Independent System Operator: independent regional organization.

Petrie-Norris, Rivas, and Becker frame a shift in California’s electricity-market governance by removing the previous path to transform the Independent System Operator into a regional organization and instead approving a framework for voluntary energy markets governed by an independent regional organization, conditioned on a defined set of governance, transparency, and oversight requirements. The measure would allow the ISO and participating transmission owners to operate voluntary markets only if certain criteria are satisfied, while the ISO would retain balancing authority and related technical capabilities, and the administration would require annual reporting and a Legislature-facing presentation of that work. It also contemplates a path for potential tariff modifications starting in 2028, contingent on a board resolution and a finding that the independent regional organization has adopted the requisite provisions, with a formal determination by the Public Utilities Commission (PUC) before any market participants join.

A core component is a restructured governance framework for the ISO, including a five-member board appointed by the Governor with Senate confirmation and three-year terms (no term limit), plus initial term staggering. The bill directs the Oversight Board to revise the ISO’s articles and bylaws and to file with the Federal Energy Regulatory Commission as needed. It also sets out a detailed set of conditions for enabling voluntary markets under an independent regional organization, to be codified as a new framework that would govern market operations and states’ oversight, including the maintenance of public policy engagement, consumer-advisor participation, and open, transparent decision-making processes.

Section 345.1 and 345.2 establish annual reporting requirements, with the chair and chief executive officer of the ISO required to appear before the Legislature to present the report, which must cover changes to federal tariffs, the status of policy initiatives, actions by governance bodies, market-monitor activity, and transmission-planning actions, and, if applicable, activities of an independent regional organization. Section 345.6 enumerates the nine through thirteen substantive requirements that an independent regional organization must meet to allow voluntary market participation, including governance structures that respect state authorities, a public-policy committee, formal relationships with state regulators, funding for consumer-advocate engagement, a public-participation office, access to market analysis, a nonbinding stakeholder process, open and well-documented meetings, public notice and remote access, and mechanisms for unilateral withdrawal without penalties. It also preserves the ISO’s role in operating the energy markets under the independent regional organization’s rules once approved by the Federal Energy Regulatory Commission, and requires disclosures on greenhouse gas information and protocols to support state compliance.

The bill introduces a separate coordination requirement under Section 399.16.5, directing the California Public Utilities Commission and the Energy Commission to coordinate to revise rules so that transitioning to the regional market governed by the ISO or the independent regional organization does not expand the types of transactions that meet the portfolio content category requirements beyond those that would qualify on December 31, 2025. In parallel, the bill repeals Section 352 and Articles 4, 5, and 5.5 of Chapter 2.3 of Part 1, Division 1 of the Public Utilities Code and adds Section 399.16.5 to carry the coordination mandate. The enactment includes a crime-related provision for violations of PUC actions implementing the bill, and a no-reimbursement clause for local agencies, consistent with the act’s scope and the altered regulatory structure.