USA – CALIFORNIA Law and Practice Contributed by: Nora Sheriff, Gwenneth O’Hara, Samir Hafez, Antonio Carrejo and Elisa Rivas, Buchalter
be zero-emission by 2045. In response, CARB adopted regulations aimed at increasing the number of zero-emission vehicles in California and tightening vehicle emissions standards. Although these transportation electrification efforts are expected to accelerate electric load growth, the timing of such growth is uncertain in light of federal policies. The Electric Vehicle (EV) mandate was scheduled to go into effect in 2026. However, due to the recent congressional repeal of the EPA waivers permitting these mandates, this deadline is now in flux. The repeal is likely to be challenged in court by California, and possibly by the 16 other states that have adopted similar standards. Western Market Co-Ordination SB 540 (2025) would enable CAISO to join a new Regional Organization and participate in a broader, voluntary wholesale energy market in the Western Interconnect. SB 540’s goal is to achieve greater market efficiencies, lower costs and improve reliability. However, these goals may be impeded by Southwest Power Pool’s Markets+ and Regional Transmission Operator (RTO) West initiatives, both of which will com- pete with CAISO’s Regional Organization. 1.8 Unique Aspects of the Power Industry California’s power industry presents several unique aspects, shaped largely by the state’s ambitious policies and geographical challenges. Ambitious Decarbonisation Goals California has set ambitious renewable energy and decarbonisation goals, including a legal mandate to reach carbon neutrality by 2045, and interim targets of 90% clean electricity by 2035 and 95% by 2040. These goals have contributed to the state’s significant year-on-year deploy-
ment of renewable energy resources, particularly utility-scale and distributed solar. In 2024, for the first time ever, California achieved 100% clean energy in the CAISO service area every three out of five days, as the CAISO system reached 100% renewable electricity for a period of the day on 219 different days. This rapid decarbonisation transition has also contributed to the state’s unique and complex challenges related to grid stability, resource adequacy, electric affordability and the integration of intermittent resources. Wildfire Risks and Resilience Efforts The escalating threat of catastrophic wildfires caused by utility infrastructure poses persistent challenges surrounding utilities’ legal obligations and operational costs. State policy and regula- tory responses to these challenges include the creation of a state-administered Wildfire Fund, mandates for extensive grid hardening (eg, undergrounding, advanced monitoring technol- ogy, enhanced vegetation management), and the deployment of public safety power shutoffs (PSPS) during high-risk conditions. AB 1054 established the California Wildfire Fund, making way for socialising the costs of paying for cata- strophic wildfire liabilities. Under the doctrine of inverse condemnation, California law uniquely holds IOUs strictly liable for damages from wild- fires caused by utility infrastructure, regardless of negligence. Prominence of CCAs CCAs represent a significant and unique struc- tural element in California’s electricity market. These entities procure electricity for their resi- dents and businesses, often with an emphasis on sourcing higher percentages of renewable and carbon-free energy relative to the incumbent IOU. CCAs’ expanding market share presents evolving regulatory considerations regarding
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