AMENDED IN ASSEMBLY JUNE 15, 2026

AMENDED IN SENATE APRIL 9, 2026

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

97

Introduced by Senator Padilla

(Coauthors: Senators Becker and Wahab)

February 18, 2026

An act to amend Section 380 of the Public Utilities Code, relating to electricity.

Vote: majority   Appropriation: no   Fiscal committee: yes   Local program: yes

LEGISLATIVE COUNSEL’S DIGEST

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations. Existing law requires the commission, in consultation with the Independent System Operator, to establish resource adequacy requirements for all load-serving entities, as provided. Existing law defines load-serving entity, for that purpose, as an electrical corporation, electric service provider, or community choice aggregator. Existing law requires each load-serving entity to be subject to the same requirements for resource adequacy, the renewables portfolio standard program, and the integrated resource planning process that apply to electrical corporations, as provided.

This bill would require the commission to authorize a load-serving entity to elect to demonstrate compliance with resource adequacy requirements by selling to, or otherwise making transactions with, another load-serving entity to meet entity, and would require those transactions to not represent more than 25% of its a load-serving entity’s compliance obligations with contracts that are and be of a short-term duration, and duration. The bill would require the commission to authorize those transactions to be denominated in the same unit of time used to denominate resource adequacy compliance requirements. The bill would authorize the commission to suspend or adjust that authority of a load-serving entity to sell to, or otherwise make transactions with, another load-serving entity, as specified.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provisions would be a part of the act, and because a violation of a commission action implementing the above prohibition would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The people of the State of California do enact as follows:

SECTION 1.

Section 380 of the Public Utilities Code is amended to read:

380.

(a) The commission, in consultation with the Independent System Operator, shall establish resource adequacy requirements for all load-serving entities.

(b) In establishing resource adequacy requirements, the commission shall ensure the reliability of electrical service in California while advancing, to the extent possible, the state’s goals for clean energy, reducing air pollution, and reducing emissions of greenhouse gases. The resource adequacy program shall achieve all of the following objectives:

(1) Facilitate the development of new generating, nongenerating, and hybrid capacity and the retention of existing generating, nongenerating, and hybrid capacity that is economical and needed for reliability and to achieve the state policy specified in Section 454.53.

(2) Establish new, or maintain existing, demand response products and tariffs that facilitate the economical dispatch and use of demand response that can either meet or reduce an electrical corporation’s resource adequacy requirements, as determined by the commission.

(3) Equitably allocate the cost of generating capacity and demand response in a manner that prevents the shifting of costs between customer classes.

(4) Minimize enforcement requirements and costs.

(5) Consideration of mitigation measures, if the commission determines they are needed, to reduce costs to ratepayers.

(6) Maximize the ability of community choice aggregators to determine the generation resources used to serve their customers.

(c) Each load-serving entity shall maintain physical generating capacity and electrical demand response adequate to meet its load requirements, including, but not limited to, peak demand and planning and operating reserves. The generating capacity or electrical demand response shall be deliverable to locations and at times as may be necessary to maintain electrical service system reliability, local area reliability, and flexibility.

(d) Each load-serving entity shall, at a minimum, meet the most recent minimum planning reserve and reliability criteria approved by the board of directors of the Western Systems Coordinating Council or the Western Electricity Coordinating Council.

(e) (1) The commission shall implement and enforce the resource adequacy requirements established in accordance with this section in a nondiscriminatory manner. Each load-serving entity shall be subject to the same requirements for resource adequacy, the renewables portfolio standard program, and the integrated resource planning process pursuant to Section 454.52 that apply to electrical corporations pursuant to this section, or are otherwise required by law or by order or decision of the commission. The commission shall exercise its enforcement powers to ensure compliance by all load-serving entities.

(2) Notwithstanding subdivision (c), the commission shall authorize a load-serving entity to elect to demonstrate compliance with resource adequacy requirements by selling to, or otherwise making transactions with, another load-serving entity to meet entity. Those transactions shall not represent more than 25 percent of its a load-serving entity’s resource adequacy compliance obligation with contracts that are and shall be of a short-term duration. The commission shall authorize those transactions to be denominated in the same unit of time used to denominate resource adequacy compliance requirements. The commission may suspend or adjust the authority of a load-serving entity to sell to, or otherwise make transactions with, another load-serving entity if the commission demonstrates the use of these transactions prevents the electrical system from meeting the planning reserve margin established by the commission.

(f) (1) The commission shall require sufficient information, including, but not limited to, anticipated load, actual load, and measures undertaken by a load-serving entity to ensure resource adequacy, to be reported to enable the commission to determine compliance with the resource adequacy requirements established by the commission.

(2) The commission shall calculate and publish annually on its internet website, in a new report or as part of another report, the percentage of each load-serving entity’s local and system resource adequacy requirements from the previous calendar year that was met with capacity from eligible renewable energy resources pursuant to the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11)), other zero-carbon resources, including large hydroelectric and nuclear resources, or energy storage resources. In determining the percentage of each load-serving entity’s resource adequacy requirements, the commission shall include all directly owned or contracted resources and each load-serving entity’s allocation of any centrally procured resources or allocation of resources pursuant to any other mechanism that involves an assignment or allocation of resources purchased or owned by a single buyer, and shall exclude any share of a load-serving entity’s resources that were allocated to another load-serving entity.

(g) An electrical corporation’s costs of meeting or reducing resource adequacy requirements, including, but not limited to, the costs associated with system reliability, local area reliability, or flexible resource adequacy, that are determined to be reasonable by the commission, or are otherwise recoverable under a procurement plan approved by the commission pursuant to Section 454.5, shall be fully recoverable from those customers on whose behalf the costs are incurred, as determined by the commission, at the time the commitment to incur the cost is made, on a fully nonbypassable basis, as determined by the commission. The commission shall exclude any amounts authorized to be recovered pursuant to Section 366.2 when authorizing the amount of costs to be recovered from customers of a community choice aggregator or from customers that purchase electricity through a direct transaction pursuant to this subdivision.

(h) The commission shall determine and authorize the most efficient and equitable means for achieving all of the following:

(1) Meeting the objectives of this section.

(2) Ensuring that investment is made in new generating capacity.

(3) Ensuring that existing generating capacity that is economical is retained to ensure reliability.

(4) Ensuring that the resource adequacy program can reasonably maintain a standard measure of reliability, such as a one-day-in-10-year loss-of-load expectation or a similarly robust reliability metric adopted by the commission, and use it for planning purposes.

(5) Ensuring that the cost of generating capacity and demand response is allocated equitably.

(6) Ensuring that community choice aggregators can determine the generation resources used to serve their customers.

(7) Ensuring that investments are made in new and existing demand response resources that are cost effective and help to achieve electrical grid reliability and the state’s goals for reducing emissions of greenhouse gases.

(8) Minimizing the need for backstop procurement by the Independent System Operator.

(i) In making the determination pursuant to subdivision (h), the commission may consider a centralized resource adequacy mechanism among other options.

(j) The commission shall ensure appropriate valuation of both supply and load modifying demand response resources. The commission, in an existing or new proceeding, shall establish a mechanism to value load modifying demand response resources, including, but not limited to, the ability of demand response resources to help meet distribution needs and transmission system needs and to help reduce a load-serving entity’s resource adequacy obligation pursuant to this section. In determining this value, the commission shall consider how these resources further the state’s electrical grid reliability and the state’s goals for reducing emissions of greenhouse gases. The commission, Energy Commission, and Independent System Operator shall coordinate to jointly ensure that changes in demand caused by load modifying demand response are expeditiously and comprehensively reflected in the Energy Commission’s Integrated Energy Policy Report forecast and in planning proceedings and associated analyses, and shall encourage reflection of these changes in demand in the operation of the electrical grid.

(k) For purposes of this section, “load-serving entity” means an electrical corporation, electric service provider, or community choice aggregator. “Load-serving entity” does not include any of the following:

(1) A local publicly owned electric utility.

(2) The State Water Resources Development System commonly known as the State Water Project.

(3) Customer generation located on the customer’s site or providing electrical service through arrangements authorized by Section 218, if the customer generation, or the load it serves, meets one of the following criteria:

(A) It takes standby service from the electrical corporation on a commission-approved rate schedule that provides for adequate backup planning and operating reserves for the standby customer class.

(B) It is not physically interconnected to the electrical transmission or distribution grid, so that, if the customer generation fails, backup electricity is not supplied from the electrical grid.

(C) There is physical assurance that the load served by the customer generation will be curtailed concurrently and commensurately with an outage of the customer generation.

SEC. 2.

No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.