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Gov. Gavin Newsom signed two California bills intended to expand the use of virtual power plants and limit some utility costs. Their impact on customer bills depends on implementation by the California Public Utilities Commission, while funding uncertainty remains for the state’s existing virtual power plant program.
California Gov. Gavin Newsom signed two bills intended to expand virtual power plants, allowing utilities to pay customers for using batteries, electric vehicles and controllable appliances to ease pressure on the grid. The measures, SB 913 and SB 905, also target costs tied to keeping peak-use power plants available and building grid capacity for periods of high demand.
Virtual power plants, or VPPs, coordinate distributed equipment such as home batteries, EV chargers and smart thermostats so they can reduce or shift electricity use when the grid is under strain. In a Wednesday statement, The Climate Center’s Kat Lockwood described the legislation as part of an effort to lower electricity costs and reduce climate pollution. The bills establish ways for utilities to use customer devices for grid services; the source report does not say that customers will automatically receive payments or specify a payment level.
SB 913 addresses the cost of keeping older gas-fired “peaker” plants ready for use during limited periods of high demand. SB 905 focuses on utility grid investments made to serve those peaks, which can leave capacity underused during other hours. Both bills also address utility returns on equity for wildfire-related investments and direct utilities to borrow more to finance a greater share of grid spending, according to the report.
Newsom also signed other energy-affordability bills, but vetoed a measure that would have directed state agencies to overhaul California’s community solar-and-battery market. The source report describes that market as underdeveloped compared with those in other states. The governor’s approval of the VPP measures drew support from consumer advocates and clean-energy groups, though advocates said the final effect will depend on how regulators put them into practice.
How VPPs Could Reduce Peak Costs
The bills could give California another option for meeting electricity demand during the hottest, most expensive hours: coordinate devices already installed in homes rather than relying only on new utility infrastructure or gas plants. According to the source report, aggregating those devices could shift hundreds of megawatts of demand away from the grid during high-stress periods. That potential is relevant to customers because utility spending and investment costs are recovered through electricity rates.
The legislation does not, by itself, establish that bills will fall. California’s three major investor-owned utilities charge residential rates that have risen to roughly twice the U.S. average over the past decade, the report says. Whether customers see savings from VPPs will depend on the program rules, payments, and utility decisions made during implementation.
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A Change After Earlier Vetoes
Newsom’s approval marks a shift from his recent record on VPP legislation. He vetoed three VPP bills last year, while his administration sought repeated funding cuts to the state’s main VPP program. The report says the program may be unable to continue operating next year unless lawmakers and the incoming governor quickly reach a funding agreement.
The bills were part of a wider affordability package passed amid public concern over electricity costs. Utility companies have opposed provisions they say would constrain spending on capital investments that can earn regulated returns, according to the report. The measures also follow a separate effort to support transmission construction: Newsom signed Assembly Bill 192 last month, funding a state transmission accelerator with $325 million, the report says.
“I’d say we saw today a lot of evidence that Gov. Newsom has really prioritized affordability and accountability to an increased extent.”
— Mark Toney, executive director of The Utility Reform Network
Customer Payments Still Depend on Rules
The source report does not specify when customers will be paid, how much they could receive, or which devices and programs will qualify under the new laws. Those details depend on implementation, with the California Public Utilities Commission expected to play a central role. No projected bill savings or timetable for customer participation is provided.
Funding for the state’s existing VPP program is also unresolved. The report says successive funding cuts could leave it unable to operate next year without agreement between the legislature and the incoming governor. Newsom’s signature on the two bills does not resolve that separate funding question, and the veto of the community solar-and-battery bill leaves that market proposal unadvanced.
Regulators and New Governor Set Terms
The next major step is implementation by the California Public Utilities Commission, under the next governor. Regulators will determine how utilities can use aggregated customer devices and what arrangements govern participation and compensation. That process will show whether the laws lead to actual customer programs and measurable changes in utility costs.
Separately, state lawmakers and the incoming governor will need to address funding for the existing VPP program before it may be unable to continue next year, according to the report. The source material does not give a specific regulatory schedule or identify a deadline for the funding agreement.
Key Questions
What did Newsom sign?
He signed SB 913 and SB 905, two bills that support using virtual power plants to address grid stress and utility costs.
What is a virtual power plant?
A virtual power plant coordinates distributed devices, such as batteries, EV chargers and smart thermostats, so they can shift or reduce electricity use when demand is high.
Will the bills immediately lower electricity bills?
That is not established. The source report says the effect on bills will depend on implementation by the California Public Utilities Commission and the next governor.
Will customers be paid for participating?
The bills support paying customers for grid services, but the source report does not specify payment amounts, eligibility or when payments could begin.
What happens to California’s existing VPP program?
Its funding remains uncertain. The report says the program may be unable to operate next year unless the legislature and incoming governor agree on a funding plan.
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