HB 2264 — An Act amending Title 66 (Public Utilities) of the Pennsylvania Consolidated Statutes, in restructuring of electric utility industry, providing for virtual power plant program.

PRINTER'S NO.   2962

                      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 AND FLEMING, MARCH 4, 2026

     REFERRED TO COMMITTEE ON ENERGY, MARCH 5, 2026


                                      AN ACT
 1   Amending Title 66 (Public Utilities) of the Pennsylvania
 2      Consolidated Statutes, in restructuring of electric utility
 3      industry, providing for virtual power plant program.
 4      The General Assembly of the Commonwealth of Pennsylvania
 5   hereby enacts as follows:
 6      Section 1.      Title 66 of the Pennsylvania Consolidated
 7   Statutes is amended by adding a section to read:
 8   § 2806.3.      Virtual power plant program.
 9      (a)   Program.--No later than July 1, 2027, the commission
10   shall require each electric distribution company to develop and
11   submit to the commission a proposal to implement a virtual power
12   plant program consistent with this section.
13      (b)   Commission review and approval.--
14            (1)    The commission shall conduct a public hearing on a
15      proposal submitted under subsection (a) and provide an
16      opportunity for the Office of Consumer Advocate and other
17      stakeholders to submit recommendations on the program
18      proposed by the electric distribution company.
 1            (2)   The commission shall approve or disapprove a
 2      proposal submitted under subsection (a) within 180 days after
 3      submission. If the commission disapproves the proposal, all
 4      of the following shall apply:
 5                  (i)    The commission shall state in detail the reasons
 6            for the disapproval.
 7                  (ii)   The electric distribution company shall submit
 8            a revised proposal within 60 days after entry of an order
 9            disapproving the proposal. The revised proposal shall
10            address the deficiencies identified by the commission.
11            The commission shall approve or disapprove the revised
12            proposal within 90 days after submission.
13            (3)   A proposal submitted under subsection (a) shall
14      include a reasonable enrollment target for the electric
15      distribution company to achieve in collaboration with
16      contracted third-party distributed energy resource management
17      system providers and device installers. The enrollment target
18      shall be sufficient to drive market participation.
19      (c)   Requirements.--A program shall harness distributed
20   energy resources to provide system peak load demand reduction
21   and other grid services. The program shall meet all of the
22   following requirements:
23            (1)   Permit a customer with an eligible technology to
24      enroll in the program through an aggregator or the electric
25      distribution company.
26            (2)   To the extent practicable, include a mechanism to
27      incorporate existing demand response programs.
28            (3)   Provide compensable grid services for each eligible
29      technology that a participant may provide, including local
30      and system peak demand response and the avoidance or deferral

20260HB2264PN2962                       - 2 -
 1    of transmission or distribution upgrades or capacity
 2    expansion. The program may also include any of the following:
 3              (i)    Clean peak service.
 4              (ii)    Locational value.
 5              (iii)    Voltage support and other ancillary services.
 6              (iv)    Daily load shifting.
 7              (v)    Emergency services.
 8              (vi)    Other functions and grid services the
 9        commission determines support efficient planning and
10        operation of the electrical grid.
11        (4)   Establish operational parameters for grid services
12    by distributed energy resource type, including all of the
13    following:
14              (i)    The minimum and maximum number of grid events
15        during which the electric distribution company may
16        dispatch enrolled distributed energy resources.
17              (ii)    The months of the year during which a grid
18        event may occur.
19              (iii)    The days of the week during which a grid event
20        may occur.
21              (iv)    The times of day during which a grid event may
22        occur.
23              (v)    A maximum duration of three hours for a grid
24        event.
25              (vi)    Minimum advance notice of a grid event to
26        participants, except that, as practicable, notice for an
27        emergency event may be provided in less than 24 hours.
28              (vii)    Other information the commission determines
29        necessary to operate the program efficiently.
30        (5)   Provide for an aggregator to perform all of the

20260HB2264PN2962                   - 3 -
 1    following:
 2              (i)    Participate in the program.
 3              (ii)    Enroll and manage customer participation.
 4              (iii)    Receive dispatch signals and other
 5        communications from the electric distribution company.
 6              (iv)    Receive performance-based compensation or other
 7        appropriate compensation from the electric distribution
 8        company.
 9        (6)   Provide for measurement and verification of battery
10    performance directly from the inverter without requiring
11    installation of an additional meter and provide other
12    measurement standards for eligible technologies, subject to
13    commission approval.
14        (7)   Provide for an upfront payment, performance-based
15    compensation or both for the full value of grid services at
16    the locations where eligible technologies are utilized. The
17    commission may approve reasonable mechanisms to disenroll a
18    customer for continued nonperformance but may not impose a
19    penalty for nonperformance.
20        (8)   Provide enhanced upfront payments for low-income
21    customers and customers located in historically disadvantaged
22    communities in addition to performance-based compensation.
23    The commission may approve enhanced upfront payment rates
24    under this paragraph and shall coordinate with State agency
25    officials to make funding available from the Inflation
26    Reduction Act of 2022 (Public Law 117-169, 136 Stat. 1818)
27    and other funding opportunities from the United States
28    Department of Energy that may be used to provide enhanced
29    upfront payments to certain customers.
30        (9)   Permit a participant to maintain the performance-

20260HB2264PN2962                   - 4 -
 1    based rate applicable at the time of enrollment for a minimum
 2    of five years and permit the participant to reenroll after
 3    the five-year period at the applicable rate for additional
 4    five-year terms.
 5          (10)   In addition to performance-based compensation,
 6    provide that each kilowatt hour of energy exported from an
 7    enrolled eligible technology under the program shall be
 8    credited to the enrolled customer at the full retail value at
 9    the time of export, regardless of the export compensation
10    rate specified in the customer's current interconnection
11    tariff. Nothing in this paragraph shall affect the rate of
12    compensation for a customer-generator under the act of
13    November 30, 2004 (P.L.1672, No.213), known as the
14    Alternative Energy Portfolio Standards Act.
15          (11)   Prohibit exclusion from enrollment in the program
16    based on receipt of other financial incentives from an
17    electric distribution company. An enrolled customer shall
18    remain eligible to receive Federal and State incentives in
19    addition to compensation received for participating in the
20    program.
21          (12)   Prohibit an electric distribution company from
22    requiring collateral from a program participant.
23    (d)   Commission duties.--
24          (1)    The commission may approve, disapprove or modify a
25    program and may modify an approved program after notice and a
26    public hearing.
27          (2)    The commission shall establish reasonable and
28    appropriate standards to protect the interests of program
29    participants, including requirements for registration forms,
30    opt-out procedures, standard contract terms and conditions,

20260HB2264PN2962                   - 5 -
 1      payment terms, warranties and disclosure forms.
 2            (3)   The commission shall ensure an electric distribution
 3      company uses a transparent and competitive procurement
 4      process for aggregator virtual power plant services.
 5            (4)   The commission shall establish standards and
 6      procedures governing energy data held by participants and
 7      electric distribution companies that must be shared with
 8      aggregators or other third parties to ensure efficient
 9      operation of a program. An aggregator or other third party
10      may not sell or use, for any other purpose, data gathered for
11      program use.
12            (5)   For good cause shown, the commission may delay, for
13      a reasonable period, the deadline for an electric
14      distribution company to comply with this section.
15      (e)   Competitive services.--A program shall be administered
16   in a manner that does not discriminate against or hinder the
17   ability of a competitive aggregator to participate in the
18   program or to offer comparable products or services to
19   customers.
20      (f)   Electric distribution company eligibility.--An electric
21   distribution company may offer program enrollment directly to a
22   customer in addition to aggregator offerings. A resource owned
23   by an electric distribution company shall not be eligible to
24   participate in the program.
25      (g)   Contracts.--An electric distribution company shall
26   contract with third-party distributed energy resource management
27   system providers and device installers to assist with program
28   implementation and customer enrollment. An electric distribution
29   company may not delay program implementation due to a lack of
30   public utility-owned third-party management system or device

20260HB2264PN2962                    - 6 -
 1   installer capability.
 2      (h)   Cost recovery.--
 3            (1)   An electric distribution company may recover, on a
 4      full and current basis from customers through a reconcilable
 5      adjustment clause under section 1307 (relating to sliding
 6      scale of rates; adjustments), all reasonable and prudent
 7      costs incurred to administer and implement a program approved
 8      by the commission under this section, including information
 9      technology costs or investments such as distributed energy
10      resource management systems. The commission may allow a
11      reasonable rate of return on payments made for grid services
12      and shall consider the allowance when developing performance
13      incentives under subsection (i).
14            (2)   The commission may permit an electric distribution
15      company to recover prudently incurred costs associated with
16      distributed energy resource rebates for new eligible
17      technologies enrolled in the program.
18            (3)   The commission may introduce performance incentive
19      mechanisms to encourage program spending efficiency.
20      (i)   Targets and incentives.--
21            (1)   The commission shall initiate a proceeding to
22      develop electricity consumption reduction targets applicable
23      to an electric distribution company for program utilization
24      and corresponding incentives for achieving established peak
25      reduction targets under paragraph (2). Targets and incentives
26      established under this subsection shall take effect no later
27      than one year after commission approval of the program under
28      subsection (b).
29            (2)   Within 270 days after the effective date of this
30      paragraph, the commission shall, by regulation or order,

20260HB2264PN2962                    - 7 -
 1      establish all of the following:
 2                  (i)    Annual electricity consumption reduction targets
 3            and performance targets for the system peak reduction
 4            service designed to increase over time.
 5                  (ii)    Corresponding performance incentives for
 6            meeting the target established for each year of the
 7            performance period.
 8                  (iii)    Financial awards equal to or greater than the
 9            rate of return generated from traditional public utility
10            capital investment required to meet the targets of the
11            performance incentives established under this subsection.
12                  (iv)    Financial penalties for failure to meet targets
13            established under this subsection.
14                  (v)    New targets for subsequent five-year periods.
15                  (vi)    Additional targets and incentives for each
16            additional grid service adopted and approved for
17            implementation under subsection (c).
18      (j)   Report.--By July 1, 2028, and annually thereafter, an
19   electric distribution company shall submit to the commission an
20   annual report on overall program performance and the program's
21   impact on participants and customers. The report shall include
22   all of the following:
23            (1)   Total capacity enrolled under the program approved
24      under this section by customer class, reported separately by
25      eligible technology type.
26            (2)   System peak reduction attributable to the program.
27            (3)   Contributions to other grid services made by the
28      program.
29            (4)   Recommendations to increase program participation.
30            (5)   Other information requested by the commission.

20260HB2264PN2962                       - 8 -
 1      (k)   Applicability.--This section shall not apply to an
 2   electric distribution company with less than 100,000 customers.
 3      (l)   Definitions.--As used in this section, the following
 4   words and phrases shall have the meanings given to them in this
 5   subsection unless the context clearly indicates otherwise:
 6      "Aggregator."    An individual or entity, including an electric
 7   generation supplier or conservation service provider, that
 8   participates, enrolls customers or provides virtual power plant
 9   services in the virtual power plant program and coordinates the
10   operation of enrolled devices.
11      "Battery."    An energy storage device and associated equipment
12   that operates together to comply with program requirements.
13      "Device."    A piece of equipment that is an eligible
14   technology owned by a participant.
15      "Distributed energy resource."      An eligible technology device
16   located behind the customer's meter that provides energy or
17   energy management capabilities for the customer or the grid. The
18   term includes battery storage, smart thermostats, smart water
19   heaters, electric vehicle charging equipment, electric vehicle
20   batteries and controllable loads, including controllable loads
21   and devices located at residential, commercial and industrial
22   sites, as well as in front of the meter resources on the
23   distribution system.
24      "Eligible technology."    Technology owned by a customer or
25   third party and installed behind the customer's meter that is
26   capable of being activated or dispatched under a virtual power
27   plant program to address a grid event. The term includes energy
28   storage systems, solar photovoltaic devices, smart thermostats,
29   heat pumps, electric vehicles and chargers and demand response
30   resources.

20260HB2264PN2962                   - 9 -
 1      "Emergency event."   A grid event identified by an electric
 2   distribution company for which notice is given in less than 24
 3   hours.
 4      "Energy storage system."     A resource capable of receiving
 5   electric energy from the grid and storing it for later injection
 6   of electric energy back to the grid.
 7      "Enrolled customer."     A customer that participates in the
 8   program through an aggregator or the electric distribution
 9   company.
10      "Enrolled resource."     An eligible technology enrolled in the
11   program.
12      "Full retail value."     The value of electric energy credited
13   to a participant at the retail rate, including the generation,
14   capacity, transmission and distribution components of the
15   electric distribution company's approved tariff.
16      "Grid event."    A grid condition or shortage of electricity
17   supply for which the electric distribution company schedules or
18   remotely dispatches enrolled resources.
19      "Grid service."   A capacity, energy or ancillary service that
20   supports grid operations.
21      "Historically disadvantaged community."     An area,
22   municipality or part of a municipality where at least 20% of the
23   population has been below the Federal poverty income level as
24   defined by the United States Department of Health and Human
25   Services for at least 30 years.
26      "Participant."    An owner of an eligible technology enrolled
27   in a program.
28      "Performance-based compensation."     A system of payments made
29   to participants based on the value of electricity dispatched or
30   saved through activating enrolled resources during a grid event.

20260HB2264PN2962                    - 10 -
 1      "Performance-based rate."    The performance-based compensation
 2   rate paid to participants based on the performance of enrolled
 3   resources providing one or more grid services during a grid
 4   event.
 5      "Program."   A virtual power plant program established under
 6   this section.
 7      "Upfront payment."   A one-time payment issued at the time of
 8   enrollment.
 9      "Virtual power plant."   An aggregation of distributed energy
10   resources enrolled through an aggregator or an electric
11   distribution company that are operated in coordination to
12   provide one or more grid services.
13      Section 2.   This act shall take effect immediately.




20260HB2264PN2962                   - 11 -