(1) Existing law provides for the establishment of an Independent System Operator (ISO) as a nonprofit public benefit corporation and requires the ISO to ensure efficient use and reliable operation of the electrical transmission grid consistent with achieving planning and operating reserve criteria no less stringent than those established by the Western Electricity Coordinating Council and the North American Electric Reliability Council. Existing law, the Clean Energy and Pollution Reduction Act of 2015, provides for the transformation of the ISO into a regional organization, with the approval of the Legislature, pursuant to a specified process. That process provides that modifications to the ISO's governance structure, through changes to its bylaws or other corporate governance documents, will not become effective until the ISO, the Public Utilities Commission (PUC) , the State Energy Resources Conservation and Development Commission (Energy Commission) , the State Air Resources Board (state board) , the Governor, and the Legislature take specified actions on or before January 1, 2019.
This bill would delete the above-described provisions providing for the transformation of the ISO into a regional organization. The bill would authorize the ISO and the electrical corporations that are participating transmission owners whose transmission systems are operated by the ISO to use voluntary energy markets governed by an independent regional organization, only if specified requirements are satisfied. The bill would authorize the ISO, on or after January 1, 2028, to implement tariff modifications accepted by the Federal Energy Regulatory Commission to operate the energy markets whose rules are governed by an independent regional organization if the governing board of the ISO adopts a resolution, as specified, finding that each of the specified requirements have been, or will be, adopted by the independent regional organization. The bill would require the ISO to maintain the necessary technical capability to operate energy markets, as specified, and would require the ISO to continue its functions and responsibilities as a balancing authority, as provided.
This bill would establish the Regional Energy Market Oversight Council, which would be responsible for ensuring that participation in regional energy markets serves the interests of the state. The bill would require the council to approve or disapprove initial participation in the independent regional organization by electrical corporations and any other participating load-serving entities and determine whether electrical corporations and any other participating load-serving entities should be required to withdraw from an energy market governed by the independent regional organization. The bill would require the council to convene a duly noticed public meeting to make a finding of approval or withdrawal of participation in the independent regional organization and would require the council to disapprove of initial participation in the independent regional organization, or order withdrawal, if the council makes any of specified findings.
(2) Existing law establishes the California Renewables Portfolio Standard Program, which requires the PUC to establish a renewables portfolio standard requiring all retail sellers, as defined, to procure a minimum quantity of electricity products from eligible renewable energy resources, as defined, at specified percentages of the total kilowatthours sold to their retail end-customers during specified compliance periods. Existing law defines "California balancing authority" and "balancing authority area" for purposes of the program.
This bill would provide that the above-described independent regional organization is not a California balancing authority and its geographic footprint is not a balancing authority area for purposes of the program.
The program, consistent with the goals of procuring the least-cost and best-fit eligible renewable energy resources that meet project viability principles, requires that all retail sellers procure a balanced portfolio of electricity products from eligible renewable energy resources, as specified, referred to as the portfolio content requirements.
This bill would require, in making determinations regarding the eligibility of products to satisfy the portfolio content requirements, the Energy Commission to require, at a minimum, resources that do not have a first point of interconnection to a California balancing authority to demonstrate either that the resource operates under a pseudo-tie agreement or dynamic scheduling agreement with the Independent System Operator of another California balancing authority, or that the resource has secured, and exercised its rights to, firm transmission necessary to deliver its output to a California balancing authority without substituting electricity from another source.
(3) Existing law requires the Power Exchange to provide an efficient competitive auction, open on a nondiscriminatory basis to all suppliers, that meets the loads of all exchange customers at efficient prices, and authorizes the Power Exchange governing board to form appropriate technical advisory committees composed of market and nonmarket participants to advise the governing board on relevant issues.
This bill would delete these provisions.
(4) Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the PUC is a crime.
Because certain provisions of this bill would be part of the act and a violation of a PUC action implementing the bill's requirements 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.

Statutes affected:
SB 540: 337 PUC, 352 PUC
02/20/25 - Introduced: 337 PUC, 352 PUC
03/24/25 - Amended Senate: 337 PUC, 352 PUC
05/01/25 - Amended Senate: 337 PUC, 352 PUC, 399.12 PUC, 399.12 PUC
05/28/25 - Amended Senate: 337 PUC, 352 PUC, 399.12 PUC
05/29/25 - Amended Senate: 337 PUC, 352 PUC, 399.12 PUC