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Could California’s major utilities control their rapidly rising electricity rates by using their power grids more efficiently? State lawmakers want to find out.
A set of bills introduced this year would order Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric to measure and improve how they’re utilizing the hundreds of thousands of miles of power lines that carry electricity to customers.
At issue is how those utilities handle peaks in electricity demand that happen only a handful of hours per year — typically by upgrading and expanding expensive grid infrastructure. Identifying exactly where on the grid that utilities have taken, or plan to take, this approach and where extra capacity could be freed up is key.
Armed with that knowledge, regulators could set metrics and create incentives for utilities to use technologies like advanced grid controls and distributed solar with batteries to smooth out those peaks — and thus, reduce one of the biggest drivers of soaring electricity costs.
Assembly Bill 1975, introduced by Assembly Member Nick Schultz, a Democrat, would require utilities to measure grid utilization and find ways to improve it over time.
Senate Bill 905, a wide-ranging utility cost-containment package, includes a provision that would mandate “additional reporting on how effectively utilities are using existing distribution grid capacity, particularly during off-peak periods,” when grids have more headroom to deliver power.
“At a time when cost is an issue, making better use of the grid we already have — and have already paid for — is paramount,” state Senator Josh Becker, the Democrat who introduced SB 905, told Canary Media. “That doesn’t mean we won’t keep building new transmission for clean energy. But let’s make sure we’re using our existing grid well.”
One way to do that would be through load flexibility programs, which help relieve temporary grid constraints by paying customers to reduce the amount of power they use via smart thermostats and other devices, or to share the electricity they’ve stored in plugged-in electric vehicles and home batteries charged with rooftop solar.
Making better use of the existing grid could save a lot of money over the long run, Becker said. California’s three big utilities are spending more than other utilities around the country on their distribution grids, according to data from the Department of Energy’s Lawrence Berkeley National Laboratory and The Brattle Group. The costs of those grid investments must be recovered through the rates they charge their customers — who are now paying roughly twice the national average for electricity.
Much of that grid spending is meant to reduce the risk of sparking deadly wildfires. But a sizable chunk goes toward expanding substations, transformers, and power lines to serve EVs, heat pumps, data centers, and broader economic growth.
As the state pushes to meet targets to electrify vehicles and buildings, those costs could grow even further. A 2023 study commissioned by the California Public Utilities Commission found the state’s three major utilities could need to invest up to $50 billion by 2035 to meet growing power demand.
But if utilities can successfully get EV chargers, heat pumps, and other devices to use electricity when the existing grid has more capacity, it would minimize the need for expensive upgrades while also increasing sales of electricity to cover new and existing grid costs.
And such devices are eminently capable of orchestrating their load-shifting capacity as “virtual power plants,” which could flip them from driving up grid costs to lowering expenses for utility customers at large. This “load shift” approach could cut costs passed on to California customers by up to $13.7 billion through 2030, according to a 2025 analysis prepared for think tank GridLab by grid analytics startup Kevala.
Utilities don’t have a clear incentive to constrain excess grid spending, however. In fact, under traditional cost-of-service regulation, they earn guaranteed profits based on how much money they invest in infrastructure. That’s why elected officials who are facing voter anger over high utility bills in states across the country are looking to measures like those that have been proposed in California.
Deploy Action, a nonprofit formed to promote distributed energy as a solution to rising electricity costs, is pushing these kinds of grid utilization bills in California and several other states.
“We all know what’s driving up utility rates and bills,” said Phil Ting, the organization’s co-founder and a former California Assembly member from 2012 to 2024. “Every time PG&E is building something, they’re getting their rate of return. That adds to our rate base — the rates go up — and that’s what they’re financially motivated to do.”
Last month, Deploy Action won its first victory on this front in Virginia, with the passage of a law that would set grid utilization requirements for Appalachian Power and Dominion Energy, the state’s two major investor-owned utilities. The law was supported by Gov. Abigail Spanberger, who campaigned on containing rising electricity costs.
Virginia’s law requires utilities to gather and report detailed data on their grid utilization, and orders regulators to use that data to establish targets and timelines for utilities to optimize grid usage, with special consideration to “non-wires alternatives” like batteries and advanced grid controls.
“A goal would be for California to follow in Virginia’s footsteps,” said Arnab Pal, Deploy Action’s executive director and a former adviser in the Biden-era Department of Energy. “Then, we can do some procurement reforms around the technologies that increase utilization.”
This work wouldn’t happen overnight. Under AB 1975 and SB 905, the California Public Utilities Commission would order utilities to collect and share core grid-utilization data. Though the bills differ slightly in their approach, both stipulate that the CPUC set rules for the utilities to improve their grid utilization starting in 2028.
Simply getting the data is the first step, Becker said. Today, regulators lack insight into “how well we’re using the existing infrastructure,” he said. “There’s data we just don’t have.”
Grid utilization can be measured in lots of ways. Some are holistic in nature, such as determining “load factor,” which is a ratio of average load compared with peak load over a year. While this data isn’t disclosed in a consistent way, Becker and Pal both noted that comments in regulatory proceedings indicate that California’s utilities are experiencing load factors of about 45% to 50% in recent years, meaning that roughly half their grid capacity is underutilized much of the year.
That’s down from roughly 60% to 65% in previous decades, when the state had more steady electricity demand from factories and other big customers and fewer “peaky” loads like air conditioners and EV chargers. Similar dynamics have been reducing load factors for utilities in other states, Pal said.
Knowing your average load factor only gets you so far, though. Finding out which parts of the grid that utilities should target for peak demand reduction, or where excess grid capacity can better serve new loads, takes more fine-tuned data, Ting said.
Luckily, California has had mandates in place for more than a decade that have ordered utilities to collect data on grid hosting capacity — a measure of how much room is available on grid circuits and substations to add new generation sources like solar panels — and publish that data on maps, which have gotten incrementally more accurate and useful over time.
A bill authored by Becker and passed in 2023 instructed California utilities to find ways to overcome grid bottlenecks preventing new customers from getting connected. Since then, California utilities have made progress on using locational grid data to support flexible interconnection of solar and battery projects, as well as flexible energization of big electricity users like EV charging hubs — and could potentially do the same with new data centers.
Utilities have also launched pilot projects to figure out how to use distributed energy resources — like rooftop solar–charged batteries, grid-responsive smart thermostats, and EV chargers — to relieve grid pressures. Other pilots are asking customers who want to add EV chargers, heat pumps, and other new loads on stressed circuits to promise to limit their draw on the grid during times of peak demand.
What’s missing from all these efforts so far is a regulatory structure that rewards utilities for planning their grid investments around these new ways to smooth out peak demand, Pal said. To address this, AB 1975 and SB 905 include provisions that would require the CPUC to design and implement penalties for utilities that fail to improve grid utilization, as well as incentives for achieving better performance over time.
“The way to do this is, give them the ability to use more of their grid, give them a set of metrics, give them the tools to actually plan for that — that is, require it of them,” Pal said.
That may involve incentives for utilities that expand options for customers to enlist their batteries, EV chargers, and remote-controllable appliances in virtual power plant programs, he said. But it could also mean giving utilities the opportunity to earn a regulated profit on technologies they deploy.
For example, utility-controlled batteries could be used to relieve peak loads on substations, a scenario that Minnesota regulators recently approved for utility Xcel Energy. Other options include so-called grid-enhancing technologies, which help utilities identify and optimize underused portions of their grid; and advanced conductors, which carry more power than traditional power lines do.
Deploy Action is supporting another bill in the California legislature, SB 1295, that would create a pathway for utilities to identify and propose projects that could meet those needs. “When it comes to distributed batteries and advanced conductors and other things that help with efficiency, we want to make sure there’s a procurement function available,” Pal said.
One way to achieve that would be for utilities “not necessarily to own the technology behind it, but perhaps rate-base some of it, so they’re able to make some of the right decisions,” he said. “We’re comfortable with that.”
These kinds of concessions to utilities raise red flags for Matthew Freedman, staff attorney for The Utility Reform Network. The consumer advocacy group supports legislative directives to the CPUC to set metrics and establish targets for improving utilities’ grid utilization, he said.
But TURN is leery of moving too quickly to create financial incentives that would reward utilities for doing things that might not directly reduce rates for customers, Freedman said. “If we say to the utility, ‘We’ll reward you based on the utilization of the system,’ but we don’t have another metric to track total spending, utilities could maximize that incentive by spending through the roof, or diverting money from other programs,” he said.
That’s why TURN has asked California lawmakers to amend AB 1975 to avoid giving the CPUC authority to set utility incentives right away, he said. “Let’s give it a number of years to play out. And at that point, we’ll have more confidence on which targets and metrics are worth putting our money on.”
Pal said that Deploy Action understands such concerns. “We’re going to want to see an incentive structure for utilization,” he said. “But we want to make sure … the ultimate goal is cost reduction.”
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