SACRAMENTO, CA — Today, Senate Chair of Energy, Utilities and Communication Josh Becker (D-Menlo Park) and Senator Henry Stern (D-Los Angeles) introduced SB 540, legislation aimed at optimizing California’s energy markets, increasing grid reliability, reducing costs for ratepayers, and accelerating the transition to a clean energy future.
This Pathways bill establishes an innovative framework for regional energy cooperation while preserving California’s authority over key aspects of its electricity system and climate goals.
“As we move toward achieving California’s 100% clean energy goals, we must look at all possible solutions to reduce costs, improve reliability, and cut emissions,” said Senator Josh Becker. “Pathways strikes that balance by unlocking the benefits of a regional energy market while safeguarding California’s critical public policy priorities. It offers a win-win scenario for California—achieving cleaner energy, more reliable power, and real savings for ratepayers.”
Senator Henry Stern, Vice Chair of the Joint Legislative Committee on Climate Change Policy, believes the future of California’s energy hinges on innovation and collaboration. "This bill will enhance the reliability of our grid during extreme weather while securing cleaner, more affordable energy for Californians. With storm clouds on the horizon, now is not the time to hunker down—we must reach beyond our borders to ensure that clean energy markets aren’t stifled by politics," said Senator Henry Stern.
"Enhanced coordination among western states will bring benefits to Californians and increase the amount of clean, affordable electricity for the region," said Victoria Rome, California Government Affairs Director for NRDC (Natural Resources Defense Council. "SB 540 takes the next important step toward a more resilient and reliable clean energy future for all westerners."
“With better access to shared resources across the West, grid operators will be better equipped to address peak demand periods, reduce the likelihood of blackouts, and support the resilience of the grid in the face of growing challenges such as extreme weather events and climate-driven disruptions,” said Hunter Stern, President of the Coalition of California Utility Employees.
“SB 540 will make electricity more affordable and reliable and will reduce emissions in California. It is rare to have an effort with positive benefits in all three of these priority areas,” said Bob Dean, Business Manager, IBEW 1245.
“California has an opportunity to lead the way in building a cleaner, more affordable, and more reliable energy future,” said Mary Creasman, CEO of EnviroVoters. “By continuing to coordinate with our partners in the West, we can reduce emissions, improve grid reliability, and prevent blackouts. A modernized, regional energy market is a critical step toward a sustainable and resilient grid that benefits all Californians.”
“SB 540 will boost California's work to decarbonize its electric grid by unlocking the fastest, cheapest options for clean energy growth while providing new tools to prevent blackouts,” said Michael Colvin, Director, California Energy Program at Environmental Defense Fund. “In paving the way for an expanded western energy market, this bill will modernize California's grid for a clean energy future and provide the strongest consumer protections of their kind. This will be a huge win for both the climate and Californians.
“No other single measure could deliver this level of cost savings to consumers while increasing reliability and reducing emissions in communities most impacted by fossil-fuel generation,” said Evelyn Kahl, California Community Choice Association (CalCCA) Chief Policy Officer and Pathways Launch Committee Member.
“The Pathways Initiative will unleash clean, affordable domestic energy for consumers in the American West, improving reliability and delivering significant economic and energy independence benefits for local communities.” said Sarah Webster, Pattern Energy, Senior Vice President External Affairs & Market Development.
“This legislation advances the holy trinity of California energy policy: it will make our power grid cleaner, more affordable, and more reliable — all while preserving a level playing field for states across the West.” said Alex Jackson, Executive Director of American Clean Power – California. “We enthusiastically support it.”
“PCE has been closely tracking the Pathways Initiative over the past year, and we appreciate the thoughtful and solution-oriented collaboration of energy leaders and partners in creating a proposal that benefits consumers by lowering energy costs, expands renewable energy supply, and helps achieve California's ambitious climate change goals," said Shawn Marshall, Chief Executive Officer of Peninsula Clean Energy.
"Today's legislation has been over a decade in the making and represents collaboration among diverse stakeholders and interests, with the ultimate goal of ensuring cost savings, increased reliability, and reduced emissions for customers across the West,” said Nidhi Thakar, the Clean Energy Buyers Association’s Senior Vice President of Policy. “The West-Wide Governance Pathways Initiative will help meet growing electricity demand at a pivotal time for economic growth and innovation. We look forward to working with California lawmakers to support the development of an independently governed, West-wide wholesale electricity market that will bring robust benefits.”
The bill contains key safeguards that will ensure the California Independent System Operator (CAISO) will continue operating these markets and ensure California retains its control over critical functions such as transmission planning, procurement, and other public policies.
Additionally, the measure provides sufficient time, until after January 1, 2027, for CAISO to assess the national political environment and analyze the benefits of joining a regional market before they have authority to join it.
By enabling a least-cost dispatch across a broader pool of Western resources, the bill is expected to save California ratepayers up to nearly $800 million annually, according to analysis by the Brattle Group. California would be able to reduce expenses for maintaining a state-specific strategic reliability reserve by pooling resources with other participating areas.
A regional market would automatically leverage diverse energy resources across the Western grid, improving resilience during system peaks. For instance, excess solar energy in sunny California could be consumed in another state like Oregon if solar is needed because of cloudy weather. With expanded visibility and coordination, CAISO will have better tools to ensure grid stability and reliability.
California will be better positioned to export excess renewable energy and import clean energy from other states, reducing dependence on backup diesel generators and inefficient gas plants.
Pathways includes robust safeguards to protect California’s policy goals, including:
- Maintaining CAISO’s role as a peer balancing authority,
- Ensuring the new regional organization respects state procurement, environmental, reliability and other public policies,
- Providing the CPUC and other stakeholders with access to critical market data, and
- Establishing a mechanism providing California that ability to withdraw from the regional market if it ceases to benefit the state.
Pathways is sponsored by the Coalition of California Utility Employees, the State Association of Electrical Workers, the Environmental Defense Fund and the Natural Resources Defense Council, and is supported by dozens of organizations including public utilities, CCAs, clean energy developers, environmental groups, labor groups, large consumers, and more.