California Plan Cracking Down on Data Centers Heads to Newsom
California lawmakers have approved a series of measures aimed at regulating data centers' electricity and water usage, which have now been sent to Gov. Gavin Newsom for approval. These bills propose special electricity rates, infrastructure upgrade contributions, and mandatory reporting for water and energy consumption for data center facilities. The legislative action comes amid growing concerns about the industry's resource demands in the drought- and wildfire-prone state.
California state lawmakers have passed several key measures designed to regulate data centers' consumption of water and electricity, sending them to Governor Gavin Newsom for final approval. The legislation includes bills (SB 886 and AB 2383) that would establish tariffs on data centers by early 2028 to prevent them from passing new costs to consumers, a move proponents say will protect California residents who face some of the nation's highest power bills. Critics, however, argue the measures unfairly target data centers while ignoring other large energy users.
Additional bills approved by lawmakers require data centers to report annual water usage (AB 2619) and energy consumption (AB 1577). Another measure, AB 2469, mandates that facilities disclose estimated water use when applying for or renewing business licenses and be financially responsible for new infrastructure necessitated by their operations. These initiatives aim to provide a clearer picture of data centers' resource demands and shield ratepayers from infrastructure costs.
The Data Center Coalition, an industry group representing data center owners and operators, has voiced opposition to the bills, citing potential privacy and security concerns. Governor Newsom, who previously rejected a similar effort to require water usage reporting due to concerns about stifling industry growth, now acknowledges that regulating data centers has become a bipartisan issue nationally.
The state's actions reflect increasing concerns over data centers' power use, which currently accounts for about 2% of California's demand and is projected to double within a decade. While California hasn't experienced the rapid growth seen in states like Texas and Virginia, it remains a major hub for AI and tech companies, prompting the state to lean into regulatory efforts as other states consider similar measures.