Newsom Vetoes Bills Promoting Demand-Side Resources and Virtual Power Plants
California Governor Gavin Newsom has vetoed two bills, AB 740 and AB 44, which aimed to promote the use of demand-side resources and virtual power plants (VPPs) in the state's electricity grid. The vetoes occurred amidst concerns about the financial implications for the California Energy Commission and the non-renewal of a key grid reliability program.
AB 740, a bipartisan bill, sought to require California to develop a comprehensive VPP deployment plan. It would have mandated collaboration between the California Energy Commission, utilities commission, and CAISO. Newsom vetoed the bill due to potential costs to the Energy Commission's primary operating fund, which is currently facing a structural deficit. Similarly, AB 44 was vetoed as it would have required the Energy Commission to adopt rules for enabling electricity providers to reduce demand forecasts using demand-side resources.
Both bills passed unanimously in the state's Assembly and Senate before being vetoed. Environmental and clean energy organizations had advocated for AB 740, arguing that VPPs could save Californians $750 million per year in traditional power system costs and provide over 7.5 GW of capacity cost-effectively. The Climate Center had also urged Newsom to sign AB 740 into law in September 2025, highlighting the potential cost savings and reduced dependence on peaker plants for emergency power needs. However, the non-renewal of the grid reliability and premier virtual power plant program may result in its end, leading to a loss of more than $200 million in energy cost savings for Californians.
Newsom's vetoes of AB 740 and AB 44 have raised questions about the future of demand-side resources and VPPs in California's energy landscape. While the governor cited financial concerns, environmental advocates argue that these technologies could provide significant cost savings and reduce the state's reliance on fossil fuels. The impact of these decisions on California's energy policy and consumers remains to be seen.
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