An Act amending Title 66 (Public Utilities) of the Pennsylvania Consolidated Statutes, in restructuring of electric utility industry, providing for virtual power plant program.

PRIOR PRINTER'S NO. 2962 PRINTER'S NO. 3369
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2264
Session of
2026
INTRODUCED BY DAVIDSON, RIVERA, FIEDLER, WAXMAN, KHAN, HILL-
EVANS, OTTEN, INGLIS, MAYES, BOROWSKI, SANCHEZ, CEPEDA-
FREYTIZ, MADDEN, KAZEEM, CIRESI, FLEMING, PIELLI, MUNROE AND
D. WILLIAMS, MARCH 4, 2026
AS REPORTED FROM COMMITTEE ON ENERGY, HOUSE OF REPRESENTATIVES,
AS AMENDED, MAY 6, 2026
AN ACT
Amending Title 66 (Public Utilities) of the Pennsylvania
Consolidated Statutes, in restructuring of electric utility
industry, providing for virtual power plant program.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Title 66 of the Pennsylvania Consolidated
Statutes is amended by adding a section to read:
§ 2806.3. Virtual power plant program.
(a) Program.--No later than July 1, 2027, the commission
shall require each electric distribution company to develop and
submit to the commission a proposal to implement a virtual power
plant program consistent with this section.
(b) Commission review and approval.--
(1) The commission shall conduct a public hearing on a
proposal submitted under subsection (a) and provide an
opportunity for the Office of Consumer Advocate and other
stakeholders to submit recommendations on the program
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
proposed by the electric distribution company.
(2) THE ELECTRIC DISTRIBUTION COMPANY SHALL DEMONSTRATE
THAT THE PROPOSAL IS COST EFFECTIVE USING A COST-BENEFIT
ANALYSIS DETERMINED BY THE COMMISSION, WHICH SHALL INCLUDE AN
ANALYSIS OF THE ELECTRIC DISTRIBUTION COMPANY'S ESTIMATED
ADMINISTRATIVE COSTS.
(2) (3) The commission shall approve or disapprove a
proposal submitted under subsection (a) within 180 days after
submission. If the commission disapproves the proposal, all
of the following shall apply:
(i) The commission shall state in detail the reasons
for the disapproval.
(ii) The electric distribution company shall submit
a revised proposal within 60 days after entry of an order
disapproving the proposal. The revised proposal shall
address the deficiencies identified by the commission.
The commission shall approve or disapprove the revised
proposal within 90 days after submission.
(3) (4) A proposal submitted under subsection (a) shall
include a reasonable enrollment target for the electric
distribution company to achieve in collaboration with
contracted third-party distributed energy resource management
system providers and device installers. The enrollment target
shall be sufficient to drive market participation.
(c) Requirements.--A program shall harness distributed
energy resources to provide system peak load demand reduction
and other grid services. The program shall meet all of the
following requirements:
(1) Permit a customer with an eligible technology to
enroll in the program through an aggregator or the electric
20260HB2264PN3369 - 2 -
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
distribution company.
(2) To the extent practicable, include a mechanism to
incorporate existing demand response programs.
(3) (2) Provide compensable grid services for each
eligible technology that a participant may provide, including
local and system peak demand response and the avoidance or
deferral of transmission or distribution upgrades or capacity
expansion. The program may also include any of the following:
(i) Clean peak service.
(ii) Locational value.
(iii) Voltage support and other ancillary services.
(iv) Daily load shifting.
(v) Emergency services.
(vi) Other functions and grid services the
commission determines support efficient planning and
operation of the electrical grid.
(4) (3) Establish operational parameters for grid
services by distributed energy resource type, including all
of the following:
(i) The minimum and maximum number of grid events
during which the electric distribution company OR
PARTICIPATING AGGREGATOR may dispatch enrolled
distributed energy resources.
(ii) The months of the year during which a grid
event may occur.
(iii) The days of the week during which a grid event
may occur.
(iv) The times of day during which a grid event may
occur.
(v) A maximum duration of three hours for a grid
20260HB2264PN3369 - 3 -
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
event.
(vi) Minimum advance notice of a grid event to
participants, except that, as practicable, notice for an
emergency event may be provided in less than 24 hours.
(vii) Other information the commission determines
necessary to operate the program efficiently.
(5) (4) Provide for an aggregator to perform all of the
following:
(i) Participate in the program.
(ii) Enroll and manage customer participation.
(iii) Receive dispatch signals and other
communications from the electric distribution company.
(iv) Receive OR MANAGE performance-based
compensation or other appropriate compensation from the
electric distribution company.
(6) (5) Provide for measurement and verification of
battery performance directly from the inverter without
requiring installation of an additional meter and provide
other measurement standards for eligible technologies,
subject to commission approval.
(7) (6) Provide for an upfront payment, performance-
based compensation or both for the full value of grid
services at the locations where eligible technologies are
utilized. The commission may approve reasonable mechanisms to
disenroll a customer for continued nonperformance but may not
impose a penalty for nonperformance .
(8) (7) Provide enhanced upfront payments for low-income
customers and customers located in historically disadvantaged
communities in addition to performance-based compensation.
The commission may approve enhanced upfront payment rates
20260HB2264PN3369 - 4 -
<--
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
under this paragraph and shall coordinate with State agency
officials to make funding available from the Inflation
Reduction Act of 2022 (Public Law 117-169, 136 Stat. 1818)
and other funding opportunities from the United States
Department of Energy that may be used to provide enhanced
upfront payments to certain customers.
(9) (8) Permit a participant to maintain the
performance- based rate applicable at the time of enrollment
for a minimum of five years and permit the participant to
reenroll after the five-year period at the applicable rate
for additional five-year terms.
(10) In addition to performance-based compensation,
provide that each kilowatt hour of energy exported from an
enrolled eligible technology under the program shall be
credited to the enrolled customer at the full retail value at
the time of export, regardless of the export compensation
rate specified in the customer's current interconnection
tariff. Nothing in this paragraph shall affect the rate of
compensation for a customer-generator under the act of
November 30, 2004 (P.L.1672, No.213), known as the
Alternative Energy Portfolio Standards Act.
(11) Prohibit exclusion from enrollment in the program
based on receipt of other financial incentives from an
electric distribution company. An enrolled customer shall
remain eligible to receive Federal and State incentives in
addition to compensation received for participating in the
program.
(9) PROHIBIT A PARTICIPANT FROM RECEIVING COMPENSATION
UNDER THE PROGRAM FOR A GRID SERVICE THAT IS SIMULTANEOUSLY
COMPENSATED UNDER A FEDERAL, REGIONAL TRANSMISSION
20260HB2264PN3369 - 5 -
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
ORGANIZATION OR ELECTRIC DISTRIBUTION COMPANY DEMAND RESPONSE
OR LOAD MANAGEMENT PROGRAM UNLESS THE GRID SERVICE IS
SEPARATE AND DISTINCT FROM THOSE PERFORMED UNDER THE PROGRAM.
(12) (10) Prohibit an electric distribution company from
requiring collateral from a program participant.
(11) ALLOW ELIGIBLE DEMAND RESPONSE RESOURCES LOCATED AT
COMMERCIAL AND INDUSTRIAL SITES TO PARTICIPATE IN THE
PROGRAM.
(d) Commission duties.--
(1) The commission may approve, disapprove or modify a
program and may modify an approved program after notice and a
public hearing.
(2) THE COMMISSION SHALL ENSURE THAT EACH PROGRAM DOES
NOT INTERFERE WITH WHOLESALE ENERGY, CAPACITY OR ANCILLARY
SERVICE MARKETS AND OPERATES IN A MANNER CONSISTENT WITH THE
MARKET RULES OF THE REGIONAL TRANSMISSION ORGANIZATION IN
WHICH THE APPLICABLE ELECTRIC DISTRIBUTION COMPANY
PARTICIPATES.
(2) (3) The commission shall establish reasonable and
appropriate standards to protect the interests of program
participants, including requirements for registration forms,
opt-out procedures, standard contract terms and conditions,
payment terms, warranties and disclosure forms.
(3) (4) The commission shall ensure an electric
distribution company uses a transparent and competitive
procurement process for aggregator virtual power plant
services.
(4) (5) The commission shall establish standards and
procedures governing energy data held by participants and
electric distribution companies that must be shared with
20260HB2264PN3369 - 6 -
<--
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
aggregators or other third parties to ensure efficient
operation of a program. An aggregator or other third party
may not sell or use, for any other purpose, data gathered for
program use.
(5) (6) For good cause shown, the commission may delay,
for a reasonable period, the deadline for an electric
distribution company to comply with this section.
(7) IN ADDITION TO RECEIVING PERFORMANCE-BASED
COMPENSATION, THE COMMISSION SHALL ADOPT RULES OR PROMULGATE
REGULATIONS TO COMPENSATE THE ENERGY EXPORTED FROM ENROLLED
DEVICES AT A VALUE COMMENSURATE WITH THE BENEFITS PROVIDED TO
THE ELECTRIC GRID AT THE TIME OF EXPORT.
(8) THE COMMISSION SHALL REQUIRE EACH ELECTRIC
DISTRIBUTION COMPANY TO USE ADVANCED METERING INFRASTRUCTURE
HOURLY USAGE FOR THE FOLLOWING:
(I) TO CALCULATE EACH CUSTOMER'S PEAK LOAD
CONTRIBUTION AND NETWORK SERVICE PEAK LOAD CONTRIBUTION.
(II) TO PERFORM A CUSTOMER'S LOAD SETTLEMENT IN THE
REGIONAL TRANSMISSION ORGANIZATION IN WHICH THE
APPLICABLE ELECTRIC DISTRIBUTION COMPANY PARTICIPATES.
(e) Competitive services.--A program shall be administered
SERVICES.--
(1) A PROGRAM SHALL BE ADMINISTERED in a manner that
does not discriminate against or hinder the ability of a
competitive aggregator to participate in the program or to
offer comparable products or services to customers.
(2) AN ELECTRIC DISTRIBUTION COMPANY MAY NOT PROMOTE OR
ADVERTISE THE PROGRAM IN A MANNER THAT GIVES UNREASONABLE
PREFERENCE TO THE ELECTRIC DISTRIBUTION COMPANY OVER
COMPETITIVE AGGREGATOR OFFERINGS.
20260HB2264PN3369 - 7 -
<--
<--
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(f) Electric distribution company eligibility.--An electric
distribution company may offer program enrollment directly to a
customer in addition to aggregator offerings. A resource owned
by an electric distribution company shall not be eligible to
participate in the program.
(g) Contracts.--An electric distribution company shall
contract with third-party distributed energy resource management
system providers and device installers to assist with program
implementation and customer enrollment. An electric distribution
company may not delay program implementation due to a lack of
public utility-owned third-party management system or device
installer capability.
(h) Cost recovery.--
(1) An electric distribution company may recover, on a
full and current basis from customers through a reconcilable
adjustment clause under section 1307 (relating to sliding
scale of rates; adjustments), all reasonable and prudent
costs incurred to administer and implement a program approved
by the commission under this section, including information
technology costs or investments such as distributed energy
resource management systems. The commission may allow a
reasonable rate of return on payments made for grid services
and shall consider the allowance when developing performance
incentives under subsection (i).
(2) The commission may permit an electric distribution
company to recover prudently incurred costs associated with
distributed energy resource rebates for new eligible
technologies enrolled in the program.
(3) The commission may introduce performance incentive
mechanisms to encourage program spending efficiency.
20260HB2264PN3369 - 8 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(4) THE COMMISSION MAY ESTABLISH ANNUAL CAPS ON THE
TOTAL PROGRAM COSTS RECOVERABLE FROM RATEPAYERS IF THE RATE
CAP IS IN THE PUBLIC INTEREST AND DOES NOT SIGNIFICANTLY
REDUCE FUTURE PARTICIPATION IN THE PROGRAM.
(i) Targets and incentives.--
(1) The commission shall initiate a proceeding to
develop electricity consumption reduction targets applicable
to an electric distribution company for program utilization
and corresponding incentives for achieving established peak
reduction targets under paragraph (2). Targets and incentives
established under this subsection shall take effect no later
than one year after commission approval of the program under
subsection (b).
(2) Within 270 days after the effective date of this
paragraph, the commission shall, by regulation or order,
establish all of the following:
(i) Annual electricity consumption reduction targets
and performance targets for the system peak reduction
service designed to increase over time.
(ii) Corresponding performance incentives for
meeting the target established for each year of the
performance period.
(iii) Financial awards equal to or greater than the
rate of return generated from traditional public utility
capital investment required to meet the targets of the
performance incentives established under this subsection.
(iv) (III) Financial penalties for failure to meet
targets established under this subsection.
(v) (IV) New targets for subsequent five-year
periods.
20260HB2264PN3369 - 9 -
<--
<--
<--
<--1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(vi) (V) Additional targets and incentives for each
additional grid service adopted and approved for
implementation under subsection (c).
(j) Report.--By July 1, 2028, and annually thereafter, an
electric distribution company shall submit to the commission an
annual report on overall program performance and the program's
impact on participants and customers. The report shall include
all of the following:
(1) Total capacity enrolled under the program approved
under this section by customer class, reported separately by
eligible technology type.
(2) System peak reduction attributable to the program.
(3) Contributions to other grid services made by the
program.
(4) AN EVALUATION OF THE COST EFFECTIVENESS OF
EXPENDITURES.
(4) (5) Recommendations to increase program
participation.
(5) (6) Other information requested by the commission.
(k) Applicability.--This section shall not apply to an
electric distribution company with less than 100,000 customers.
(l) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Aggregator." An individual or entity, including an electric
generation supplier or conservation service provider, that
participates, enrolls customers or provides virtual power plant
services in the virtual power plant program and coordinates the
operation of enrolled devices.
"Battery." An energy storage device and associated equipment
20260HB2264PN3369 - 10 -
<--
<--
<--
<--1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
that operates together to comply with program requirements.
"Device." A piece of equipment that is an eligible
technology owned by a participant.
"Distributed energy resource." An eligible technology device
A TECHNOLOGY located behind the customer's meter that provides
energy or energy management capabilities for the customer or the
grid. The term includes battery storage, smart thermostats,
smart water heaters, electric vehicle charging equipment,
electric vehicle batteries and controllable loads, including
controllable loads and devices located at residential,
commercial and industrial sites, as well as in front of the
meter resources on the distribution system.
"Eligible technology." Technology A DISTRIBUTED ENERGY
RESOURCE owned by a customer or third party and installed behind
the customer's meter that is capable of being activated or
dispatched under a virtual power plant program to address a grid
event. The term includes energy storage systems, solar
photovoltaic devices, smart thermostats, heat pumps, electric
vehicles and chargers and demand response resources.
"Emergency event." A grid event identified by an electric
distribution company for which notice is given in less than 24
hours.
"Energy storage system." A resource capable of receiving
electric energy from the grid and storing it for later injection
of electric energy back to the grid.
"Enrolled customer." A customer that participates in the
program through an aggregator or the electric distribution
company.
"Enrolled resource." An eligible technology enrolled in the
program.
20260HB2264PN3369 - 11 -
<--
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
"Full retail value." The value of electric energy credited
to a participant at the retail rate, including the generation,
capacity, transmission and distribution components of the
electric distribution company's approved tariff.
"Grid event." A grid condition or shortage of electricity
supply for which the electric distribution company schedules or
remotely dispatches enrolled resources.
"Grid service." A capacity, energy or ancillary service OR
SERVICE RELATING TO THE TRANSMISSION OR DISTRIBUTION SYSTEM that
supports grid operations.
"Historically disadvantaged community." An area,
municipality or part of a municipality where at least 20% of the
population has been below the Federal poverty income level as
defined by the United States Department of Health and Human
Services for at least 30 years.
"Participant." An owner of an eligible technology enrolled
in a program.
"Performance-based compensation." A system of payments made
to participants based on the value of electricity dispatched or
saved through activating enrolled resources during a grid
event . , WHICH MAY INCLUDE A RESERVATION PAYMENT PER KILOWATT OR
PERFORMANCE PAYMENT PER KILOWATT HOUR OR BOTH.
"Performance-based rate." The performance-based compensation
rate paid to participants based on the performance of enrolled
resources providing one or more grid services during a grid
event.
"Program." A virtual power plant program established under
this section.
"Upfront payment." A one-time payment issued at the time of
enrollment.
20260HB2264PN3369 - 12 -
<--
<--
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
"Virtual power plant." An aggregation of distributed energy
resources enrolled through an aggregator or an electric
distribution company that are operated in coordination to
provide one or more grid services.
Section 2. This act shall take effect immediately.
20260HB2264PN3369 - 13 -
1
2
3
4
5