California Enacts Seven New Laws Targeting Data Center Power and Water Use

California Governor Gavin Newsom signed seven bills on September 21, 2026, imposing new state requirements on data centers that span electricity cost allocation, water use disclosure, energy reporting, local permitting, and environmental review.

The governor’s office announced the signing from Sacramento, saying the laws require data centers to report on water and electricity use and give communities more information about the energy, water, workforce, and land use of proposed projects. The office described the package as the most comprehensive data center laws in the nation and contrasted it with the Trump administration’s moves toward deregulation. “With these laws, we are ensuring that Californians remain in the driver’s seat — and that those profiting from data centers aren’t doing so at our expense,” Newsom said.

The package consists of AB 1577 by Assemblymember Rebecca Bauer-Kahan (D-Orinda), AB 2383 by Assemblymember Rick Chavez Zbur (D-Hollywood), AB 2469 and AB 2619 by Assemblymember Diane Papan (D-San Mateo), SB 886 by Senators Steve Padilla (D-San Diego) and Jerry McNerney (D-Pleasanton), SB 887 by Padilla, and SB 1168 by McNerney.

Electricity Tariffs and Rate Structures

SB 886, the California Technology Innovation and Ratepayer Protection Act, requires the California Public Utilities Commission, by January 1, 2028, to establish or update tariffs for the interconnection of data centers and the provision of retail electric service, transmission, distribution, and generation to them. The commission must evaluate the risks and benefits of the tariffs to nonparticipating customers, ensure the tariffs prevent stranded costs or cost shifts to those customers, and require that generation charges for unbundled customers appear as a separate line item on their bills.

For data centers seeking retail service at the transmission level, the tariff must require applicants to disclose whether interconnection applications for the same facility have been filed in other utility territories or jurisdictions, assign all transmission facility upgrade and usage costs to the data center under a methodology set by the commission, cap refunds of initial interconnection contributions at 75 percent of the annual net transmission revenue received from the customer, and impose an early termination fee, tied to the facility’s originally projected demand, on a customer that departs the system within 10 years or fails to ramp load as projected.

SB 886 applies to data centers entering new transmission-level interconnection agreements on or after January 1, 2027. It also authorizes a demand response program with no net costs to nonparticipating customers and allows utilities to file exceptional case contracts for data centers seeking service before the tariff is approved.

AB 2383 requires each electrical corporation to file a transmission and distribution tariff ensuring data centers pay a share of wildfire mitigation, wildfire liability, electrification, and environmental program costs typically collected from distribution-level ratepayers. The generation tariff must make data centers fund the incremental generation costs of their load through a payment mechanism lasting at least 10 years, including upfront collateral or prepayment, fees for projects that do not complete interconnection, early termination fees, and minimum payments based on projected load, with reductions available for zero-emissions resources installed behind the meter. The commission may not set the generation tariff’s minimum peak demand threshold above 25 megawatts, and community choice aggregators and electric service providers must adopt data center generation tariffs by January 1, 2028.

SB 1168 directs the commission to assess opportunities for rate structures that ensure data centers pay a reasonable share of transmission and distribution costs and their proportionate share of the load increases and procurements needed to reliably serve them, while alleviating cost pressures on residential ratepayers, including customers enrolled in the California Alternate Rates for Energy and Family Electric Rate Assistance programs. The bill’s legislative findings state that the Independent System Operator expects California data center energy use to grow by 2.3 gigawatts by 2030 and that Pacific Gas and Electric alone had about 2,300 megawatts of applications for data center capacity in 2024.

Water Use Disclosure and Local Permitting

AB 2469 prohibits a city, county, or city and county from approving a discretionary or ministerial permit for the construction of a data center, or an expansion that increases its maximum peak water use, unless the applicant provides a water supply assessment, projected water use and efficiency measures, and workforce disclosures covering composition, job classifications, employment duration, wage ranges and benefits, and the share of workers residing in the county and in the state.

Beginning January 1, 2028, applicants must also file a water scarcity plan describing staged measures for progressively severe drought years, including withdrawal reductions and curtailment of nonessential uses. The applicant must assume the full cost of any water conveyance, treatment, storage, or distribution infrastructure needed to serve the project, as determined by the applicable water supplier.

AB 2619 requires data center owners and operators, under penalty of perjury, to give their water supplier a good-faith estimate of expected water use, its anticipated source, and projected volumes for the maximum day, maximum month, and average year before applying for an initial city or county business license, and to report the same figures on the application itself. At renewal, operators must report the prior calendar year’s total and direct water use, including the cooling system type and whether the water is potable, nonpotable, or recycled.

The bill defines Type I, or hyperscale, data centers as those with more than 10,000 servers or more than 25 megawatts of power consumption, Type II as 2 to 25 megawatts, and Type III as below 2 megawatts. It also requires urban water suppliers to include data center demand in the current-year unconstrained demand used in annual water supply and demand assessments.

Energy Reporting and Environmental Review

AB 1577 directs the State Energy Resources Conservation and Development Commission to establish a reporting process for data centers with an electrical capacity of 10 megawatts or more. Owners must submit the facility’s identity, size, and anticipated peak capacity upon energization and then report at least annually on maximum electrical load, energy consumption, power usage effectiveness (the ratio of total facility energy to the energy used by computing equipment), demand flexibility participation, refrigerants, onsite generation, fuel use, and energy storage. The commission must publish the submissions annually in anonymized, aggregated form. Separately, applicants for local discretionary permits must provide expected annual energy consumption, expected onsite generation by type, and expected average and maximum sound levels measured at the property boundary, which local agencies may use for land use planning, infrastructure planning, energy supply assessment, and environmental review.

SB 887 writes a definition of data centers into the California Environmental Quality Act, the state law requiring environmental impact reports for projects that may significantly affect the environment, and prohibits the use of categorical exemptions for data center projects, with exceptions including publicly funded research, public safety, national security, publicly owned, and utility facilities.

The bill allows the Governor to certify a data center as an environmental leadership development project eligible for CEQA streamlining only if conditions are met, including advance payment of interconnection costs, no increase in fossil fuel consumption, zero-carbon energy storage providing at least four hours of capacity at 100 percent of forecast peak demand, recycled water or waterless cooling, 100 percent zero-carbon electricity within five years of initial operations, 75 percent of it newly developed, and a binding community benefits agreement. Geothermal powerplants meeting specified criteria also become eligible for certification, and the Office of Land Use and Climate Innovation must develop uniform statewide standards for the data center conditions in consultation with the energy commission.

Beginning with the 2029 integrated energy policy report, AB 1577 requires the energy commission to include an assessment of electrical load trends for data centers, with projections of future load, identification of potential net peak load demands, and recommendations for mitigating impacts on grid capacity, grid reliability, and greenhouse gas emissions.