Senate panel hears debate over SB 540 to set guardrails for joining a Western regional energy market

Senators and witnesses spent an extended portion of the Judiciary Committee hearing debating SB 540 on whether California should create statutory guardrails before deciding to join a broader regional power market. The bill would allow California Independent System Operator (CAISO) participation in a regional organization — only after specified protections are included in governing documents and FERC‑approved tariffs, and no earlier than 2028. Supporters argued the move would increase reliability, bring down costs and reduce emissions; opponents cautioned it could surrender state authority and expose California to federal intervention.

Senator Becker, the bill's joint author, told the committee SB 540 builds on the existing Western Energy Imbalance Market (WEM) and would permit participation in a regional market “if and only if it meets extensive guardrails.” Becker said the WEM has produced roughly $6.6 billion in savings over the last decade with about $2.2 billion directly benefitting California. Becker described amendments that, among other things, (1) delay any participation until January 2028, (2) require the regional organization and its FERC tariff to respect state authority and California policy, (3) prohibit creation of a capacity market or mandatory resource adequacy construct, (4) bar assessment of costs for fossil‑fuel generation to California participants, (5) mandate a penalty‑free unilateral withdrawal mechanism, (6) require CAISO to solicit feedback from the Legislature before adopting a resolution to join and (7) require a jobs study and periodic compliance updates to state energy committees.

Mark Joseph, representing the Coalition of California Utility Employees and the State Association of Electrical Workers, urged support and described the bill as a product of long collaboration among labor, environmental groups, utilities and customers. Caitlin Rodner Sutter of the Environmental Defense Fund said better regional coordination would reduce curtailment of solar and allow cleaner power to displace coal and other higher‑cost resources, while preserving California’s authority to set procurement and resource adequacy rules.

Opponents included Bernadette Del Chiaro of the Environmental Working Group and Loretta Lynch speaking for a coalition of community‑based environmental groups. They argued SB 540 could surrender California’s enforcement authority to FERC and the new regional operator, pointing to federal preemption and dormant commerce clause risks. Lynch urged retaining explicit statutory language that California markets remain “run consistent with” state law rather than placing such language only in a tariff that FERC would interpret.

Committee members pressed authors on several points: whether the Brattle Group analysis underpinning regionalization still applies after recent federal developments; whether the structure would permit coal to be economically imported; and whether the withdrawal mechanisms are effective in practice if FERC approval could limit their operation. Proponents pointed to amendments forbidding capacity markets, requiring tariff language permitting penalty‑free withdrawal, and specifying automatic withdrawal conditions if federal actions forced fossil fuel subsidies or if state RPS rules were struck down by courts. Senator Stern defended the amendments as striking a balance that would preserve California’s clean energy goals while improving reliability and lowering costs if the state participates robustly in a regional market.

The author and supporters said negotiations would continue with groups expressing concerns. The committee hearing did not record a final committee vote on SB 540 during the portion of transcript provided. The bill drew a broad array of witness statements in favor from labor, environmental groups, utilities, municipal utilities and renewable developers, and oppositions from environmental and public interest groups urging additional statutory protections and review mechanisms.