California Passes Bills to Require Data Centers to Pay Their Own Electricity Costs
California lawmakers approved two bills requiring large data centers to pay for their own electricity costs and grid upgrades. The bills direct the California Public Utilities Commission to establish separate rates and connection rules by July 2027, preventing ordinary customers from subsidizing data center energy demands. Governor Gavin Newsom's support increases the likelihood of the bills becoming law.
California lawmakers have approved two significant bills aimed at restructuring electricity costs for large data centers across the state. The legislation mandates that the California Public Utilities Commission (CPUC) establish separate rate structures and updated connection rules for these facilities by July 2027. This initiative is designed to ensure that regular electricity customers are not burdened with the costs associated with new power generation and grid infrastructure upgrades necessitated by data center expansion.
Senator Steve Padilla, a key proponent, emphasized that the bills hold "Big Tech" accountable for their community impact, addressing long-standing concerns regarding data centers' substantial electricity and water consumption, and their potential effect on utility bills. A recent poll indicated widespread public sentiment, with 73% of Californians opposing data center construction in their neighborhoods. The Little Hoover Commission, along with advocacy groups such as The Utility Reform Network and the Union of Concerned Scientists, supported the bills, citing potential transmission upgrade costs of up to $1.8 billion in PG&E's service area if data centers do not cover their grid-integration expenses.
Conversely, companies like Google and Microsoft, represented by the Data Center Coalition, opposed the measures, arguing that the laws unfairly target data centers and could lead to increased operational costs or delays in energy infrastructure development. Early drafts of the bills had included stricter requirements for on-site batteries and 100% carbon-free power by 2030, but these provisions were removed during negotiations.
Governor Gavin Newsom, who initially had reservations about stringent water use reporting for data centers, ultimately supported the bills, emphasizing that companies should bear the full costs of their projects. His involvement significantly increases the likelihood of the bills being signed into law, signaling California's commitment to balancing the energy demands of its growing data center sector with consumer protection.