California Governor Gavin Newsom has vetoed several key energy bills that aimed to accelerate the state’s clean-energy transition, including Assembly Bill 740, which called for the creation of a statewide plan to expand virtual power plants (VPPs).

The bill had passed with bipartisan support and was viewed by many as a major step toward making California’s power grid cleaner, cheaper, and more resilient.Virtual power plants are systems that connect distributed energy resources — such as rooftop solar panels, home batteries, smart thermostats, and electric vehicles — into a coordinated network that can supply power during high demand periods. Proponents of AB 740 said that building out VPPs could save Californians around $750 million every year in electricity system costs and provide over 7,500 megawatts of additional capacity, roughly equivalent to several large power plants.More than a dozen environmental organizations, energy companies, and advocacy groups had urged the governor to sign the measure. They argued that virtual power plants represent a “ready-to-go” solution to lower energy bills and reduce reliance on fossil fuels while improving grid reliability during heat waves and wildfire-related outages.However, in his veto message, Governor Newsom said that while he supports the goal of expanding distributed energy resources, the bill would have added costs to the California Energy Commission’s main operating fund. He described that fund as being under “ongoing structural deficit,” suggesting that the state’s energy agency simply doesn’t have the budget capacity to take on new planning mandates at this time.Newsom’s decision to veto AB 740 came just weeks after he signed a large package of energy legislation that included several landmark measures. That earlier package set the groundwork for a regional Western electricity market, extended California’s cap-and-trade program, and dedicated $18 billion to the state’s wildfire management fund. Despite those achievements, many clean-energy advocates say the governor’s latest round of vetoes sends mixed signals about California’s clean-energy leadership.Edson Perez, California lead at Advanced Energy United, was among those who sharply criticized the vetoes. Perez said the governor’s decisions mark “a major setback” for efforts to make energy more affordable and sustainable. “Together, these decisions establish Governor Newsom as the state leader who walked away from billions in potential savings for ratepayers at a critical moment in California’s history,” Perez said in a statement.In addition to AB 740, Newsom also rejected Senate Bill 541, Assembly Bill 1408, and Assembly Bill 44 — all of which were focused on improving energy management and planning across the state. Each of these bills had been developed with input from both energy experts and environmental advocates, aiming to make the power grid more flexible and efficient.SB 541 would have directed the California Energy Commission and the California Public Utilities Commission to study load-shifting strategies, which encourage consumers to use power at times when renewable energy is most abundant. The bill also called for detailed reports from each electricity provider. Newsom vetoed the measure, arguing that it was “redundant” with existing state programs and would be too expensive for the agencies to implement.AB 1408, another bill vetoed by the governor, focused on better integrating surplus interconnection capacity — the unused portions of grid infrastructure that could be leveraged for new clean-energy projects. Newsom said that the measure could “constrain energy resource procurement and interconnection options,” potentially leading to higher electricity costs and weaker grid reliability.Meanwhile, AB 44 aimed to formally embed load flexibility — the ability to adjust energy use based on grid needs — into California’s energy planning process. Supporters said the bill would have helped balance supply and demand more efficiently, particularly as more solar and wind energy come online. But Newsom countered that the bill could disrupt ongoing resource planning and interfere with current regulatory frameworks that ensure grid stability.For many clean-energy advocates, these vetoes represent a pattern of cautious policymaking that undermines California’s climate ambitions. They argue that by rejecting these bills, the state is missing a crucial opportunity to embrace technologies that can reduce strain on the grid, lower household energy bills, and enhance resilience during extreme weather events.Critics also note that the vetoes come at a time when Californians are paying some of the highest electricity rates in the nation, and when demand for reliable, low-carbon power is rising sharply. Virtual power plants and load-flexibility measures, they say, could have helped ease those pressures without requiring large new power plant investments.Despite the backlash, the governor maintains that his administration remains committed to expanding clean energy and modernizing the grid — but within the limits of the state’s budget. He emphasized that many of the goals outlined in the vetoed bills are already being pursued through existing state programs and regulatory proceedings.Still, for many in the renewable energy sector, the vetoes signal hesitation at a time when California needs bold action. The state’s long-term goals of achieving 100% clean electricity and carbon neutrality by mid-century, they warn, will be harder to reach without proactive investment in innovative solutions like virtual power plants.As the debate continues, lawmakers and energy advocates are expected to revisit many of these proposals in next year’s legislative session, hoping to address the governor’s fiscal concerns while keeping California’s clean-energy momentum alive.