Lawmakers press agencies on shifting CalSHAPE and DBA funds to demand‑response programs; stakeholders urge preserving DSGS and extending school funds

David Evans of the Department of Finance told the subcommittee the governor’s budget includes two trailer‑bill language proposals: one to redirect $22,000,000 from a prior general‑fund appropriation for the Distributed Energy Backup Assets program into the Demand Side Grid Support (DSGS) program for summer 2026, which would supplement roughly $30,000,000 already in DSGS for a combined total near $52,000,000; and a second to return accumulated interest (about $70,000,000) from the CalSHAPE fund back to electrical corporations for use in emergency load‑reduction programs in 2027–28 (ELRP or an equivalent).

"So that's the first proposal," David Evans said, describing the $22,000,000 transfer and the administration’s view that returning CalSHAPE interest to IOUs would flow benefits to ratepayers.

CEA and CPUC staff explained program differences. Diana Carrillo of the California Energy Commission described DSGS as a rapidly scaled program that this office designed and operated and noted DSGS expanded a storage virtual power plant to provide incremental megawatts during tests. Luam Tesfaye, executive director of the California Public Utilities Commission, said ELRP is a separate, ratepayer‑funded program and the administration proposes directing interest back to IOU ratepayers so those funds align with their original sources.

Committee members pushed several lines of questioning: how redirected funds will reduce bills for ratepayers; whether CalSHAPE funds should be retained for school HVAC/plumbing projects; and how customers enrolled in DSGS would be transitioned to ELRP without losing capacity. Multiple senators and witnesses said DSGS has demonstrable program performance and warned that technical enrollment differences mean only a small share of DSGS participants may successfully transfer into ELRP under current rules.

Demand‑response aggregators told the committee they expect very low transfer rates: "Based on our experience, we expect to see around 5 percent of DSGS participants actually successfully move into ELRP if we try to transition these customers over using the existing enrollment processes," one witness said, urging lawmakers not to end a proven DSGS program before a functional replacement exists.

At the same time, multiple public‑interest and school‑related witnesses urged the Legislature to extend CalSHAPE and reopen applications so school districts can finish HVAC and plumbing projects. Witnesses warned that the CEC froze CalSHAPE applications in July 2024 and that unspent funds could revert to utilities in December 2026 unless the Legislature acts. "We hope you will statutorily extend the CalSHAPE program so we can finish these projects," a school‑district representative said during public comment.

Why it matters: The choices affect summer 2026 grid reliability, how Prop 4 and CalSHAPE dollars are used, ratepayer costs, and whether school ventilation projects receive their intended funding.

The subcommittee took no vote and held the items open for additional information, including enrollment and cost comparisons for DSGS and ELRP and legal/technical options for preserving CalSHAPE awards.