California lawmakers approved two bills requiring special electricity rules for large data centers.
The bills direct the California Public Utilities Commission to create separate rates and updated connection rules for these facilities. This change prevents regular electricity customers from paying for new power generation and grid upgrades needed by data centers. One bill depends on the other to become law.
Senator Steve Padilla said the bills hold Big Tech accountable for promises to local communities. Data centers have raised concern over their electricity and water use and unclear impacts on utility bills. A recent poll showed 73% of Californians oppose building data centers in their neighborhoods.
The Little Hoover Commission recommended tech companies cover their own grid-integration costs to avoid burdening everyday ratepayers. Groups supporting the bills include The Utility Reform Network and the Union of Concerned Scientists. They cite estimates that data centers could cause up to $1.8 billion in transmission upgrade costs in PG&E’s area.
Companies like Google and Microsoft, represented by the Data Center Coalition, opposed the bills. They argue the laws unfairly single out data centers and could increase costs or delay energy infrastructure. Business groups warn that California’s high energy costs and regulations might deter data center development.
Earlier drafts of the bills required on-site batteries and 100% carbon-free power by 2030, but these provisions were removed. The CPUC now has until July 2027 to set special tariffs and rules, with more control given to the governor and regulators.
Some environmental and consumer advocates worry data centers might avoid paying certain costs or clean-energy requirements by exploiting loopholes. Governor Gavin Newsom initially opposed strict reporting on data center water use but later joined negotiations and supported the bills. He stated that companies should pay the costs tied to their data center projects.
Newsom’s involvement increases the chance he will sign the bills into law, though he has not officially committed yet. This move signals California’s effort to balance energy demands of growing data centers with protecting other electricity customers.
