Directs BPU to establish virtual power plant program to reduce peak demand for electric energy.

S3399

SENATE, No. 3399

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED FEBRUARY 9, 2026

Sponsored by:

Senator� ANDREW ZWICKER

District 16 (Hunterdon, Mercer, Middlesex and Somerset)

Senator� LINDA R. GREENSTEIN

District 14 (Mercer and Middlesex)

SYNOPSIS

���� Directs BPU to establish virtual power plant program
to reduce peak demand for electric energy.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act
concerning electric energy supply and distribution and
supplementing Title 48 of the Revised Statutes.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.� a.� The Legislature finds
and declares that:

���� (1) virtual power plants are
dynamic load management and energy supply resources that support grid
operations, reduce ratepayer costs, and achieve other important public policy
goals;

���� (2) virtual power plants can
reduce demand for grid supplied electricity during peak periods, shift
electricity consumption out of peak periods, make renewable energy generated
during off-peak periods available for use during on-peak periods, supply energy
to the grid at desired times, provide frequency regulation, voltage support,
and other ancillary services, improve system resiliency and reliability, and
provide other grid services;

���� (3) virtual power plants
facilitate and optimize the utilization of electrical generation from variable
sources such as wind and solar energy to help utilities increase hosting
capacity and integrate more renewable energy resources;

���� (4) virtual power plants
reduce costs to ratepayers by utilizing customer-sited resources to provide
grid services, avoiding or reducing reliance on fossil-fuel fired peaker
plants, avoiding or deferring the need to construct new and more costly
grid-scale resources, optimizing the use of existing assets, and avoiding or
deferring distribution and transmission system upgrades and other grid
investments;

���� (5) virtual power plants
promote equity by reducing costs for all ratepayers and providing other
important co-benefits, including reduction in greenhouse gases and other
pollutants, especially in overburdened communities and other disadvantaged
communities that host fossil fuel generation plants; and

���� (6) the United States
Department of Energy estimates that the United States could deploy 80 to 160 gigawatts
of virtual power plants by 2030, a tripling of current levels, which could
provide ratepayer savings on the order of $10 billion annually.

���� b.� The Legislature therefore
determines that the deployment of virtual power plants can provide energy cost
savings and other benefits to the citizens of New Jersey, and that it is in the
public interest to direct the Board of Public Utilities to establish a virtual
power plant program in collaboration with electric public utilities and distributed
energy resource aggregators.

���� 2.� As used in this act:

���� �Board� means the Board of
Public Utilities.

���� �Distributed energy resource�
or �DER� means an electricity-producing resource, energy storage system,
bidirectional electric vehicle charger, or controllable load, including a
controllable unidirectional electric vehicle charger, that is connected to an
electric public utility�s distribution infrastructure.

���� �Distributed energy resource
aggregator� or �DER aggregator� means a third-party business entity that is
authorized to enroll, operate, and compensate a virtually integrated and
coordinated set of interconnected DERs which deliver services under the PJM tariff
as filed in compliance with FERC Order 2222.

���� �Electric public utility�
means the same as the term is defined in section 3 of P.L.1999, c.23
(C.48:3-51).

���� �Federal Energy Regulatory
Commission� or �FERC� means the same as the term is defined in section 3 of
P.L.1999, c.23 (C.48:3-51).

���� �Overburdened community� means
the same as the term is defined in section 2 of P.L.2020, c.92 (C.13:1D-158).

���� �Virtual power plant� means an
aggregation of distributed energy resources, enrolled either directly with an
electric public utility or indirectly through a DER aggregator, that are
operated in coordination to provide one or more grid services.

���� 3.� a.� The board shall
establish, by board order, a demand optimization program for electric public
utilities to optimize demand, reduce system peak demand, increase resource
adequacy, reduce or defer the need for costly distribution system infrastructure
upgrades, and help maintain grid reliability through virtual power plant
services provided by distributed energy resource aggregators in the State.� The
program shall be designed with a target for peak demand reduction of 500
megawatts by 2030.

���� b.� No later than 12 months
after the effective date of this act, the board shall establish minimum
requirements for the demand optimization program, including, but not limited
to:

���� (1) the allocation of the
system peak demand reduction target that must be achieved by each electric
public utility;

���� (2) grid flexibility services
provided by the demand optimization program, which shall include, at a minimum,
contribution toward system wide peak load reduction, and may also include local
peak demand reduction, locational value, the avoidance or deferral of
transmission or distribution upgrades for expanding integration capacity
expansion, voltage support or other ancillary services, and such other
functions and grid flexibility service opportunities that the board determines
are supportive of efficient planning and utilization of the electric
distribution grid;

���� (3) a process for allowing
customers to combine load modification behavior with battery storage,
non-battery storage, electric vehicle technologies, and other distributed
energy resources that offer generation or load profile modification to enroll
such devices in the program;

���� (4) the specific distributed
energy resources that should be included, which shall include, but need not be
limited to, battery energy storage systems, managed electric vehicle charging,
bidirectional electric vehicle operation, smart thermostat demand response,
smart inverter voltage support, grid-interactive water heaters, and commercial
and industrial automated demand response;

���� (5) technical requirements for
the development of a distributed energy resource registry, a distributed energy
resource management system, and other data infrastructure and technology
platforms developed to enable the demand optimization program, prioritizing
open standards and interoperability for data, devices, and controls that are
orchestrated through grid edge distributed energy resource management systems
under market development;

���� (6) standards for electric
public utility technology that are compatible with a competitive market for
third-party aggregations participating in PJM wholesale markets in compliance
with FERC Order 2222;

���� (7) standards for electric
public utility selection of developers and vendors, including use of
competitive procurement processes where practicable;

���� (8) performance terms for
customers participating in the program, including measurement and verification,
compensation levels, and non-performance penalties;

���� (9) requirements to ensure
that low- and moderate-income customers and customers in overburdened
communities are included in and benefit from the program;

���� (10) any categories of costs
associated with the electric public utilities� implementation of the program
that may be recovered from ratepayers; and

���� (11) a prohibition on an
electric public utility directly controlling any virtual power plant or other
demand response system that modifies the electrical usage or energy storage of
a customer, and a requirement that any such system be controlled by a third-party
DER aggregator.

���� c.� After the board issues
minimum filing requirements, each electric public utility shall file an
implementation and reporting plan with the board for its proposed demand
optimization program.� The board shall review each plan for cost effectiveness,
conformance with program requirements, and conformance to the utility�s filed
grid modernization plan, and may request changes to the submitted plan prior to
board action.� The board may approve, approve in part, or deny each submitted
plan, and shall determine the appropriate level of spending for each electric
public utility�s demand optimization program and establish an appropriate rate
of return on equity, which may be less than the rate of return established in
the electric public utility�s most recent base rate case.� In determining
whether to approve a plan and the appropriate level of spending, the board
shall consider impacts on electric customer bills and shall ensure that the
program results in cost savings to ratepayers, taking into account potential
capacity market savings, avoided system costs, reduced peak demand and deferred
distribution system upgrades, and the level of system integration capacity
anticipated.

���� d.� Each electric public
utility shall file an annual report with the board to demonstrate compliance
with its approved implementation plan and the board�s minimum requirements. If
the electric public utility fails to achieve required program metrics, including,
but not limited to, required peak demand reduction, integration capacity
expansion, customer enrollment, and avoided energy system cost, the board may
disallow recovery of all or some costs, unless such failure is due to factors
beyond the electric public utility�s control and reasonable ability to predict.

���� 4.� The board shall, in
accordance with the "Administrative Procedure Act," P.L.1968, c.410
(C.52:14B-1 et seq.), adopt rules and regulations as necessary to implement
this act.

���� 5.� This act shall take effect
immediately.

STATEMENT

���� This bill would require the Board
of Public Utilities (BPU) to establish, by board order, a virtual power plant
program to reduce peak demand for electric energy and provide other services to
electric customers.

���� As defined by the bill,
�virtual power plant� means an aggregation of distributed energy resources, e.g.,
residential solar systems, behind-the-meter energy storage systems, or electric
vehicle charging systems, enrolled either directly with an electric public
utility or indirectly through a distributed energy resource (DER) aggregator,
that are operated in coordination to provide one or more grid services.� The
purpose of the program would be to reduce system peak demand, increase resource
adequacy, reduce or defer the need for costly distribution system
infrastructure upgrades, and help maintain grid reliability through virtual
power plant services provided by DER aggregators in the State.�

���� The program would be required
to be designed with a target for peak demand reduction of 500 megawatts by
2030.� The bill would require the BPU to establish minimum requirements for the
program, but electric public utilities would be responsible for the program�s
implementation.� However, the bill would require that any direct control of
electricity customers� electricity usage or storage would be by third-party DER
aggregators, rather than by electric utilities. �Under the bill, each electric
public utility would be required to file an implementation and reporting plan
with the BPU, as well as an annual report.