California virtual power plant bills clear key legislative hurdle

Last year, California Gov. Gavin Newsom vetoed a slate of bills meant to expand virtual power plants that could offset the state’s fast-rising electricity costs. Will he do the same this year?

Earlier this month, two virtual power plant bills made it through a key legislative hurdle. Lawmakers must vote on the bills by Aug. 31. Should they pass, Newsom, a Democrat, would have until the end of September to sign or veto them.

Californians pay some of the most expensive electricity rates in the continental U.S., an issue of increasing political salience. Climate advocates, clean energy groups, and supportive lawmakers say the state can curb these costs by tapping into its nation-leading fleet of rooftop solar–charged batteries, remote-controllable EV chargers, and other household devices — in other words, the collective components of virtual power plants.

The bills propose two different approaches for using VPPs to bring down costs: Senate Bill 913 would harness them to blunt the edge of costly grid peaks, while Senate Bill 905 could encourage California’s major utilities — Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric — to use VPPs to reduce costly grid investment.

“If we can call on these resources, it is a massive win-win. People get paid, and it also saves everybody in California money,” Sen. Josh Becker, a Democrat who authored both bills, said at a Monday press conference in Sacramento promoting ​“local, affordable” clean energy policies.

SB 913 would give the California Public Utilities Commission until mid-2028 to craft regulations that allow VPPs to play a role in providing resource adequacy. That’s the term for the increasingly costly services that every utility and community energy provider must secure from gas-fired power plants, battery banks, and other dispatchable resources to keep the grid running when demand for power peaks.

VPPs could cover more than 15% of the state’s peak grid demand and deliver $550 million in annual utility customer savings by 2035, according to a 2024 analysis by consultancy The Brattle Group for GridLab.

“Many of these resources are sitting on the sideline because our rules have not kept up with technology,” said Becker, who also penned one of last year’s vetoed VPP bills.

VPPs face multiple barriers to being counted toward resource adequacy, from measurement protocols that erode their value during heat waves to rules that ban home batteries from getting credit for power they inject back onto the grid.

Meanwhile, Californians are paying roughly $1 billion per year to extend the lives of fossil-fueled ​“peaker” gas plants needed for only a handful of hours per year, he said. ​“We can get rid of those if we take better advantage of what’s already in people’s homes.”

SB 913 has won backing from dozens of environmental groups, trade organizations, and companies that manufacture, install, and manage the devices that constitute VPPs. Utilities Pacific Gas & Electric and Southern California Edison withdrew their opposition to the bill after amendments were added to it in late June.

California leads the country in home batteries and electric vehicles, and has millions of homes that could adjust the power usage of smart thermostats, water heaters, and other devices during the handful of hours per year when the grid is under the greatest strain.

Distributed batteries could be a particularly powerful tool. A July 2025 utility test of home batteries delivered more than 500 megawatts of grid relief over a two-hour period corresponding to when California’s grid tends to face its greatest stress during summertime heat waves.

The state currently has 2.5 gigawatts of residential batteries and more than 600 megawatts of batteries at commercial properties, according to the California Energy Commission.

SB 913 could make it more lucrative for households with these ​“behind-the-meter batteries” to commit their spare power to the grid. That could encourage more participation in VPP programs, said Brandon García, California policy director at trade group Advanced Energy United.

It’s particularly important to create new incentives for households with batteries to participate in VPPs given that California’s largest such program faces the threat of being defunded and disbanded, he said.

That program is called Demand Side Grid Support, and it has grown to one of the largest VPPs in the country, including nearly 75,000 homes with smart thermostats and flexible load devices, and nearly 130,000 homes with batteries. But DSGS is operated by the California Energy Commission using state taxpayer funds — and under a budget proposal from Newsom’s administration, that funding could be cut and the program shut down next year.

Many of the groups supporting SB 913 are also calling on Newsom and lawmakers to extend DSGS for a few more years, to avoid stranding the companies that have invested and the households that have enrolled in it.

“If there’s not a program to keep these resources online with some level of compensation until a resource adequacy pathway is created, those resources will go somewhere else,” García said.

In an echo of debates over rooftop solar in California, the state’s Public Utilities Commission and utilities have argued that it’s unfair to pay households for VPP participation, because it shifts the costs of running the grid onto utility customers who don’t have batteries, EV chargers, or other eligible devices.

García said that allowing VPPs to compete with gas plants, utility-scale batteries, and other providers of resource adequacy could help resolve these concerns. That’s because VPPs competing in those markets ​“only get enrolled if they’re lowest-cost resources — and we are confident that they will be the lowest-cost resources.”

SB 905, meanwhile, targets an even bigger cost driver in California: utility grid investments.

Among the bill’s wide array of utility affordability measures is a provision that would require the Public Utilities Commission to establish ​“grid utilization” metrics for the state’s three big utilities. That data could reveal where utilities are using their existing grids more or less efficiently, and potentially encourage them to employ batteries, flexible-load controls, and other VPP-style approaches to smooth out the peaks in electricity demand that drive much of the need for new grid infrastructure.

California’s utilities are planning tens of billions of dollars of investments on their sprawling distribution grids to keep up with growing power demand and mitigate wildfire risks. Using VPPs to reduce peak loads on those circuits and substations could allow them to defer billions of dollars of those investments, reducing upward pressure on rates, Becker said.

“We’re not saying we’re not going to build anything new,” Becker told Canary Media in a Monday interview. ​“But let’s make the best use of the existing resources that are already out there, that we’ve already paid for, before we go off spending a lot of money on new resources.”

It’s unclear whether Newsom will respond to this year’s VPP policies differently than he did last year’s. The three bills he vetoed in 2025 were passed by large majorities and proposed relatively minor changes in state VPP policy. Newsom’s veto statements cited the risk that they could disrupt existing grid reliability and planning methods.

Those arguments haven’t sat well with lawmakers pushing for VPP reforms. ​“We should be leaning in a lot more to innovation, especially on clean energy,” state Assemblymember John Harabedian, a Democrat who authored one of the VPP bills vetoed last year, said at an event in Sacramento earlier this month. ​“How do we utilize the grid in a more efficient way? I think technological innovation will help us do that.”

Becker declined to predict if Newsom would sign his VPP bills. ​“We’re focused on getting it passed,” he told Canary Media. ​“Then we’ll focus on the governor’s team and the governor’s reply.”