(The Center Square) – Energy affordability and grid reliability were again at the center of discussion in Harrisburg.
The House Energy Committee heard testimony on legislation that would use technology – including virtual power plants or VPPs – to add capacity and lower costs.
House Bill 2264 would require Pennsylvania electric distribution companies, like PPL and PECO, to submit regulator-approved VPP program proposals that use distributed energy resources – like battery storage, rooftop solar, and smart thermostats – to reduce peak demand and compensate participants.
The bill’s sponsor, Rep. Nathan Davidson, D-Lemoyne, said the same smart devices that are contributing to rising demand and costs can also be part of the solution. He also noted that similar legislation has drawn bipartisan support in Virginia.
Testifiers spoke about the practical aspects of VPPs, describing them as voluntary, customer-friendly programs that can produce measurable savings.
At the same time, some raised concerns about potential overlapping compensation mechanisms, market coordination, and the need for rigorous cost-benefit analysis.
“Virtual power plants turn thousands of everyday devices that people are already using into a powerful grid resource,” said Chris D’Agostino, Pennsylvania policy lead at Advanced Energy United. “With the right policy framework, Pennsylvania can unlock these technologies to deliver cleaner, cheaper, and more reliable electricity.”
D’Agostino said that as demand rises, the traditional response has been to build more power plants and expand grid infrastructure. While those measures remain necessary, he argued the state also needs additional cost-effective tools that are quick to deploy and make better use of existing assets. Virtual power plants are one such tool, he said.
He cited a 2025 Department of Energy Report showing that VPPs can provide capacity at 40% to 60% lower cost than conventional peak power plants.
Leah Gibbons, senior director of regulatory affairs at NRG Energy, told the committee the company has extensive experience delivering VPPs. Partnering with Renew Home and Google Cloud, NRG built what she described as one of the largest residential smart thermostat VPPs in the country, targeting 500,000 customers and one gigawatt of peak demand reduction by 2035.
Gibbons said a successful program depends on devices installed at scale, strong customer engagement, and a clear way to monetize reductions in capacity and transmission costs. She added that while NRG has proposed several amendments to the bill, it provides a solid framework for a utility-run program.
Based on the company’s experience, customers typically save between $80 and $120 annually simply by reducing usage during peak periods, she said, with even greater savings possible through smart home technology.
She stated that smart meters and advanced metering infrastructure, or AMI, usage data are ubiquitous across Pennsylvania and essential to monetizing the benefits of customer participation, Gibbons said.
While supportive of the concept, Rod Williamson, executive director of Industrial Energy Consumers of Pennsylvania, or IECPA, said he has some concerns with the bill as drafted.
He offered five recommendations to ensure that any VPP program adopted in Pennsylvania supports grid reliability without burdening customers with unnecessary costs. They included prohibiting duplicative compensation for the same event, basing compensation on actual avoided costs or market value, tying utility incentives to real net savings rather than spending, requiring the PUC to conduct rigorous benefit-cost and rate-impact analyses, and ensuring alignment with PJM markets and safe interconnection.
Rep. Martin Causer, R-Bradford, echoed Williamson’s concerns about protections for nonparticipants and potential cost shifting. Proponents argued that VPPs are less expensive than building new peaker plants or major transmission upgrades, meaning total system costs would be lower and nonparticipants would benefit indirectly as well.
Supporters also noted that device rebates already exist under current ratepayer-funded programs and that VPP benefits come from avoided costs. When customers reduce peak usage, system costs fall, and part of those savings can be shared back through bill credits or other payments rather than relying primarily on new charges to other customers.
