Two California virtual power plant bills have cleared a key legislative hurdle and now face a floor vote deadline of August 31. If lawmakers pass them, Governor Gavin Newsom — who vetoed a slate of VPP bills last year — would have until the end of September to sign or veto.

The bills target the state's high electricity rates, among the most expensive in the continental U.S., by tapping a distributed resource base the California Energy Commission quantifies at 2.5 gigawatts of residential batteries plus more than 600 megawatts of commercial battery capacity. Senate Bill 913 would let VPPs compete in resource adequacy markets; Senate Bill 905 would push the state's three investor-owned utilities — Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric — to use VPPs to reduce 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," Senator Josh Becker, a Democrat who authored both bills, said at a Monday press conference in Sacramento.

The resource adequance pathway

SB 913 would give the California Public Utilities Commission until mid-2028 to craft regulations allowing VPPs to provide resource adequacy — the dispatchable capacity every utility and community energy provider must secure from gas plants, battery banks, and other resources to keep the grid running during peaks.

The potential is quantified. VPPs could cover more than 15% of California's peak grid demand and deliver $550 million in annual 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. Existing barriers include measurement protocols that erode VPP value during heat waves and rules that bar home batteries from receiving credit for power injected back onto the grid.

The displaced capacity is concrete. Californians pay roughly $1 billion per year to extend the lives of fossil-fueled peaker gas plants that run only a handful of hours per year, Becker said. "We can get rid of those if we take better advantage of what's already in people's homes."

A July 2025 utility test demonstrated the deliverable capacity: home batteries delivered more than 500 megawatts of grid relief over a two-hour period corresponding to peak summertime grid stress.

SB 913 has backing from dozens of environmental groups, trade organizations, and device manufacturers and aggregators. PG&E and Southern California Edison withdrew their opposition in late June after amendments.

The DSGS funding cliff

The bill arrives as California's largest existing VPP faces defunding. The Demand Side Grid Support program, operated by the California Energy Commission with taxpayer funds, has grown to nearly 75,000 homes with smart thermostats and flexible load devices and nearly 130,000 homes with batteries — one of the largest VPPs in the country. Under a budget proposal from Newsom's administration, that funding could be cut and the program shut down next year.

"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," said Brandon García, California policy director at trade group Advanced Energy United.

SB 913 could make behind-the-meter battery participation more lucrative, encouraging households to commit spare capacity to the grid, García said.

The cost-shift debate that consumed California's rooftop solar policy looms here too. The CPUC and utilities argue paying households for VPP participation shifts grid costs onto customers without eligible devices. García counters that market competition resolves the concern: VPPs competing against gas plants and utility-scale batteries for resource adequacy contracts "only get enrolled if they're lowest-cost resources — and we are confident that they will be the lowest-cost resources."

The bigger prize: deferred grid capital

SB 905 targets distribution grid investment, an even larger rate driver. Among its affordability measures, the bill would require the CPUC to establish "grid utilization" metrics for the three big utilities. That data could reveal where utilities use existing grids inefficiently and encourage VPP-style approaches — batteries, flexible-load controls — to shave the demand peaks that drive much of the need for new infrastructure.

California's utilities are planning tens of billions of dollars in distribution grid investment to meet growing demand and mitigate wildfire risk. Using VPPs to reduce peak loads on constrained circuits and substations could defer billions of dollars of that capital, Becker said.

"We're not saying we're not going to build anything new," Becker told Canary Media. "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."

The veto question

Newsom vetoed three VPP bills in 2025 that had passed by large margins and proposed relatively minor policy changes, citing risks to existing grid reliability and planning methods. That stance has frustrated reform backers. "We should be leaning in a lot more to innovation, especially on clean energy," Assemblymember John Harabedian, a Democrat who authored one of the vetoed bills, said at a Sacramento event this month.

Becker declined to predict the governor's response. "We're focused on getting it passed," he said. "Then we'll focus on the governor's team and the governor's reply."

The legislative floor vote by August 31 and the governor's decision by September 30 will determine whether California's 2.5-plus gigawatts of distributed batteries gain a permanent market pathway — or whether the DSGS defunding next year strands the capacity already enrolled.