The California Legislature closed its 2025-26 session midday on September 1, about twelve hours later than expected due to extended negotiations with their sometime friend, sometime foil Governor Newsom. Whether those negotiations were ultimately successful depends on your perspective, like so many other things in politics. The Legislature focused more on issues around energy, interconnection, and local climate planning than they have in quite some time, but many of the specific policies achieved uncertain or temporary outcomes and will need more attention next year.

Here are some things we know for sure: Proposition 4 bond funds are now about 2/3 allocated, funding for “tier 3” programs in GGRF are reduced and still at imminent risk of complete defunding, IOU liability for wildfires they cause is unchanged, and of course several hundred bills are on the Governor’s desk awaiting his decision to sign or veto them, which he must do by October 1.

Proposition 4

AB 113 (Gabriel), the budget bill carrying this year’s climate allocations, distributes $2.66 billion from Proposition 4, the $10 billion climate bond voters approved in 2024, including $355.6 million for clean air and energy programs. Other allocations of interest include $329.5 million for wildfire and forest resilience, $288.4 million for biodiversity and nature-based solutions, and $245.9 million for extreme heat mitigation. Local agencies should prepare relevant projects for these and many of the funds allocated last year to be released as grants through the relevant state agency or department.

Most of the clean air and energy allocation—$322.6 million—is earmarked for the Transmission Accelerator created by SB 254 (Becker, Wahab, and Petrie-Norris; 2025), which is housed in the state’s Infrastructure and Economic Development Bank (I-Bank) and will provide public financing for clean-energy transmission projects through GO-Biz. AB 192 (Committee on Budget) makes several important but largely technical changes to the Transmission Accelerator.

Greenhouse Gas Reduction Fund

Let’s review the timeline. In the 2025-26 budget, the Governor convinced the Legislature to allocate most of the portion of GGRF that they get to dole out every year, about $1 billion, to backfill CAL FIRE’s General Fund budget for three or four years. Then, in last-minute negotiations, the Legislature and the Governor agreed on a plan to extend cap-and-trade (now cap-and-invest) and how to allocate the funds (AB 840, Irwin; 2025). Under the new allocation plan, funding goes first to General Fund backfills for CAEATFA and SRA fees (~$250 million), then high-speed rail ($1 billion), then annual “legislative priorities” ($1 billion), and last to the “tier 3” programs that fund SAFER drinking water, Affordable Housing and Sustainable Communities, forest/vegetation management, community air protection, and transit programs like TIRCP and LCTOP. In the event GGRF revenues are below $4.25 billion, the losses would hit the tier 3 programs.

A few months later, CARB expanded the Low Carbon Fuel Standard Program, which incentivizes production of cleaner low-carbon transportation fuels. Because fuel producers won’t need to buy as many emissions credits, CARB’s decision will significantly reduce the cap-and-invest auction revenues, blowing a huge hole in the newly minted allocation plan and potentially zeroing out funding for the tier 3 programs.

Earlier in the year, the Senate attempted to make permanent changes to the GGRF allocation plan, but neither the Assembly nor the Governor engaged. As the end of session approached, the Senate put forward a new, temporary plan that used state general funds and Prop 4 funds, and adjusts the CAL FIRE backfills, to provide funding to most tier 3 programs and SB 125 (Zero Emission Transit Capital). Their plan was partially enacted in the budget, with all of those programs getting some funding, though at far lower amounts than full GGRF funding would provide, and only for one year. TIRCP is funded at $95 million, LCTOP at $48 million, and AHSC at $133 million, all about a quarter of their full allocations. We expect this issue to continue with the new administration next year.

Wildfire Liability for IOUs

One last time, Newsom followed a playbook that has worked remarkably well for him throughout his years in office: drop a complex policy in the Legislature’s lap and urge them to pass it with just weeks to debate it before a real or asserted deadline. For the first time, possibly because of his imminent departure from office, it didn’t work.

The Governor spent much of his energy in the session’s final weeks pushing the Legislature to limit how much PG&E, Southern California Edison, and San Diego Gas & Electric pay when they cause wildfires. The bullet point version of his plan was five pages long and included, among much else, limiting the ability of local agencies, insurance companies, and wildfire survivors to sue investor-owned utilities to cover losses. 

All three of those groups read this as cost-shifting onto policyholders, taxpayers, and fire victims, and fought it hard. The three-party compromise that finally emerged Saturday morning, SB 492 (Becker and Petrie-Norris), was stripped of most of what Newsom wanted, including the provisions above, but even so the Assembly Democratic Caucus did not support the negotiated bill and so it was not brought up for a vote. Newsom has left open the possibility of calling a special session before he leaves office in January, but nothing in the Constitution compels the Legislature to pass bills in a special session if the Governor does call one.

Grid, Interconnection, and Distributed Energy

Several bills that passed speak directly to how distributed generation and grid capacity are managed. They are on the Governor’s desk awaiting action.

• AB 2493 (Petrie-Norris) creates independent oversight and enforceable accountability for delays in transmission and interconnection projects in an attempt to clear California’s interconnection backlog.
• SB 913 (Becker) authorizes and expands the use of aggregated distributed energy resources to satisfy resource adequacy requirements, giving DER portfolios a clearer regulatory path to count toward the state’s reliability targets.
• SB 868 (Wiener) lets homeowners and renters connect small plug-in solar panels without a full utility interconnection agreement.
• AB 1813 (Ward) increases compensation for grid energy from community renewable generation.
• AB 2313 (Berman) requires gas utilities to offer a monetary incentive for ending service rather than defaulting to line replacement.
• SB 222 (Wiener) requires HOAs to permit residential heat pumps and pushes cities and counties toward asynchronous inspections and online permitting.
• AB 2111 (Papan) aims to build more uncertainty and risk analysis into resource portfolio planning.

One bill that did not pass was SB 1097 (Wiener), which would have created a CEQA exemption for existing transmission lines. However, Proposition 45, which will be on the November ballot, would streamline CEQA review for transmission lines and clean-electricity facilities, as well as housing and other infrastructure.

Data Centers, Utility Bills, and Affordability

Data centers are a hot topic across the country and in California that meant their energy use was the topic for several bills. Data center concerns even bled over into concerns about energy affordability, which was also addressed in bills targeting IOU profits and use of taxpayer dollars.

• SB 887 (Padilla) confirms that CEQA applies to data center projects while offering streamlined review to those meeting clean energy, sustainability, environmental justice, and labor standards.
• SB 886 (Padilla and McNerney) and AB 2383 (Zbur) both require new tariffs so data center energy demands don’t increase costs for other ratepayers.
• AB 1577 (Bauer-Kahan) requires data centers to report their energy usage and efficiency to the CEC and local agencies, feeding into the state’s 2029 Integrated Energy Policy Report. 
• SB 905 (Becker) opens up alternative financing for investor-owned utility infrastructure, including asking the CPUC to consider a reduced rate of return on certain capital costs, including undergrounding.
• AB 1715 (Schiavo) requires investor-owned utilities to report any taxpayer funding above $1 million.

The Future

Governor Newsom has until September 30 to sign or veto bills the Legislature passed in the last few days of session. Over the past eight years, he has vetoed about 15 percent of those that reach his desk, and the Legislature has not yet overridden any.

In his term as Governor, he has faced COVID, recall, federal administrations hostile and friendly and hostile again, and a mostly compliant Legislature with a Democratic supermajority. He has been the face of California to the rest of the country. Barring a special session, his decisions about signing and vetoing this year’s bills are his last chance to directly affect state policy.

Next year will bring a lot of changes: a new Governor and his new appointees, perhaps a quarter of the state Senate will be new, perhaps some of the cities where you live and work will have new leadership. But we will continue to debate, locally and in Sacramento, how policy should change to deal with our changing world, how we should treat our natural and built environments, and how we should treat each other.