Newsom signs landmark virtual power plant bills, setting California's grid strategy in his final weeks

In one of his last major energy-policy moves as governor, Gavin Newsom on Wednesday signed two bills that establish California’s most structured commitment yet to virtual power plants — aggregations of home batteries, EV chargers, and smart appliances that can replace gas-fired peaking plants and reduce utility grid-spending.

SB 913 takes direct aim at the economics of those gas "peaker" plants: for decades, utilities have paid customers to curtail air conditioners and other appliances during the handful of high-demand hours each year that justify keeping aging gas units online. The bill creates a formal resource-adequacy pathway so that aggregated behind-the-meter resources — including rooftop-solar-charged home batteries — can earn compensation for performing the same reliability service, giving them a path into the organized wholesale markets that currently favor large centralized plants Canary Media.

SB 905 targets a second category of grid costs: the capital investments utilities make to build out their distribution and transmission infrastructure to serve peak demand. Utilities overbuild that infrastructure for hours that occur only a few dozen times per year. The bill orders the California Public Utilities Commission to develop grid-utilization metrics for the three large investor-owned utilities, creating a framework to measure whether some of that overbuilding can be avoided by relying instead on customer-sited resources Canary Media.

Together, the two bills address the core economic logic that has kept virtual power plants from competing effectively with gas infrastructure in California. SB 905 restricts cost recovery for grid investments that efficient demand-side resources could displace; SB 913 lets behind-the-meter resources earn the same market payments as the gas plants they replace Canary Media.

The outcome was far from guaranteed. Newsom had vetoed three VPP bills in 2025 and his administration had repeatedly pushed to cut funding for the state’s existing demand-response programs Canary Media. The administration’s previous energy-cost-containment work had focused on smaller-bore policies even as critics pushed for more fundamental reform of utility economics Canary Media. California's three major investor-owned utilities have opposed legislation that would reduce their spending authority and the regulated profits they recover through customer rates Canary Media.

But with average residential electricity rates having risen to roughly twice the U.S. average over the past decade — while utilities reported record profits — the political terrain shifted Canary Media. The bills also drew backing from consumer advocates, clean-energy trade groups, and environmental organizations. "I’d say we saw today a lot of evidence that Gov. Newsom has really prioritized affordability and accountability to an increased extent," said Mark Toney, executive director of The Utility Reform Network, a ratepayer group that sponsored seven bills this session, all of which passed Canary Media.

Clean-energy advocates did not get everything. Newsom vetoed AB 1813, a bill that would have restructured California’s community-solar program — a mechanism many other states have used more effectively — which advocates had pushed as a parallel pathway for getting more distributed resources online Canary Media.

Brad Heavner, executive director of the California Solar and Storage Association, called the signing a step forward — but warned that the bills’ effect on customer bills will depend on how the CPUC writes the rules Canary Media.

"Implementation of the bill at the CPUC under the next governor will determine whether customers see lower bills," Heavner said in a statement Wednesday Canary Media.

The CPUC has not yet opened formal rulemaking proceedings for either bill as of October 1, 2026. The earliest the new programs could be operational is 2027. The existing state-funded VPP — which pays participants directly for demand reductions — faces a funding gap that could force it to pause operations before the new programs are ready, advocates have warned Canary Media.

Both bills were signed September 30, 2026, and chaptered by the Secretary of State that same day. SB 905 is chaptered as Chapter 986 of the Statutes of 2026.

Story filed from Sacramento