Governor Gavin Newsom signed seven data center bills on September 21, establishing new requirements for electricity rates, energy and water reporting, and project approvals.
The package directs regulators to protect other utility customers from costs incurred to serve data centers while giving local governments more information about proposed facilities. Several of the electricity provisions require tariffs or further action by the California Public Utilities Commission (CPUC).
Electricity tariffs aim to prevent cost shifts
SB 886 requires the CPUC to establish new tariffs or update electric rules by January 1, 2028, and to prevent stranded costs or cost shifts to customers outside those tariffs. For data centers entering new agreements to receive retail service at the transmission level beginning January 1, 2027, the law calls for a tariff assigning responsibility for transmission upgrades. It also requires an early termination fee if a covered customer leaves the system within 10 years or fails to reach an adequate level of electricity use.
AB 2383 adds requirements for transmission, distribution and generation tariffs. It directs investor-owned utilities to account for costs including wildfire mitigation and incremental electricity procurement. Its generation provisions include minimum payment commitments, upfront collateral or prepayment, and fees intended to protect other customers if a project is canceled or uses less power than projected. Community choice aggregators and electric service providers must adopt generation tariffs for covered data centers by January 1, 2028.
SB 1168 separately directs the CPUC to assess rate structures that make data centers pay a reasonable share of transmission, distribution, and power procurement costs, including when they connect at the distribution level. The commission must also consider ways to ease cost pressures on residential customers. (For a more in-depth discussion, see CEJ Alert: Legislature Passes Bill to Examine Data-Center Rate Structures.)
Energy demand reporting requirements
Under AB 1577, data center owners and operators must submit operating information to the California Energy Commission through a process the agency will establish. The commission must publish submitted information in aggregated, anonymized form and assess data center electricity demand trends beginning with its 2029 integrated energy policy report. Applicants for certain local permits must also provide projected energy use and other information to the local agency. (For a more in-depth discussion, see CEJ Alert: Legislature Passes Data-Center Energy Reporting Bill.)
Water use reporting requirements
AB 2469 conditions permits for new data centers and expansions that increase peak water use on disclosures that include a water supply assessment and projected use. A water scarcity plan is required beginning January 1, 2028. Applicants must assume the full cost of water infrastructure improvements needed to serve the project, as determined by the water supplier.
AB 2619 requires water-use estimates in initial business license applications and reporting of the prior year’s water use in renewal applications.
CEQA review remains required
SB 887 bars specified data center projects from using categorical exemptions under the California Environmental Quality Act (CEQA). It also allows qualifying projects to seek the law’s environmental leadership designation, which provides a streamlined process for litigation over environmental approvals. To qualify, a project must meet conditions covering grid costs, energy supply, storage, water use and community benefits. The designation does not exempt a project from CEQA review.
The next decisions will come through CPUC tariff proceedings and the Energy Commission’s reporting process. Those actions will determine how the electricity cost rules apply to individual projects and what data becomes available to regulators, local governments and the public.