How California is addressing the electricity, ratepayer, land, and permitting implications of rapidly growing data-center demand.
Last updated Sep. 10, 2026
3. Why it matters to California energy policy
5. Key policy and regulatory actions
7. Legal and regulatory framework
10. Key players and organizations
14. Primary sources and further reading
1. Executive overview
California regulators and lawmakers are developing new policies to address rapidly growing electricity demand from data centers and artificial intelligence infrastructure, including how the cost of new grid capacity should be allocated between large-load customers and other ratepayers.
PG&E has reported approximately 15,000 megawatts of data-center and other large-load interconnection requests, up from roughly 12,000 megawatts only months earlier. The increase is forcing the California Public Utilities Commission (CPUC), California Independent System Operator (CAISO), utilities, and the Legislature to reconsider interconnection procedures, transmission planning, rate design, and cost allocation.
The policy debate extends beyond electricity demand. Data-center development is also raising questions about water use, land use, environmental review under the California Environmental Quality Act (CEQA), local permitting, and California’s climate and reliability goals.
California has not established a comprehensive framework for addressing these issues. Instead, state policy is developing through CPUC interconnection proceedings, legislation, local permitting decisions and litigation. The central questions are how quickly large new loads should be connected, which infrastructure costs they should bear, what environmental and resource requirements should apply, and how state and local governments should evaluate increasingly large projects.
2. Current status
Regulatory. CPUC’s interim Electric Rule 30 in PG&E territory remains the operative framework for certain transmission-level large-load connections. Qualifying customers may proceed by paying specified connection costs in advance or pre-funding transmission upgrades. The interim decision did not approve a refund or repayment framework; those issues remain before CPUC in A.24-11-007. CPUC has approved a 90 MW Microsoft-PG&E data-center project in San Jose and is considering other unusually large computing loads. CAISO’s Large Loads Initiative is now in active proposal development: it issued a straw proposal Aug. 11, received stakeholder comments Sept. 2, and has scheduled a draft final proposal and tariff language for Sept. 24, with Board consideration targeted for Oct. 28.
Legislative. SB 57 is law and authorizes CPUC to assess whether data-center load creates cost shifts to other customers; if CPUC completes an assessment, it must submit and publish it by Jan. 1, 2027. SB 886 and SB 887 passed the Legislature Aug. 31 and were presented to Gov. Gavin Newsom Sept. 9. AB 1577 and AB 2383 also passed the Legislature and are awaiting gubernatorial action. SB 978 was held in Senate Appropriations and did not advance in 2026. AB 222 died in Senate Appropriations in 2025, and AB 93 was vetoed.
Local. Monterey Park voters approved a permanent ban on data centers on June 2, 2026. Imperial County approved a hyperscale project and later adopted and extended a temporary moratorium on data-center approvals. A Superior Court ruling in August ordered the moratorium set aside; the county subsequently announced that it was preparing a revised moratorium while continuing work through its Data Center Advisory Committee. Other California jurisdictions have also considered or adopted temporary restrictions.
Litigation. The Imperial County project has generated multiple disputes involving the developer, Imperial County, the Imperial Irrigation District, the City of Imperial, Sierra Club and local opponents. The cases raise CEQA, water, zoning and related procedural issues.
3. Why it matters to California energy policy
Data-center growth is forcing California to determine how the electricity system should accommodate unusually large new loads while allocating the cost of the infrastructure required to serve them.
The decisions could affect transmission planning, utility rate design, resource adequacy, clean-energy procurement and electricity affordability. Data-center development is also creating new interactions between state energy policy, CEQA, local land-use authority, and water policy.
The resulting policies could extend beyond data centers. The rules California develops for large loads may influence how the state treats other electricity-intensive industries, including advanced manufacturing, hydrogen production and large transportation loads.
4. Timeline
Jul. 14, 2025 — California moves to use generative AI for real-time grid-operator decision support during power outages.
Jul. 25, 2025 — CPUC approves interim Electric Rule 30, establishing a standardized pathway for certain large-load connections in PG&E territory with upfront payment requirements.
Sep. 9, 2025 — EPA proposes air-permitting changes intended to accelerate AI data-center infrastructure nationally.
Sep. 29, 2025 — PG&E announces an approximately $73 billion capital-investment plan through 2030, with data-center demand identified as one driver alongside wildfire mitigation and other system investment.
Oct. 11, 2025 — Gov. Gavin Newsom signs SB 57, authorizing CPUC to assess whether data-center load growth creates cost shifts to other customers; any completed assessment must be submitted and published by Jan. 1, 2027.
Nov. 2025 — Reporting raises questions about whether developers are overstating prospective demand in utility queues; Next 10 publishes analysis of California data-center grid and environmental impacts; the Little Hoover Commission holds a hearing on data centers and the electricity system.
Dec. 2025 — Data-center growth in San Jose draws additional attention to grid cost allocation; most 2025 data-center legislation fails, leaving SB 57 as the principal enacted measure.
Jan. 2026 — PG&E reports large-load interconnection requests of roughly 15,000 MW, up from about 12,000 MW; lawmakers introduce SB 886, SB 887 and AB 1577; CPUC approves the 90 MW Microsoft-PG&E San Jose agreement.
Feb. 11, 2026 — A court finds the City of Imperial’s initial CEQA claims insufficient to block the Imperial Valley project.
Mar. 2026 — The Little Hoover Commission publishes a report on data centers and California’s electricity system; SB 886 and SB 887 advance from Senate policy committees.
Apr. 2026 — Imperial County supervisors approve combining land parcels for a hyperscale AI data-center project; local opposition and a recall effort follow.
May 2026 — SB 886 and SB 887 pass the California Senate; Sen. Adam Schiff introduces federal ratepayer-protection legislation; Sierra Club sues Imperial County over the hyperscale project’s approval.
Jun. 2, 2026 — Monterey Park voters approve a permanent data-center ban.
Jun.-Aug. 2026 — Imperial County adopts and later extends a temporary moratorium on new data-center approvals. In August, a Superior Court ruling orders the moratorium set aside; the county later says it is preparing a revised moratorium.
Jun.-Aug. 2026 — Litigation over the Imperial County project’s request for roughly 260 million gallons of Colorado River water annually proceeds against the Imperial Irrigation District.
Jul.-Sep. 2026 — CAISO files its large-load informational report in FERC docket EL26-71, obtains abeyance of the federal show-cause proceeding, issues an Aug. 11 Large Loads straw proposal and receives stakeholder comments Sept. 2.
Aug. 31-Sep. 9, 2026 — SB 886 and SB 887 pass the Legislature Aug. 31, are enrolled Sept. 4 and are presented to Gov. Gavin Newsom Sept. 9.
5. Key policy and regulatory actions
Electric Rule 30
CPUC’s interim Electric Rule 30 provides a standardized framework for connecting certain transmission-level large loads in PG&E territory. Qualifying customers may proceed by advancing specified connection costs or pre-funding transmission upgrades. The interim decision did not authorize a refund, interest or repayment framework; those cost-allocation issues remain before CPUC in A.24-11-007.
Large-load interconnection reform
CAISO’s Large Loads Initiative is in active proposal development. After filing an informational report in FERC docket EL26-71 on July 20, CAISO issued a straw proposal Aug. 11, held a stakeholder meeting Aug. 19 and received comments Sept. 2. A draft final proposal and tariff language are scheduled for Sept. 24, with Board consideration targeted for Oct. 28.
Ratepayer cost-allocation assessment
SB 57 authorizes CPUC to assess whether data-center load growth creates cost shifts to other customer classes. If CPUC completes an assessment, it must submit the findings to the Legislature and publish them on its website by Jan. 1, 2027. The statute does not require CPUC to conduct the assessment.
6. Legislation
As of September 10, 2026.
SB 57: Authorizes CPUC to assess whether data-center load growth creates cost shifts to other customers; any completed assessment must be submitted and published by Jan. 1, 2027. Author: Padilla. Status: Signed 10/11/25.
SB 886: Requires CPUC to establish or update interconnection and electricity-service tariffs for qualifying data centers, including provisions governing transmission-upgrade costs, refunds, load realization, early termination and demand response, while protecting other customers from stranded costs and cost shifts. Author: Padilla. Status: Passed Legislature 8/31/26; presented to governor 9/9/26.
SB 887: Addresses CEQA review for data-center projects and provides an expedited pathway for projects meeting specified clean-power and community-benefit conditions. Author: Padilla. Status: Passed Legislature 8/31/26; presented to governor 9/9/26.
SB 978: Additional data-center cost-allocation proposal. Author: Pérez. Status: Held in Senate Appropriations 5/14/26; did not advance in 2026.
AB 1577: Requires specified data-center reporting to the CEC, including location, size, power usage effectiveness and onsite generation information, and specified disclosures to local agencies during discretionary permitting. Author: Bauer-Kahan. Status: Passed Legislature; presented to governor 9/4/26
AB 2383: Requires separate transmission/distribution and generation-service tariffs for data centers and addresses specified wildfire, electrification, environmental-program and other costs otherwise collected from distribution customers. Author: Zbur. Status: Passed Legislature 8/31/26; enrolled 9/4/26.
AB 222: Would have required reporting of data-center energy consumption and power usage effectiveness and directed CEC work on efficiency standards. Author: Bauer-Kahan. Status: Died in Senate Appropriations, 2025.
AB 93: Would have required data centers to track and report water use. Author: Papan. Status: Vetoed.
7. Legal and regulatory framework
Federal and state jurisdiction. Transmission-level interconnections can implicate FERC jurisdiction, while retail distribution service and utility rate design remain primarily state-regulated. Very large retail loads are testing traditional assumptions about how transmission and connection costs should be allocated.
Cost of service and cost causation. California utility ratemaking generally seeks to assign costs to the customer classes that cause them. Data-center growth is increasing attention to whether existing customer classifications and accounting practices adequately identify infrastructure built for exceptionally large individual loads.
CEQA. The application of the California Environmental Quality Act to data-center siting and permitting is being contested project by project. SB 887 would establish a more explicit statutory framework, including an expedited pathway for projects meeting specified conditions.
Flexible-load and scarcity proposals. Academic work cited in the source material proposes treating data centers as a distinct customer class that could use flexible-demand contracts, drawing on approaches used in other resource-constrained systems.
Water. Data-center projects may also implicate California water law, local water-agency authority and Colorado River allocations. The Imperial County dispute illustrates how water availability can become a separate constraint on project development.
8. Litigation
A roughly 950,000-square-foot hyperscale AI data-center project in Imperial County has generated at least five related legal disputes since early 2026.
Imperial Valley Computer Manufacturing, LLC v. Imperial County
Developer Sebastian Rucci sought emergency relief against the county’s later-imposed moratorium, challenging the basis for the county’s action.
City of Imperial v. Imperial County
The city challenged the county’s approval process under CEQA. A court found the city’s initial claims insufficient to block the project in February 2026, while related disputes continued.
Rucci v. Imperial Irrigation District
The developer seeks access to roughly 260 million gallons of Colorado River water annually for the facility. Litigation against the Imperial Irrigation District was filed by June 2026.
Sierra Club v. Imperial County
Sierra Club sued the county in May 2026 over approval of the data-center complex.
Developer v. activist/environmental nonprofit
The developer filed a defamation action against a local activist and environmental nonprofit in connection with opposition to the project.
Nationally, law firms and industry observers have reported additional nuisance, negligence, environmental, noise and land-use litigation involving data centers. The source material does not identify a confirmed California case in that broader category beyond the Imperial County disputes.
9. Key data
PG&E large-load/data-center interconnection requests. (~15,000 MW, up from ~12,000 MW).
PG&E planned capital investment through 2030. (~$73 billion).
Potential added data-center demand over the next decade. (Up to 10 GW).
Metric: California data-center total employment footprint, 2023. (724,650 jobs, including indirect, induced and cross-state spillover).
California data-center total GDP contribution, 2023. ($149.1 billion, including spillover).
California state and local tax contribution, 2023. (~$16.2 billion, including spillover).
Microsoft-PG&E San Jose project. (90 MW).
Imperial County project water request. (~260 million gallons/year).
Projected national peak-demand growth over next decade. (18%).
National context: estimates cited in the source material put U.S. data centers at up to 10% of national electricity generation by 2030 and roughly one-fifth by 2035. California-specific figures should be read carefully: the roughly 15,000 MW PG&E figure represents reported interconnection requests, while the separate estimate of up to 10 GW refers to potential added data-center demand over the next decade. Interconnection queues can include projects that do not ultimately materialize.
10. Key players and organizations
California Public Utilities Commission (CPUC). Sets utility interconnection and rate-design rules, approves relevant large-load agreements and is authorized by SB 57 to assess potential data-center cost shifts.
California Independent System Operator (CAISO). Operates the bulk transmission grid and is developing its Large Loads Initiative, with Board consideration targeted for October 2026.
California Energy Commission (CEC). Addresses load forecasting, efficiency policy, and Integrated Energy Policy Report analysis relevant to data-center consumption.
Little Hoover Commission. Investigated data-center impacts on California’s electricity system and issued a 2026 report recommending additional cost-responsibility and disclosure measures.
FERC. Oversees interstate transmission rates and tariffs and receives CAISO filings affecting transmission-level interconnection policy.
Imperial County Board of Supervisors. Approved the Imperial County hyperscale project, adopted a temporary moratorium that was later set aside by a court, and is continuing work on data-center zoning policy.
PG&E. Faces the largest identified California data-center interconnection pipeline in the source material and is operating under interim Electric Rule 30.
Microsoft. Party to a CPUC-approved 90 MW San Jose project and has publicly committed to bearing infrastructure costs associated with its AI expansion.
Google. Has proposed a Bay Area facility whose classification and electricity demand are under CPUC scrutiny.
Imperial Valley Computer Manufacturing LLC. Developer of the contested Imperial County hyperscale project and party to multiple related disputes.
Data Center Coalition. Industry trade association opposing a statewide moratorium and several data-center-specific regulatory proposals.
TURN. Ratepayer advocacy organization participating in the debate over cost allocation and consumer protections.
Food & Water Watch / Stop Data Centers Coalition. Advocacy organizations supporting stronger restrictions on data-center development, including moratorium proposals.
11. What happens next
SB 886, SB 887, AB 1577, and AB 2383: passed the Legislature and are awaiting gubernatorial action.
SB 57 assessment: CPUC is authorized to assess potential data-center cost shifts; any completed assessment must be submitted and published by Jan. 1, 2027.
CAISO Large Loads Initiative: draft final proposal and tariff language scheduled for Sept. 24, with Board consideration targeted for Oct. 28.
Google facility: a CPUC decision could provide guidance on how unusually large computing facilities are classified and treated for utility purposes.
Imperial County: the county is preparing a revised moratorium after the prior moratorium was set aside, while zoning work and litigation continue.
Local restrictions: additional moratoria, zoning ordinances or ballot measures could increase pressure for a more uniform statewide framework.
Federal activity: congressional proposals and FERC-related proceedings could affect California’s approach to large-load cost allocation and interconnection.
12. Open policy questions
How should California allocate transmission and distribution costs caused by exceptionally large new loads?
How should CPUC structure any eventual refund or repayment mechanism under Electric Rule 30 while protecting other customers from stranded costs?
How much of the reported interconnection pipeline represents firm demand rather than speculative or duplicative requests?
Should data centers constitute a distinct utility customer class for tariff and cost-allocation purposes?
How should California balance faster permitting with CEQA, local land-use authority and community impacts?
Will local bans and moratoria lead to state preemption or a more uniform statewide siting framework?
How should water availability and water-use reporting be incorporated into data-center permitting?
Will Imperial County litigation produce broader precedent or remain primarily project-specific?
13. CEJ coverage
Legislators Introduce Bills to Protect Ratepayers from Data Center Demand (Jun 19, 2025).
New Bills Target a Range of Energy Issues, with a Focus on Affordability (Feb 23, 2026).
California Report Outlines Framework to Manage Data Center Power Demand (Mar 27, 2026).
CEJ Alert: Legislature Passes Data-Center Energy Reporting Bill (Aug 28, 2026).
CEJ Alert: Legislature Passes Bill to Examine Data-Center Rate Structures (Aug 31, 2026).
14. Primary sources and further reading
Primary documents
CPUC — Electric Rule 30 proceeding materials and July 2025 interim action
Little Hoover Commission — Data Centers and California Electricity Policy, Report No. 292
CAISO — July 20, 2026 Informational Report, FERC docket EL26-71
Data Center Coalition — PwC 2025 Economic Contributions study
Further reading identified in research
“Big Tech blocks California data center rules, leaving only a study requirement” (CalMatters, Dec. 2025).
“Major data center bills advance in California despite industry pushback” (Canary Media, Aug. 2026).
“Checks on AI data centers closer to reality in California” (inewsource, Mar. 2026).
“Efforts to Regulate California Data Centers Falter — For Now” (Mayer Brown, Dec. 2025).
Union of Concerned Scientists: Connection Costs (UCS.org, Sep. 2025).
“Who pays for AI’s power? California watchdog urges new data center rules” (CalMatters, Mar. 2026)
“This million-square-foot data center would be the biggest in the state. How local leaders are challenging it” (CalMatters, June 2026)
“Sierra Club sues Imperial County over approval of massive data center complex” (KPBS, May 2026).
“Data center water fight heads to Imperial County court” (Western Water, Aug. 2026).
“The Coming Electricity Crisis: What America Must Do to Meet Surging Demand,” Deese & Hansmann (Foreign Affairs, Sep. 2025).
“To Handle Data Centers, the Electricity System May Need New Rules. Here is a Proposal” (Inside Climate News, Aug. 2025).
“Allocating Electricity,” Klass & Owen (George Washington Law Review, Feb. 2026).