## Facts

- Arizona’s Renewable Energy Standard and Tariff (REST) rules require utilities to satisfy annual renewable-energy requirements through Renewable Energy Credits (RECs) from eligible renewable resources.
- The REST rules permit the Arizona Corporation Commission to (1) adopt pilot programs establishing additional eligible technologies and (2) waive compliance with any REST provision for good cause.
- Mohave Electric Cooperative applied for approval related to a proposed waste-to-energy facility that would generate electricity by burning municipal solid waste.
- Mohave sought either pilot-program treatment or a good-cause waiver so that energy from the facility would count as an eligible renewable resource for REC purposes.
- Commission staff recommended against pilot-program designation but supported a good-cause waiver, initially proposing that 75% of the output be REC-eligible.
- Staff testimony described Mohave’s data indicating the waste stream was predominantly biogenic, and staff calculated biogenic materials would contribute about 91% of the energy content; staff stated a 90% REC-eligible level was reasonable.
- After hearings, the Commission granted pilot-program status and authorized RECs for 90% of the facility’s energy output.
- Sierra Club sought judicial review; the superior court vacated the Commission’s decision, finding no authority for pilot status, no good cause, and no credible evidence supporting the 90% figure.

## Issues

1. Whether the Commission had constitutional and REST-rule authority to approve REC eligibility for the waste-to-energy facility through a pilot program and/or a good-cause waiver.
2. What deference courts must give to the Commission’s policy judgments and factual determinations under the REST rules and the Arizona Constitution.
3. Whether substantial evidence supported a finding of good cause and the Commission’s determination that 90% of the facility’s output qualified for RECs.

## Decision

- The Court of Appeals reversed the superior court.
- The court held the Commission acted within its constitutional and regulatory authority at least in granting a REST-rule waiver for good cause.
- The court reinstated the Commission’s decision to the extent it granted Mohave’s application for a waiver.
- The court concluded the record contained credible, substantial evidence supporting the Commission’s 90% REC-eligibility determination and that the superior court improperly reweighed evidence.

## Legal Principles

- The Arizona Corporation Commission possesses broad constitutional authority to make classifications and implement rate-related regulatory programs for public service corporations, including renewable-energy requirements.
- REST rules expressly authorize the Commission to establish pilot programs for additional technologies and to waive REST provisions for good cause.
- Judicial review of Commission decisions is limited; courts must defer to the Commission’s technical fact-finding and policy determinations when the Commission acts within its authority and the decision is supported by substantial evidence.
- “Good cause” and a REC-eligibility percentage may be supported by staff testimony and data indicating a reasonable evidentiary range; a court may not overturn the Commission merely because it would weigh the evidence differently.

## Conclusion

The Court of Appeals held that the Commission could use its REST-rule waiver authority to treat a waste-to-energy facility’s output as REC-eligible and that substantial evidence supported the Commission’s decision to credit 90% of the facility’s energy as renewable, requiring reversal of the superior court’s contrary judgment.


Sierra Club–Grand Canyon Chapter v. Ariz. Corp. Comm’n, 354 P.3d 1127 (Ariz. Ct. App. 2015)