehearing, AMR asserted it had been
attempting to develop a microgrid by electrically connecting two AMR-owned
properties, “[b]ut AMR lacks a clear regulatory pathway to construct and
interconnect this privately owned electrical system, because SCE mistakenly
believes it has unfettered discretion to deny the interconnection request” and
“SCE apparently believes it can refuse to interconnect AMR’s Section 218
compliant microgrid.” (Italics added.)
It is not entirely clear whether AMR’s grievance against SCE
arises from its denial of an interconnection request or of a request to
accommodate a connection between AMR’s two properties independently of
SCE’s distribution system. But regardless of whether AMR’s proposed rule
changes would affect connections or interconnections, or both, the statements
in the PUC’s rehearing decision are not entirely wrong. As we explain below
in subsection III, AMR’s proposed rule changes would have created the
potential for microgrid operators to exert some degree of control over a
regulated utility’s infrastructure. And in the case of an interconnection, SCE
would own its own distribution system (including easement rights) and,
under SCE Rule 2.H.1, would own additional or substitute facilities installed
to accommodate AMR’s interconnection request. In that way, the PUC’s
statement that AMR intended to use SCE-owned infrastructure is at least
partly correct.
In opposing AMR’s proposed rule changes, SCE claimed that
“AMR’s proposal would result in SCE’s existing facilities being sold to AMR,
removed, or abandoned in place.” (Italics added.) AMR’s response, that there
was or should be a process for “necessary facility transfers,” supports the
23
PUC’s finding that AMR’s proposed rule changes would in fact lead to AMR’s
acquisition of SCE infrastructure.
But even if the PUC misstated the record in the way AMR
describes, the mistake is immaterial because the supposedly misstated facts
were unnecessary to the PUC’s decisions. In track 5 the PUC was neither
determining whether AMR’s project should go forward nor adjudicating the
dispute between AMR and SCE. The issue before the PUC was whether to
adopt AMR’s proposed rule changes, and those changes were not limited in
application to AMR’s project or its dispute with SCE. Those proposed rule
changes were of universal application and do not stand or fall on the specific
facts relating to AMR and its microgrid project.
III.
The PUC’s Decisions Were Not Based on a
Misinterpretation or Misapplication of Section 218
AMR contends the PUC failed to proceed as required by law by
misinterpreting and misapplying section 218. Specifically, AMR contends the
PUC made three erroneous conclusions in its decisions: (1) “The multi-
property microgrid tariff proposals of AMR . . . fail to comply with numerous
statutory requirements of the California Public Utilities Code”; (2) “AMR’s
proposal should not be adopted because it does [not] comply with Section
218”; and (3) “AMR’s proposed tariff focuses on a narrow set of priorities and
does not fit within the contours of Section 218.”
The PUC did not err by concluding AMR’s proposed rule changes
did not comply with section 218. AMR’s proposed change to SCE Rule 2.H.1
states that “SCE shall agree to install facilities which are in addition to, or in
substitution for the standard facilities SCE would normally install,” and
AMR’s proposed change to Rule 16.F.2.b states that “SCE shall agree to
24
relocate or rearrange SCE’s existing facilities.” (Italics added.) Those
proposed rule changes thus would strip SCE and the other IOU’s of any
discretion to deny a microgrid operator’s request to relocate, rearrange,
modify, or install additional facilities to their distribution systems in order to
facilitate a microgrid. 11
AMR’s proposed changes to SCE Rule 18 would have permitted a
customer operating a microgrid to receive electricity from SCE and use that
electricity on separate premises if the customer is “compliant” with section
218(b). In other words, the proposed changes to SCE Rule 18 would permit an
unregulated entity to privately distribute electricity received from a
regulated electrical corporation.
AMR’s proposed rule changes were hardly “modest,” as AMR told
the PUC or “narrow” as AMR asserts in its petition for review. To the
contrary, as the PUC argues, AMR’s proposed rule changes “would make
global changes to the electric utilities’ tariffs,” and, as the IOU’s argue,
“would eliminate the regulated utilities’ discretion by requiring them to
modify their infrastructure upon customer demand.”
In its decisions, the PUC repeatedly found that a regulated utility
must operate and control its electric distribution grid and specifically found
11 AMR argues its proposed rule changes would not have
eliminated a regulated electrical corporation’s discretion to deny such a
request by a customer, but only would have eliminated the electrical
corporation’s unfettered discretion to deny the request. That is not what
AMR’s proposed rule changes said. AMR’s proposed changes to SCE Rules
2.H.1 and 16.F.2.b are clearly written as commands. Neither proposed rule
change is written in a way that would give SCE or another IOU any
discretion to deny a request. Neither proposed rule change defines the scope
and limits of an IOU’s discretion. According to the IOU’s, they do not now
have unfettered discretion because a customer can bring its case to the PUC
for individual determination.
25
that AMR’s proposed rule changes “would allow an unregulated private party
to control utility infrastructure.” Those findings are consistent with the
requirement imposed by the PUC that proposed tariffs in track 5 “[a]llow for
the utility to always maintain control of its distribution system.”
The PUC’s findings are not erroneous. AMR’s proposed changes
to SCE Rules 2 and 16 would violate section 218 by creating the potential for
an unregulated entity to exert some degree of control over a regulated
utility’s electrical distribution system. Under AMR’s proposed rule changes,
an unregulated microgrid operator would be able, on demand, to compel a
regulated utility corporation to install additional facilities on the regulated
utility’s distribution system and relocate and/or rearrange existing facilities
in order to facilitate a microgrid. The regulated utility would have no choice
but to accede to the unregulated entity’s demands. In those ways, AMR’s
proposed rule changes would allow an unregulated entity to exert control
over a regulated utility’s distribution system and thereby operate as an
electrical corporation in violation of section 218.
AMR has not disputed SCE’s claim that AMR’s proposed rule
changes could have resulted in a regulated utility being forced to sell,
remove, or abandon in place its existing facilities, including underground
cables, transformers, and related equipment. AMR argued to the PUC that
“transferring redundant or unnecessary facilities as part of an
interconnection should not operate as a barrier to AMR’s planned microgrid”
and there was or should be a process for “necessary facility transfers.” As the
IOU’s pointed out in their comments to AMR’s proposed rule changes, such
forced transfer, which the regulated utility would have no discretion to avoid,
could impair the utility’s ability to serve other customers or require the
construction of new facilities. In that regard, AMR’s proposed rule changes
26
violated section 218 because, as the PUC found, an objective of section 218 is
“to ensure the . . . reliability of the electricity supplied from the distribution
grid to the customers, and to protect customers who may have no or limited
choices about who provides their electricity.”
AMR mentions its proposed rule changes to SCE Rule 18 a total
of only two times in its writ petition, its reply to the answers filed by the PUC
and the real parties in interest, and AMR’s supplemental brief. In both
instances AMR only describes the proposed changes and does not argue how
the PUC abused its discretion by rejecting them. We therefore may consider
AMR’s challenge to the PUC decisions as to SCE Rule 18 to be forfeited. (Lee
v. Kim (2019) 41 Cal.App.5th 705, 721 [“‘“When an appellant fails to raise a
point, or asserts it but fails to support it with reasoned argument and
citations to authority, we treat the point as [forfeited]”’”].)
We note nonetheless that AMR’s proposed changes to SCE Rule
18 are contrary to section 218 because those changes would allow an
unregulated entity to distribute energy received from an electrical
corporation. In its track 2 decision, the PUC stated that “[SCE] Rules 18 and
19 prohibit one premise from supplying electricity to another premise to
ensure safe and reliable distribution of power at reasonable rates” and
relaxing some SCE Rule 18 requirements might have “unintended, negative
consequences.”
AMR lays much stress on its claims it is not an electrical
corporation under section 218(a) and that it is exempt under section 218(b)
from regulation by the PUC. AMR argues the PUC decisions, by treating it as
an electrical corporation, are contrary to the text of section 218. The PUC did
not make a finding as to whether AMR is an electrical corporation or would
become one under its proposed rule changes. The PUC was never asked to
27
make such findings. The PUC’s decision is premised on a recognition that
AMR is not an electrical corporation and not subject to PUC regulation.
AMR’s rule changes would violate section 218 precisely because they would
give microgrid operators which are not electrical corporations the ability to
compel changes to, and thereby control, the distribution systems of regulated
utilities.
In a similar vein, AMR argues the PUC’s decisions are contrary
to law because “[e]ach of AMR’s proposals w[as] explicitly limited to
microgrids that comply with [section] 218.” (Italics omitted.) Section 218
simply provides definitions of what is and what is not an electrical
corporation. Section 218 does not enable or entitle a nonelectrical corporation
to compel a regulated utility to install additional facilities or modify its
distribution system in order to facilitate a multi-property microgrid. The PUC
decisions do not categorically bar AMR or any other nonelectrical corporation
that is exempt under section 218(b) from PUC regulation from installing a
multi-property microgrid.
AMR argues the PUC erred by finding that AMR’s proposed rule
changes “focus[ ] on a narrow set of priorities and does not fit within the
contours of Section 218.” The PUC did not err. AMR’s proposed rule changes
did indeed focus on a narrow priority: Resolving AMR’s dispute with SCE by
compelling it to agree to AMR’s connection and/or interconnection requests.
In the petition for writ of review, AMR narrowly described this case as
“pertain[ing] to the [PUC]’s refusal to require SCE to serve a business
customer [(AMR)] that, in full compliance with Section 218, seeks to operate
a microgrid between two customer[-]owned properties separated by a public
street.” Track 5 of the rulemaking was not intended to adjudicate AMR’s
dispute with SCE. The PUC’s responsibilities were not narrowly limited to
28
meeting one stakeholder’s wants or resolving a stakeholder’s dispute:
Instead, the PUC was undertaking a quasi-legislative action to establish
rules affecting an entire industry. (§ 1701.1, subds. (a), (d)(1).)
AMR contends the PUC misinterpreted section 218 by finding
that an entity selling electricity to more than two contiguous parcels or across
a street must become a regulated electrical company. AMR argues that
“[b]ecause AMR’s proposal was expressly limited to microgrids that do not
sell electricity or otherwise violate Section 218, nothing in Section 218
justified rejecting the proposal.” The PUC’s interpretation of section 218 is
not so much erroneous as it is incomplete: An entity producing power from a
nonconventional power source and using or selling that power to adjacent
real property across an intervening public street is an electrical corporation
unless at least one of the conditions of section 218(b)(2)(A) through (C) is
satisfied.
But even assuming the PUC did misinterpret section 218 in that
respect, AMR has failed to show the error was prejudicial. (Community
Choice, supra, 103 Cal.App.5th at p. 860 [PUC decisions may be set aside if
its failure to proceed in the manner required by law resulted in prejudice].)
The PUC’s conclusion that AMR’s proposal violated section 218 was not based
on whether AMR or another microgrid operator sells electricity, but upon the
potential for the proposed rule changes to allow an unregulated microgrid
operator to control a regulated utility’s distribution infrastructure. In
addition, as we shall discuss, the PUC’s decisions were based on other
factors, including sections 399.2 and 451 and the need to ensure system,
worker, and public safety. In light of those factors, it is not reasonably
probable the PUC would have reached a result more favorable to AMR in the
29
absence of the presumed error. (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th
780, 800.)
AMR’s proposed rule changes would, as the IOU’s argue, “enable
unregulated microgrid developers to dictate the installation or modification of
utility distribution facilities for microgrids with interconnections to the
broader grid, and to distribute electricity generated by the regulated utility,
so long as the developer is not an electrical corporation subject to [PUC]
regulation under Section 218.” The PUC did not err by finding that AMR’s
proposed rule changes violated and would “circumvent[ ]” section 218.
IV.
The PUC’s Decisions Were Based on Statutes and Factors
in Addition to Section 218
The PUC’s decisions are not based solely on section 218. The PUC
also concluded, correctly so, that AMR’s proposed rule changes were in
contradiction to sections 399.2 and 451. In Decision No. D.24-11-004, the
PUC concluded that the stakeholders’ multi-property microgrid tariff
proposals (which would include AMR’s proposed rule changes) “call for
unregulated parties to control and/or operate microgrids in direct
contradiction of Sections . . . 399.2 [and] 451.”
The PUC’s decisions were necessary to satisfy the dictates of
section 399.2. It recites the state policy that “each electrical corporation shall
continue to operate its electric distribution grid in its service territory”
(§ 399.2, subd. (a)(1)) and, in furtherance of that policy, “each electrical
corporation shall continue to be responsible for operating its own electric
distribution grid” (id., subd. (a)(2)). Such operation includes “controlling,
operating, managing, maintaining, planning, engineering, designing, and
constructing its own electric distribution grid.” (Ibid.) AMR’s proposed
30
changes to SCE Rules 2 and 16 were directly contrary to section 399.2
because, as we have explained, they would enable unregulated entities to
control, operate, or manage a regulated utility’s electrical distribution
system.
Section 451 provides, in relevant part, that “[e]very public utility
shall furnish and maintain such adequate, efficient, just, and reasonable
service, . . . and facilities, . . . as are necessary to promote the safety, health,
comfort, and convenience of its patrons, employees, and the public.” Section
8371 directs the PUC to develop large electrical corporation rates and tariffs
to support microgrids, “while ensuring that system, public, and worker safety
are given the highest priority.” (§ 8371, subd. (d).)
In its reply brief, AMR argues that “safety concerns were not the
basis of the PUC’s decision” and “[t]he only conclusion of law that addressed
AMR’s proposal stated . . . ‘AMR’s proposal should not be adopted because it
does not comply with Section 218.’” In decision No. D.24-11-004, the PUC
expressly found: “Worker safety and grid reliability are absent from the
stakeholder proposals.” (Italics added.) AMR is a stakeholder and made
proposals. The PUC therefore found that worker safety and grid reliability
were absent from AMR’s proposed rule changes.
The PUC made other findings, applicable to all stakeholder
proposals, that relate to safety. Those findings included, (1) “[t]o ensure
system, public, and worker safety are given the highest priority, a regulated
utility must control and operate a multi-property microgrid if the multi-
property microgrid uses the regulated utility’s distribution system,”
(2) “[r]egulated control of the distribution system is essential to public and
worker safety and grid reliability,” and (3) “[t]o ensure system, public, and
worker safety are given the highest priority, regulated entities must operate
31
and control their electric distribution grid.” As an example of a safety
concern, the PUC found: “[A]fter any outage, crews must perform restoration
work to ensure that it is safe to reenergize the utility’s grid. An unregulated
third party cannot decide when a microgrid can begin actively discharging to
the regulated utility’s grid while utility employees may be working on the
grid.”
AMR contends those safety concerns are without merit and
claims the example offered by the PUC was incorrect for two reasons. 12 First,
AMR argues its proposed rule changes would only apply to microgrids that do
not sell electricity, and “many such microgrids would not export electricity to
the grid and or have the facilities to do so.” AMR’s proposed rule changes are
not limited, however, to microgrids that do not export electricity.
Second, AMR argues that if a microgrid exports electricity to the
grid, that microgrid would be subject to an IOU’s interconnection rules, and
those rules “would allow the IOU to require installation of interruption and
other protective devices that allow the IOU to control when and how
electricity is exported to the grid.” To support that argument, AMR cites only
to SCE Rule 21, which is 235 pages in length. AMR does not pinpoint any
12 AMR asserts its proposed rule changes would not result in
unregulated microgrids because “they would be subject to regulation by local
and municipal authorities.” AMR does not identify those authorities or their
regulations to which it would be subject. And, of course, local and municipal
regulations vary throughout the state. Only the PUC has constitutional and
legislative authority to regulate public utilities throughout the State of
California (Cal. Const., art. XII, §§ 2, 4, 6; § 701), and that authority extends
to safeguarding the health and safety of employees, customers, and the public
(§ 768). Local governments are preempted from regulating matters within the
PUC’s jurisdiction. (Cal. Const., art. XII, § 8.)
32
relevant provisions in SCE Rule 21. 13 “It is not our place to comb the record
seeking support for assertions parties fail to substantiate.” (Howard v.
American National Fire Ins. Co. (2010) 187 Cal.App.4th 498, 534.) To the
extent AMR is making a sufficiency of the evidence argument, it necessarily
fails because in a challenge to a rulemaking decision, the PUC’s factual
findings are not subject to substantial evidence review. (§ 1757.1, subd. (a);
Community Choice, supra, 103 Cal.App.5th at p. 854.)
In addition, AMR has forfeited any argument based on SCE Rule
21. A party seeking judicial review of a PUC decision must first bring an
application for rehearing specifically setting forth “the ground or grounds on
which the applicant considers the decision or order to be unlawful.” (§ 1732;
see § 1756, subd. (a).) “No corporation or person shall in any court urge or
rely on any ground not so set forth in the application.” (§ 1732.) “In other
words, the petitioner may not raise in court a matter not included in its
application for rehearing.” (Utility Consumers’ Action Network v. Public
Utilities Com. (2010) 187 Cal.App.4th 688, 696 (Utility Consumers’ Action
Network).)
In the rulemaking proceedings, both SCE and CUE raised safety
concerns in their comments regarding AMR’s proposed rule changes. In
responding to SCE’s and CUE’s comments, AMR did not mention SCE Rule
21 but argued that local authorities would ensure that microgrids met
applicable safety standards. AMR did not mention SCE Rule 21 in its
application for rehearing, even though the PUC had found that worker safety
13 In response, CUE argues that “[w]hile interconnection
protective devices may prevent certain types of discharge or provide technical
safeguards under normal operating conditions, they cannot substitute for the
utility’s operational authority to control reenergization decisions in real time
during emergency restoration.”
33
was absent from the stakeholder proposals and made other findings related
to safety. 14
V.
The PUC’s Decisions Are Consistent with Section 8371
AMR argues the PUC misinterpreted section 8371 in two ways.
First, AMR contends that in denying AMR’s application for rehearing, the
PUC erroneously found that “‘[t]he [PUC] has already satisfied the
requirements of section 8371’” before considering AMR’s proposed rule
changes. Second, AMR contends that denial of AMR’s proposed rule changes
“is contrary to the clear language and intent behind [section] 8371.” Neither
argument has merit.
A. The PUC Did Not Err by Finding It Had Satisfied Section 8371’s
Requirements
Section 8371 states, in relevant part: “The [PUC], in consultation
with the Energy Commission and the Independent System Operator, shall
take all of the following actions by December 1, 2020, to facilitate the
commercialization of microgrids for distribution customers of large electrical
corporations.” Section 8371 then lists six actions the PUC had to complete by
that date. (§ 8371, subds. (a)–(f).) On June 17, 2020, the PUC issued decision
No. D.20-06-017 which addressed the actions identified in subdivisions (a),
14 SCE explains in its supplemental brief that SCE Rules 2.H,
16.F, and 18 address matters different from those addressed by SCE Rule 21.
While SCE Rule 21 focuses on the “technical mechanics” of the
interconnection process, SCE Rule 2.H addresses “the processes for ‘Added
Facilities’ that a customer seeks to supplement to regulated grid
infrastructure,” SCE Rule 16.F addresses “service relocation or
rearrangement, including modification of existing infrastructure,” and SCE
Rule 18 “covers the supply of electricity by customers to separate premises
and use by others more broadly.”
34
(b), and (d) through (f) of section 8371 and instituted a rulemaking
proceeding. On January 21, 2021, the PUC issued decision No. D.21-01-018
which addressed the actions identified in subdivision (c) of section 8371 and
further addressed the actions identified in subdivisions (e) and (f). The PUC
therefore did not err by finding it had satisfied the requirements of section
8371 before considering AMR’s proposed rule changes.
If the PUC did so err, the error was harmless. In track 5, the
PUC considered AMR’s proposed rule changes, as well as the proposed tariffs
of other stakeholders and the IOU’s, before issuing decision Nos. D.24-11-004
and D.25-06-067.
B. The PUC’s Decision Is Consistent with Section 8371
1. Statutory Language
AMR argues the PUC’s denial of its proposed rule changes is
contrary to section 8371’s directive to the PUC to “facilitate the
commercialization of microgrids for distribution customers of large electrical
corporations” and to “develop separate large electrical corporation rates and
tariffs, as necessary, to support microgrids.” We disagree.
Section 8371 directs the PUC to “facilitate the commercialization
of microgrids for distribution customers of large electrical corporations” by
taking the specific actions identified in subdivisions (a) through (f) by
December 1, 2020. Other than taking those actions, section 8371 does not
expressly impose any obligations on the PUC to facilitate commercialization
of microgrids. (See In re Groundwater Cases (2007) 154 Cal.App.4th 659, 689
[“To construe a statute as imposing a mandatory duty on a public entity, ‘the
mandatory nature of the duty must be phrased in explicit and forceful
language’”].)
35
Assuming section 8371 by implication imposes a general
obligation on the PUC to facilitate commercialization of microgrids beyond
the statutorily required actions, the PUC met any such obligation by
developing a microgrid multi-property tariff and issuing decision Nos. D.24-
11-004 and D.25.06-067. The PUC’s decisions to deny AMR’s proposed rule
changes were not inconsistent with or contrary to the statute. Section 8371’s
directives are broadly drafted and do not specify any details or requirements
on how distribution systems and facilities for multi-property microgrids must
work. As the PUC argues, in section 8371 “the Legislature provided general
policy objectives and outcomes, leaving significant room for the [PUC] to
determine the most appropriate means of meeting them.”
The one specific directive that section 8371 does give is that
“ensuring that system, public, and worker safety are given the highest
priority.” (§ 8371, subd. (d).) Public safety is also mandated by section 451,
and system reliability is mandated by section 761, which grants the PUC
authority to issue orders to regulate public utility services that “are unjust,
unreasonable, unsafe, improper, inadequate, or insufficient.” Interpreting
section 8371 as requiring the PUC to adopt AMR’s rule changes would
conflict with section 399.2 which, as we have explained, mandates that
electrical corporations continue to operate their electric distribution grids
within their respective service territories and to do so “in a safe, reliable,
efficient, and cost-effective manner.” (§ 399.2, subd. (a)(1) & (2).)
The definition of microgrid found in section 8370, subdivision (d)
does not help AMR. Section 8370, subdivision (d) says only that a microgrid
“can connect to, disconnect from, or run in parallel with, larger portions of the
electrical grid.” It is true, as AMR contends, that the definition of microgrid
on its face does not preclude an interconnected system from using privately
36
owned connections between loads and energy sources on opposite sides of a
street. But neither does that definition mean the PUC must adopt tariffs that
would entitle a microgrid operator to demand that a regulated utility relocate
or rearrange existing facilities or install additional facilities to accommodate
a connection or an interconnection.
In sum, section 8371 cannot be reasonably interpreted to mean
the PUC must adopt any and all proposals which might in some way
facilitate commercialization of microgrids for distribution customers, without
regard to other statutory mandates, system reliability, the effect on other
customers, and system, worker, and public safety. Given section 8371’s
broadly drafted directives, the highest priority given to safety (§ 8371, subd.
(d)), the requirement that electrical corporations operate their distribution
grids (§ 399.2), the PUC’s broad authority to regulate utilities (San Diego Gas
& Electric Co. v. Superior Court, supra, 13 Cal.4th at pp. 914–915), and its
quasi-legislative role in rulemaking (Center for Biological Diversity, supra, 18
Cal.5th at p. 305), the PUC acted in conformance with section 8371 by
declining to adopt AMR’s proposed rule changes.
2. Legislative History
In its reply brief, AMR quotes parts of section 8371’s legislative
history to argue that “[i]n enacting [Senate Bill No.] 1339, the Legislature
contemplated that microgrids could be owned and operated by individual
customers and treated as a single entity by the grid operator.” In particular,
AMR quotes legislative findings that “[m]any electricity customers are seeing
the potential benefits of investing in their own distributed energy resources
as part of microgrids” and “[a]llowing the electricity customer to manage
itself according to its needs, and then to act as an aggregated single entity to
the distribution system operator, allows for a number of innovations and
37
custom operations.” (Historical and Statutory Notes, 57C West’s Ann. Pub.
Util. Code (2026 supp.) foll. § 8370, p. 31.)
AMR also quotes the following passage from a Senate Rules
Committee Analysis: “In addition to the increased reliability, microgrids with
properly configured controllers have the potential to provide lower electricity
bills for the customer and cleaner air by displacing the need for energy
generating resources with higher emissions. Specifically, microgrids can
control the rate and schedule of distributed energy generation resources,
coordinate the use of energy storage, and implement demand response.” (Sen.
Rules Com., Off. of Sen. Floor Analyses, Analysis of Sen. Bill No. 1339 (2017–
2018 Reg. Sess.) as amended Aug. 28, 2018, p. 4.)
Those legislative findings and the Senate Rules Committee
analysis extol the potential benefits of microgrids but, like section 8371 itself,
say nothing about how distribution systems for microgrids must work. We do
not read this legislative history as supporting an interpretation of section
8371 that would have required the PUC to approve AMR’s proposed rule
changes. Moreover, “while uncodified legislative findings may be used as an
aid in construing a statute, they ““‘do not confer power, determine rights, or
enlarge the scope of a measure.’”’” (People v. Chhuon & Pan (2026) 19 Cal.5th
1018, 1104, fn. 12.)
AMR also quotes two passages from the June 27, 2018 Analysis of
the Assembly Committee on Utilities and Energy. First, that analysis states
that Senate Bill No. 1339 “[p]ermits a microgrid to be owned by an IOU,
POU, community choice aggregator (CCA), third party, or customer.” (Assem.
Com. on Utilities and Energy, Analysis of Sen. Bill No. 1339 (2017–2018 Reg.
Sess.) as amended June 11, 2018, p. 1.) Second, the analysis states:
“[O]peration of the microgrid is normally determined by the needs of the
38
primary customer or end-user. There is clearly an added cost to design,
install and operate a microgrid. The end-user who makes this decision
normally has a history of energy issues or specific energy needs that justifies
the cost and effort to install and operate a microgrid.” (Id., at p. 5.)
The first quote merely confirms that a third party or customer
may own a microgrid. The second quote makes the unremarkable
observations that microgrid operation is determined by the primary
customer’s needs and that there are costs to designing, installing, and
operating a microgrid. Neither passage quoted by AMR supports an
interpretation of section 8371 that would have required the PUC to adopt
AMR’s proposed rule changes.
The same Assembly analysis states that Senate Bill No. 1339
“calls for an interconnection process and tariff for microgrids” and makes
recommendations “to develop processes for interconnection of customer-
supported microgrids.” (Assem. Com. on Utilities and Energy, Analysis of
Sen. Bill No. 1339 (2017–2018 Reg. Sess.) as amended June 11, 2018, p. 5,
italics omitted.) While one recommended process is to “[d]evelop methods to
reduce cost barriers for, without shifting costs to ratepayers, for microgrid
interconnection requirements” (id., at p. 6), the analysis does not mandate
any particular method or process, or require the PUC to adopt connection and
interconnection methods in line with AMR’s proposed rule changes.
3. “Neighborhood-type” Microgrids
In its reply brief, AMR argues that the PUC “was obligated to
[give] effect [to] the intent of the Legislature in enacting S[enate] Bill No.]
1339” and “was therefore required to adopt AMR’s proposed tariff or another
tariff that would permit IOU customers to develop and interconnect
neighborhood-type microgrids.” The issue before us is whether, under the
39
relevant standard of review, the PUC erred by declining to adopt AMR’s
proposed rule changes. The issue whether the PUC should have adopted
some other proposed tariff, which AMR has not identified, is not before us.
According to AMR, the PUC’s decisions “categorically bar all
neighborhood-type microgrids.” In its application for rehearing, AMR did not
set forth as a ground on which it considered the PUC’s decision to be
unlawful any obligation on the part of the PUC to adopt a proposal that
would permit private companies to develop and interconnect “neighborhood-
type” microgrids. The term “neighborhood-type microgrids,” which is not
defined by statute, did not appear in any of AMR’s filings with the PUC—or
this court—until AMR’s reply brief. AMR’s argument regarding neighbor-type
microgrids is therefore forfeited. (§ 1732; see Utility Consumers’ Action
Network, supra, 187 Cal.App.4th at p. 696.)
In its track 5 decision the PUC approved, with modifications,
tariffs proposed by the IOU’s to facilitate commercialization of multi-property
microgrids. AMR points to nothing in the approved tariffs that would
categorically bar a “neighborhood-type” microgrid, and the PUC’s decisions to
reject AMR’s proposed rule changes do not bar microgrids developed by
nonelectrical corporations.
40
DISPOSITION
The PUC decisions are affirmed. Respondent and real parties in
interest may recover costs incurred in this proceeding.
SANCHEZ, J.
WE CONCUR:
MOTOIKE, ACTING P. J.
MOORE, J.
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