DSGS Stays in the Game: A Key Win for California’s VPP Future

It’s playoff season for California’s legislature, and virtual power plants (VPPS) just advanced to the next round. 

This year, California’s demand response (DR) community is focused on how this legislative session will shake out for the Demand Side Grid Support (DSGS) program, the country’s most successful VPP program that was counterintuitively defunded in 2025. 

Team DSGS had a slow start this playoff season. The Governor’s budget proposed moving some funding to DSGS to run it through this year, but it also maintained a separate proposal that would end DSGS after 2026 and move participating customers to a different DR program. If that second proposal passes, many customers will likely be fumbled in the transition, and those that do make it into the other program will earn less than they would have in DSGS.

This month, however, DSGS’s funding prospects turned around when the Senate budget subcommittee voted to maintain the Governor’s first proposal to transfer funds into DSGS, but reject the second proposal to move customers out of DSGS in 2027. Instead, the Senate’s budget plan recommends that those customers remain in DSGS, with additional funding that would have gone to other programs to be shifted into DSGS instead. 

This is a huge win, potentially providing DSGS with enough funding to run the program through 2028, when CAISO and CPUC reforms are expected to enable DSGS customers to participate directly in the state’s wholesale market. 

California rallies support for DSGS 

While this may appear to be a dramatic turnaround, strong legislative support for DSGS has been building for months. Influential members of both houses have stepped up to champion a program that’s already proven its value to the grid and to California residents. Leap has been close to this effort, working with a coalition of environmental advocates and other stakeholder groups to help legislators understand the importance of DSGS as California prepares for what’s likely to be an especially hot summer.

Far from being a hand-out to the well-off, DSGS is actively helping Californians confront the state’s energy affordability crisis.

DSGS isn’t just popular with legislators because it helps prevent blackouts (although that’s certainly part of it!). The program is also putting money back in the pockets of everyday Californians. Research conducted by UC Santa Barbara showed that participation for DSGS is particularly strong across California’s Central Valley and Inland Empire regions, with participation rates higher on a per-capita basis among lower-income solar adopters.

Communities in the lowest income quintile average 7.7 DSGS sites for every thousand residents, the highest rate of any income quintile. Far from being a hand-out to the well-off, DSGS is actively helping Californians confront the state’s energy affordability crisis, a crisis that legislators are razor-focused on solving for their constituents as well.

Allowing these constituents to continue participating in DSGS through 2026 and beyond is crucial to maintain this affordability solution. 

Setting DSGS up for a winning season

Alongside the funding discussions, Leap has also been actively working with the California Energy Commission (CEC) to ensure that the rules for 2026 DSGS participation offer the same benefits customers have had access to in the past. One key victory was the removal of a proposed restriction that would have prevented customers that just installed their batteries in 2026 from participating in DSGS this season. In April, the CEC approved a new set of guidelines that, following feedback from Leap and other stakeholders, will maintain much of the value that DSGS provides to customers and the grid.

Now, all eyes are turning to the legislative budget process to see whether the Assembly adopts the Senate’s approach and helps secure DSGS funding for another season. 

Like a real-life sports game, this process also often comes down to the wire, with last-minute negotiations between the Governor’s Office and legislative leadership sometimes finalizing the budget just before the June 15 deadline. Unlike a sports game, the final buzzer isn’t the end; trailer bills amending the budget passed on July 15 can continue to be introduced and implemented through August. 

Either way, the next few weeks are a critical period for DSGS to garner the legislative support that will carry it through this final quarter. The road to the championship is a long one, but in California, the game is just getting started.