California VPP Bills Return to Newsom After Utility Dive Panel Makes Affordability Case
California lawmakers revived virtual power plant legislation Newsom vetoed last year, betting grid reliability and bill relief can outweigh the political risk.
California's legislature cleared a new slate of virtual power plant bills in late August 2026, resending measures to Gov. Gavin Newsom that he vetoed a year ago when similar proposals reached his desk6. The votes came after advocates spent the intervening year making a narrower argument: that cheap peak capacity is now an affordability tool, not just a decarbonization one.
That framing has hardened into the industry's consensus position. A Regulatory Assistance Project webinar on Tuesday (2026-08-18) heard a group of experts argue that successful VPPs are simply reliable aggregations of distributed resources that deliver predictable benefits to distribution or bulk power grids, a description designed to appeal to utility planners rather than clean-energy advocates5. The shift matters because the money follows the framing.
National Grid offers the most concrete data point. The utility has 7.2 MW of active or committed capacity across two programs, ConnectedSolutions+ for residential and small business resources that leans on stationary batteries and EVs, and a more market-based program5. That is a rounding error against the territory's peak, but it is measured capacity already dispatched, not a pilot.
The political math in California is straightforward. VPPs could cover more than 15% of state peak demand and deliver $550 million in annual utility customer savings by 2035, according to a 2024 analysis by The Brattle Group for GridLab6. Newsom's veto pen is the only remaining obstacle, and the savings estimate is now the headline number in the lobbying effort.
Costs elsewhere explain why utilities are listening. PJM capacity rates have risen more than 1,000% over the last two years, and the financial impact is already showing up in budget meetings across the region, according to Utility Dive4. When capacity is that expensive, a behind-the-meter battery that trims peak load starts to compete with new generation on price alone.
New England provides the counterexample. In ISO-NE, a 4.9 MW/15 MWh battery energy storage system was deployed to dispatch stored energy during high-cost peak periods that occur only a few hours each year4. That is the niche where distributed storage earns its keep: rate spikes so brief that new peaking plants cannot recoup their capital.
The breadth of the search for capacity is visible in PJM's own rate trajectory. Municipal utilities and electric cooperatives that operated for decades in a stable, predictable environment now face data center demand growth colliding with an aging grid, the same Utility Dive analysis noted4. Efficiency gains that once kept demand flat are no longer doing the work.
Australia offers a useful preview on orchestration. AEMO chief executive Daniel Westerman said the country's home battery fleet is delivering enormous benefits to the grid, cutting system costs and power bills, even without being orchestrated as part of a virtual power plant3. That suggests total peak reduction approaching 600 MW from 600,000 households, based on the passive behavior already observed3.
Westerman's point is uncomfortable for the VPP industry: consumers with complete control over their batteries, soaking their own solar or charging during free daytime periods, are already producing system-level value3. Orchestration may add to that, but the baseline benefit does not require anyone's dispatch software.
Xcel Energy in Minnesota is testing the opposite approach. The utility is poised to become the first in the nation to build and operate its own virtual power plant, a plan that has drawn six months of debate from fans and foes1. Utility-owned aggregation sidesteps the question of who captures the value, but concentrates the execution risk in one balance sheet.
Broader forces keep pushing the same direction. Ageing grids, rising electrification and urban demand growth are straining systems worldwide, and AI is being marketed as a way to squeeze more capacity from existing lines2. VPPs fit that narrative: capacity without new transmission.
The unresolved risk sits with Newsom. If he vetoes again, California's cheapest peak capacity stays on the drawing board, and the $550 million annual savings estimate stays a consultant's projection6. If he signs, the first test is whether utility programs like National Grid's 7.2 MW scale fast enough to matter before the next capacity auction clears5.