MEMBERS-ONLY FACT SHEET
California Energy Commission’s Demand Side Grid Support Program

Last Updated April 22, 2025

Program Overview

Demand Side Grid Support is a program developed by the California Energy Commission (CEC) that offers incentives to electric utility customers for providing load reduction and backup generation to support the state’s electrical grid during extreme events, reducing the risk of blackouts.

The Legislature created the Demand Side Grid Support (DSGS) program in summer 2022. In its first year, DSGS was only available to customers of publicly owned utilities. On July 26, 2023, the CEC adopted the Second Edition of the DSGS Guidelines, which expanded the program in several ways, including making it available to additional customers and developing two new pathways for participation. On May 8, 2024, the CEC adopted the Third Edition of the DSGS Guidelines, which refined and clarified several requirements of program participation, incorporating lessons learned from the 2023 season.

After the 2024 season, the CEC again modified the guidelines. The DSGS Program Guidelines, Fourth Edition, approved on April 10, 2025, are the currently operative guidelines.

DSGS began with $200 million in funding in 2022. With additions and reversions in 2023 and 2024, the maximum provided funding currently stands at approximately $125 million. As of the date of this fact sheet, the Governor’s budget proposes to add approximately another $125 million in the 2025-26 budget year. While the CEC has not provided an updated estimate of funds expended, a reasonable best estimate is between $30 and $50 million.

DSGS has four program incentive options, providing flexibility and pathways for different kinds of customers and energy resources to contribute during emergency events. One incentive option provides an innovative pathway for behind-the-meter batteries to participate (called Option 3, the Market-Aware Storage Virtual Power Plant Pilot). This program option is specifically for batteries that are remotely dispatched as a fleet—a concept often called a virtual power plant, or VPP. This allows distributed batteries to combine into a larger resource that can replace the need for a conventional power plant to fire up, or to avoid costly upgrades to the distribution grid, for example. In 2024, this program pathway expanded eligibility to battery electric vehicles (EVs) with bidirectional charging capability.

When participating in the DSGS Option 3 program pathway, a battery virtual power plant responds when wholesale energy market prices rise, signaling that energy supply is tight—as happens during a heat wave when demand for electricity spikes to keep air conditioners running. Bringing fleets of batteries online during these high-price events helps respond to grid emergencies, avoids power outages, helps lower prices for all ratepayers, and can avoid grid emergencies in the first place. Starting in 2025, Option 3 resources also respond to CAISO Energy Emergency Alert (EEA) signals.

This fact sheet provides information on DSGS program availability, general eligibility and enrollment information, some information for each of the four program incentive options with a primary focus on Option 3, and links to resources from the CEC and the DSGS Program Administrator.

Program Availability

DSGS Program Year: May 1–October 31

DSGS Program Duration: The program does not have a set term. It was originally anticipated to run approximately five years from its inception in 2022. Funding added after 2022 has been authorized for expenditure beyond that time frame, and if funding is maintained, the program can reasonably be expected to run until about 2028 or later. That said, incentive payments are available on a first-come, first-served basis.

General Eligibility and Enrollment

Entities participate in DSGS as DSGS providers or as participants. In general, DSGS providers are utilities or aggregators, and participants are customers.

DSGS Providers:

Aggregators of customers
- Aggregators of customers must notify publicly owned utilities (POUs), investor-owned utilities (IOUs), and community choice aggregators (CCAs) of their intent to enroll customers in their service territory. In POU territories, aggregators must get a written statement from the POU that it doesn’t object to the aggregator enrolling the POU’s customers, along with other acknowledgments.
Retail electricity suppliers, including IOUs, POUs, CCAs, and electric service providers
Federal power marketing administrations

➱ See DSGS Guidelines, Chapter 2, Section A.1.

Note: POUs outside the CAISO balancing authority area may develop alternative dispatch requirements and performance measurement criteria, with CEC approval. This means that in these POU territories, program rules may vary from what is described in this fact sheet.

➱ See DSGS Guidelines, Chapter 2, Section B.

DSGS Participants:

Participants are customers of utilities and other entities that provide electricity. The eligibility criteria vary for the DSGS program incentive options; more information is given below for each incentive option.
Participants are ineligible if their energy resource is enrolled in certain other grid services programs. See below for each DSGS incentive option.
DSGS providers may include additional eligibility requirements.

➱ See DSGS Guidelines, Chapter 2, Section A.2.

Enrollment:

DSGS providers enroll in the program by submitting an application package to the CEC, using an application form available on the DSGS Program Administrator enrollment webpage and uploading it through the website.
- The CEC reviews the application, notifies the DSGS provider if more information is needed, and after approving an application, provides an enrollment letter to the DSGS provider.
Participants generally enroll through a DSGS provider. CALSSA has member companies that are DSGS providers, and may be able to assist in connecting other members with DSGS providers. Contact kate@calssa.org for information.

➱ See DSGS Guidelines, Chapter 2, Section C.

Reporting:

All incentive options require enrolled participation reports. These include initial reports due shortly after a DSGS provider enrolls in the program and ongoing reports to provide information about changes in enrolled participants over the course of the program season.
Required information in enrolled participation reports varies by incentive option. The guidelines have complete information on what is required.
Starting in 2025, the guidelines also require reports on dispatch or performance for Options 2, 3, and 4.

➱ See DSGS Guidelines, Chapter 2, Section D.

Program Incentive Options (Participation Pathways)

In 2023 and 2024, DSGS had three incentive options, or participation pathways. Beginning in 2025, it has four options. The incentive options are open to different sets of participants, as set out below. DSGS providers can limit the incentive options available to their participants, so there may be additional limitations beyond what is described here.

This fact sheet provides basic overviews of the incentive options, with a focus on the BTM battery VPP option, which is Incentive Option 3. More information is provided in the guidelines and at the Program Administrator’s website.

Incentive Option 1: Emergency Dispatch

Incentive Option 1 offers an energy-based incentive payment during CAISO emergency events. This program pathway is similar to the California Public Utilities Commission’s Emergency Load Reduction Program, which also provides energy-based payment for response during CAISO emergencies.

Eligible Customers:

Only non-residential customers are eligible to participate in Option 1.
POU customers
IOU, CCA, and energy service provider (ESP) customers using backup generators
Customers of tribal utilities
Customers of federal power marketing administrations
Water agencies

➱ See DSGS Guidelines, Chapter 2, Section A.2, and Chapter 3, Section A.

Limitations on Customer Eligibility: Participants are ineligible if the load reduction resource is:

Enrolled in the Emergency Load Reduction Program, Base Interruptible Program, or Agricultural Pump Interruptible Program
Receiving payment or accounting for the same reduction in use of electricity through another utility, CCA, or state program—except that the guidelines specifically allow customers on critical peak pricing rate plans to participate in DSGS
A cogeneration facility with a power purchase agreement

➱ See DSGS Guidelines, Chapter 2, Section A.2.

Eligible Resources:

Behind-the-meter combustion or non-combustion resources may participate in Option 1.

➱ See DSGS Guidelines, Chapter 3, Section A.

Program Hours: Any hour, 7 days per week

Dispatch Rules:

Resources dispatch in response to Energy Emergency Alert (EEA) events issued by the CAISO, or by a non-CAISO host balancing authority under specified rules.
Resources are dispatched in a defined loading order, with demand response and batteries dispatched first.
Combustion and non-combustion resources are dispatched at different EEA levels, with non-combustion resources generally dispatched at lower EEA levels.

➱ See DSGS Guidelines, Chapter 3, Sections C–F.

Incentive Structure and Level:

Energy payments are $2/kWh for verified incremental load reduction.
Standby payments are $0.25/kWh for combustion resources that make a standby commitment during an EEA Watch or EEA 1, for any hour or portion of an hour when the combustion resource is not dispatched.

➱ See DSGS Guidelines, Chapter 3, Sections B and F.

Incentive Option 2: Market-Integrated Demand Response Incremental Capacity Pilot

Incentive Option 2 is for demand response resources enrolled and participating in the CAISO energy market. It compensates for demonstrated demand response capacity provided in excess of the resource’s existing resource adequacy capacity commitments.

The DSGS guidelines describe Option 2 as a pilot intended to test a new program design. The CEC will prepare a report assessing the performance and cost-effectiveness of this pilot.

Eligible DSGS Providers (called DR Providers):

Third-party demand response (DR) aggregators with at least one registered CAISO Proxy Demand Resource (PDR)
POUs operating in the CAISO balancing authority with at least one registered CAISO Proxy Demand Resource (PDR)

➱ See DSGS Guidelines, Chapter 4, Section A.

Eligible Customers:

POU customers
IOU, CCA, and ESP customers
Customers of tribal utilities
Customers of federal power marketing administrations
Water agencies

➱ See DSGS Guidelines, Chapter 2, Section A.2.

Limitations on Customer Eligibility:

All Option 2 participants must be enrolled in a CAISO Proxy Demand Resource (PDR).

Additionally, participants are ineligible if the load reduction resource is:

Enrolled in the Emergency Load Reduction Program, Base Interruptible Program, or Agricultural Pump Interruptible Program
Receiving payment or accounting for the same reduction in use of electricity through another utility, CCA, or state program—except that the guidelines specifically allow customers on critical peak pricing rate plans to participate in DSGS
A cogeneration facility with a power purchase agreement

➱ See DSGS Guidelines, Chapter 2, Section A.2, and Chapter 4, Section B.

Program Hours: DR aggregators can choose whether to participate 7 days per week or only on non-holiday weekdays. The daily availability requirements vary depending on the RA resource’s obligations.

➱ See DSGS Guidelines, Chapter 4, Section D.

Dispatch Rules: Resources dispatch in market-integrated DR programs, according to their rules.

➱ See DSGS Guidelines, Chapter 4, Section D.

Incentive Structure and Level:

Incentive payments are made to DR providers, which allocate the payments between themselves and customers according to the terms and conditions agreed between them.
Payment is in terms of $/MW based on demonstrated capacity—i.e., capacity actually provided—above and beyond the highest monthly shown resource adequacy capacity.
Capacity prices vary by month, with a season total of $82,800/MW for resources available every day and $66,240 for resources available on non-holiday weekdays.
For 2023–2026, an additional 30% bonus is provided, for a season total of $107,640/MW for resources available every day or $86,112/MW for resources available on non-holiday weekdays. Bonuses may be provided in future years at CEC discretion.

➱ See DSGS Guidelines, Chapter 4, Section C.

Incentive Option 3: Market-Aware Storage Virtual Power Plant Pilot

Incentive Option 3 is the pathway for BTM battery virtual power plants. The incentives are primarily based on capacity delivered during events that are determined by wholesale market prices, but this pathway is for resources that are not participating in the CAISO market, and the compensation isn’t based on market prices. For this reason, the pathway is called “market aware.”

Since 2024, Option 3 has also been open to battery EVs with bidirectional charging. A VPP can consist of stationary batteries, EV batteries, or both.

The DSGS guidelines describe Option 3 as a pilot intended to test a new program design. The CEC will prepare a report assessing the performance and cost-effectiveness of this pilot.

Eligible DSGS Providers (called storage VPP aggregators):

Third-party battery providers
POUs
CCAs

➱ See DSGS Guidelines, Chapter 5, Section A.

Eligible Storage VPP Resources:

Residential (bundled or unbundled) customers
Nonresidential (bundled or unbundled) customers
Both solar-paired and stand-alone stationary storage
EVs with bidirectional-capable EV service equipment (EVSE)

Every VPP resource participates as a 2-hour, 3-hour, or 4-hour resource. The DSGS provider nominates the duration. Each VPP aggregation must include customer sites of a single duration.

➱ See DSGS Guidelines, Chapter 5, Sections A and C.

Storage VPP Aggregator Minimum Size Thresholds:

To participate as a DSGS Provider, an Option 3 storage VPP aggregator must meet one of the following minimum thresholds:

It must aggregate a total minimum of 400 kW of resource nameplate power rating across all resource durations and utility service territories, or
It must have at least one aggregation with a total minimum nameplate power rating of 200 kW (consisting of assets with the same nominated duration, within a single UDC service territory, and if applicable, with a single partner company), or
It must have at least three aggregations with a total minimum nameplate power rating of 100 kW each (each consisting of assets with the same nominated duration, within a single UDC service territory, and if applicable, with a single partner company).

If a storage VPP aggregator meets any of the above thresholds, it may also have other aggregations that do not meet these minimum size requirements.

➱ See DSGS Guidelines, Chapter 5, Section A.

Eligible Customers:

POU customers
IOU, CCA, and ESP customers
Customers of tribal utilities
Customers of federal power marketing administrations
Water agencies

➱ See DSGS Guidelines, Chapter 2, Section A.2.

Limitations on Customer Eligibility: Participants are NOT eligible if:

The load reduction resource is enrolled in the Emergency Load Reduction Program, Base Interruptible Program, or Agricultural Pump Interruptible Program
The load reduction resource is receiving payment or accounting for the same reduction in use of electricity through another utility, CCA, or state program—except that the guidelines specifically allow customers on critical peak pricing rate plans to participate in DSGS
The load reduction resource is a cogeneration facility with a power purchase agreement
The customer site is participating in a CAISO Proxy Demand Resource (PDR) or Reliability Demand Response Resource (RDRR), except in two circumstances:
- The storage resource’s energy charge and discharge behavior is removed from the customer’s energy baseline following a CAISO methodology.
- The participant is enrolled with a stationary export-only resource, as described in the DSGS guidelines, Chapter 5, Section E.

➱ See DSGS Guidelines, Chapter 2, Section A.2, and Chapter 5, Section A.

There are additional requirements and obligations for storage VPP aggregators, aggregations, and customer sites, as described in the DSGS guidelines, Chapter 5, Section A.

Program Hours: 7 days per week, 4:00 pm to 9:00 pm.

➱ See DSGS Guidelines, Chapter 5, Section D.

Dispatch Rules:

New in 2025, Option 3 has two sets of dispatch triggers: price-based and EEA-based. Price-based events are only day-ahead events. EEA-based events may be day-ahead or day-of events.

Day-Ahead Events:

Price-Based Events:

Resources dispatch in response to CAISO day-ahead locational marginal prices (LMP) for the appropriate CAISO default load aggregation point or Path 15 zone.
Events occur on days when the applicable LMP is at least $200/MWh for one or more program hours (4:00 pm–9:00 pm). See the guidelines for more information on how events are triggered and in which hours resources must respond.
In non-CAISO POU territories, other dispatch signals may apply.

EEA-Based Events:

If an EEA Watch or above is called by the host balancing authority (BA) for the following day, the emergency trigger takes effect for the entire 4:00 pm–9:00 pm program period.
The specific hours that resources must respond during these events are determined by the nominated duration (2, 3, or 4 hours) and the applicable day-ahead LMP. See the guidelines for more information about how the specific hours for dispatch are determined.

There is a requirement that all resources respond to at least one day-ahead event for the resource’s full nominated duration every month. If no day-ahead price-based or EEA-based event dispatches an Option 3 resource for its full duration, the storage VPP aggregator must conduct a test event by the end of that month. See the guidelines for more information on test event rules.

Day-Of Events:

If an EEA Watch or above is called by the host BA for the same day, the emergency trigger takes effect at the later of
- the notice start time, rounded to the nearest hour (even if the nearest hour is before the notice was issued),
- the EEA start time listed on the event notice, or
- 4:00 pm.
Events last no later than 9:00 pm.
It is possible for there to be day-ahead and day-of event hours on the same day. Day-of hours are treated separately from day-ahead event hours for purposes of compensation.

➱ See DSGS Guidelines, Chapter 5, Section D, and Chapter 2, Section B.

Incentive Structure and Level:

Incentive payments are made to storage VPP aggregators, which allocate the payments between themselves and customers according to the terms and conditions agreed between the provider and participants.

Beginning in 2025, there are two incentive structures, one applicable to day-ahead event hours, and one for day-of event hours.

Day-Ahead Event Hours:

Payment is in terms of $/kW based on demonstrated capacity (capacity actually provided) during day-ahead event hours.
Incentive levels vary for VPP resources of 2-hour, 3-hour, and 4-hour duration, and storage VPP aggregators state in advance the duration for which they will operate each of their VPP aggregations.
Incentive rates vary from month to month.
The total base incentives for a program year are as follows.
- $82.80/kW for 4-hour resources
- $74.52/kW for 3-hour resources
- $62.10/kW for 2-hour resources
For 2023 through 2026, the CEC provides an additional 30% bonus, so that the total program year incentives are as follows. Bonuses may be provided in future years at CEC discretion.
- $107.64/kW for 4-hour resources
- $96.88/kW for 3-hour resources
- $80.73/kW for 2-hour resources

Day-Of Event Hours:

For any hours that are triggered on a day-of basis, payment is $1/kWh of net discharge.
If an hour was already triggered on a day-ahead basis, it is treated as a day-ahead event hour, not a day-of event hour.
See below under Dispatch Rules and Performance Measurement for more information about day-of event hours.

In measuring performance and calculating incentives, stationary battery resources with a permission-to-operate date before July 1, 2023, or that receive a Self-Generation Incentive Program (SGIP) incentive have a defined “prescriptive” baseline deducted from the demonstrated capacity, as described in the DSGS guidelines, Chapter 5, Section E.

The guidelines set out that beginning in the 2026 program season, a prescriptive baseline will be applied to all resources participating in Option 3, including those with a permission-to-operate date after July 1, 2024, and those that have not received SGIP incentives. Additionally, starting in 2026 and every two years thereafter, the CEC may update the baseline values to be deducted from discharge.

➱ See DSGS Guidelines, Chapter 5, Section C.

Performance Measurement:

Performance is measured at the submeter, inverter, or EVSE. For most Option 3 resources, performance includes all battery discharge, whether to serve load or for export to the grid. Stationary batteries may participate in Option 3 as export-only resources. For those resources, only the portion of discharge that is exported to the grid will be counted toward DSGS performance.

Steps 1 through 5 below describe the determination of performance and compensation for day-ahead, capacity-based performance.

For day-of, energy-based performance and compensation, the net discharge determined in step 3 is multiplied by $1/kWh.

Step 1: If the resource is export only, determine the discharge value for purposes of performance measurement.

For resources that are enrolled in a supply-side demand response program and participate in the CAISO market as part of a PDR or RDRR, the discharge value is the absolute value of any negative load during a DSGS event hour. If there was no export (i.e., negative load) during the hour, there is no discharge for DSGS purposes in that hour.

Step 2: Determine whether a prescriptive baseline applies to the battery resource.

A prescriptive baseline applies if either:

The stationary battery resource has a permission to operate date before July 1, 2023, or
The stationary battery resource has received SGIP funding

If a baseline applies, the baseline is determined by multiplying the battery’s nameplate energy capacity by the applicable factor:

For residential battery resources: 0.074
For nonresidential battery resources: 0.028

The resulting value is in kWh per hour.

Through 2025, for stationary batteries with a permission to operate date of July 1, 2023, and after that do not receive SGIP funding, and for EVs, the baseline is zero kW. Beginning in 2026, there will be no zero kW baseline, and the prescriptive baseline factors shown above may be adjusted.

Step 3: Determine the net discharge.

Net discharge is determined for an aggregation. It is the discharge minus the baseline in each event hour, as determined in the prior step. See the formula in the guidelines, Chapter 5, Section E.3.

Step 4: For each month of participation, determine the demonstrated capacity.

Demonstrated capacity over a participation month is a weighted average net discharge during day-ahead program and applicable test event hours in that month, with weighting by the relevant locational marginal prices (LMP).

The formula for the capacity in a given month is shown in the guidelines, Chapter 5, Section E.4.

Step 5: Determine the compensation for that month.

The demonstrated capacity in kW is multiplied by the applicable month’s BTM storage capacity price for a resource of the relevant duration. The prices are shown in Table 2 in Chapter 5, Section C, of the DSGS guidelines. For performance through 2026, a 30% bonus is applied to the total calculated incentive. The approximate annual values are as follows: $107.64/kW for 4-hour resources, $96.88/kW for 3-hour resources, and $80.74/kW for 2-hour resources.

After 2026, the prices may return to the base level shown in Table 2 in the DSGS Guidelines, or additional bonuses may be provided at CEC discretion.

➱ See DSGS Guidelines, Chapter 5, Sections C and E.

Incentive Option 4: Emergency Load Flexibility Virtual Power Plant Pilot

Incentive Option 4 is a new pathway established in 2025. It offers capacity-based compensation for load reduction capacity committed by VPPs composed of load flexibility resources. It is similar to Option 3 in its capacity-based structure, but it is only dispatched based on EEAs.

Option 4 is not available to PG&E distribution service customers.

The DSGS guidelines describe Option 4 as a pilot intended to test a new program design. The CEC will prepare a report assessing the performance and cost-effectiveness of this pilot.

Eligible DSGS Providers (called load flexibility VPP aggregators):

Third-party load flexibility providers
POUs
CCAs

➱ See DSGS Guidelines, Chapter 6, Section A.

Eligible Load Flexibility VPP Resources:

Dispatchable devices located at residential (bundled or unbundled) customer sites, nonresidential (bundled or unbundled) customer sites, or both are eligible. The following device technology types may participate.

Smart thermostats with runtime monitoring capability that control air conditioning units, including heat pumps, without load monitoring capability
Smart thermostat–controlled air conditioning units, including heat pumps, with load monitoring capability
Heat pump water heaters and electric resistance water heaters
Electric vehicle supply equipment (EVSE)
Stationary BTM batteries
Residential smart electric panels.

➱ See DSGS Guidelines, Chapter 6, Section A.

Load Flexibility VPP Aggregator Minimum Size Thresholds:

To participate as a DSGS Provider, an Option 4 load flexibility VPP aggregator must meet one of the following minimum thresholds:

It must aggregate a total minimum of 200 kW of resource nameplate power rating across all device technology types and utility service territories, or
It must have at least one aggregation with a total minimum nameplate power rating of 100 kW (consisting of a single device technology type, within a single UDC service territory), or
It must have at least three aggregations with a total minimum nameplate power rating of 50 kW each (each consisting of a single device technology type, within a single UDC service territory).

If a load flexibility VPP aggregator meets any of the above thresholds, it may also have other aggregations that do not meet these minimum size requirements.

➱ See DSGS Guidelines, Chapter 6, Section A.

Eligible Customers:

POU customers
IOU, CCA, and ESP customers (but see the limitation for PG&E distribution service customers below)
Customers of tribal utilities
Customers of federal power marketing administrations
Water agencies

➱ See DSGS Guidelines, Chapter 2, Section A.2, and Chapter 6, Section B.

Limitations on Customer Eligibility: Participants are NOT eligible if:

The load reduction resource is enrolled in the Emergency Load Reduction Program, Base Interruptible Program, or Agricultural Pump Interruptible Program
The load reduction resource is receiving payment or accounting for the same reduction in use of electricity through another utility, CCA, or state program—except that the guidelines specifically allow customers on critical peak pricing rate plans to participate in DSGS
The load reduction resource is a cogeneration facility with a power purchase agreement
The customer site is participating in a CAISO Proxy Demand Resource (PDR) or Reliability Demand Response Resource (RDRR), or is registered in the CAISO DRRS
The customer is a distribution service customer of PG&E

➱ See DSGS Guidelines, Chapter 2, Section A.2, and Chapter 6, Section A.

Program Hours: 7 days per week, 4:00 pm to 10:00 pm.

➱ See DSGS Guidelines, Chapter 6, Section E.

Dispatch Rules:

Events occur on every day that the host balancing authority issues an EEA Watch or EEA event.
There is a maximum of 60 hours per season, with participation above that maximum voluntary to increase demonstrated capacity.
There is a cap of 3 events in any 7-day period.
There is a minimum of 2 events per season, with one event per 3-month period (May–July and August–October). The CEC will initiate a test event in a 3-month period that has no EEA-triggered events.
During events, event hours are determined based on mean CAISO locational marginal prices. For more information on event hour selection, see the DSGS guidelines, Chapter 6, Section E.

➱ See DSGS Guidelines, Chapter 6, Section E.

Incentive Structure and Level:

Incentive payments are made to load flexibility VPP aggregators, which allocate the payments between themselves and customers according to the terms and conditions agreed between them.
Payment is in terms of $/kW and is based on the performance of each aggregation relative to its committed capacity.
Capacity prices vary by month, with a season total of $60.58/kW.
The final incentive payment is adjusted relative to the total incentive associated with the minimum capacity nomination based on performance of the VPP during program events.
Load flexibility VPP aggregators nominate per-device average load reduction for each month. The nomination for weather-sensitive resource aggregations should reflect the weather-normalized capability.
Energy-based payments are available for performance in events triggered above the cap of 3 events in 7 days.

➱ See DSGS Guidelines, Chapter 6, Sections C, D, and E.