Governor Gavin Newsom signed a package of seven bills on Monday, September 21, 2026, to regulate the growing data center industry in California. The new laws introduce requirements for data centers to disclose their energy and water consumption, pay for upgrades to local power grids and water systems, and undergo environmental review. This legislative action marks a shift in the state's approach to data center development, contrasting with earlier concerns that regulation could hinder artificial intelligence growth.
Three of the new laws focus on electricity costs, aiming to prevent these expenses from being passed on to residential customers. Senate Bill 1168, Senate Bill 886, and Assembly Bill 2383 require data centers to cover the costs associated with transmission and distribution upgrades, as well as their proportionate share of increased load and procurement needs. Senate Bill 886, known as the California Technology Innovation and Ratepayer Protection Act, mandates the California Public Utilities Commission (CPUC) to establish new tariffs for data center interconnection and retail electric service by January 1, 2028. The CPUC must evaluate the tariffs to ensure they prevent stranded costs or cost shifts to other customers. Assembly Bill 2383 specifically requires electrical corporations to file a transmission and distribution tariff that ensures data centers contribute to wildfire mitigation, wildfire liability, electrification, and environmental program costs.
The legislative package also includes three bills addressing water usage. Assembly Bill 2469 and Assembly Bill 2619 strengthen oversight by requiring proposed data centers to provide local governments and water suppliers with detailed information on their estimated water use, anticipated water sources, and drought planning. These bills also stipulate that data center developers are responsible for the costs of any upgrades needed to supply water to their projects. Assembly Bill 1577 further mandates monthly reporting of data centers' energy consumption and efficiency metrics, including water consumption, to the California Energy Commission.
A seventh bill, Senate Bill 887, removes blanket environmental review exemptions for data centers. Under this law, data center projects must undergo environmental review and demonstrate compliance with state standards for energy, water, and fuel consumption to qualify for any streamlined judicial review. Senator Steve Padilla (D-San Diego), who authored Senate Bills 886 and 887, stated that these laws make promises of "good neighbors" legally enforceable, ensuring local communities have a say and projects comply with environmental standards.
The new regulations follow increasing public concern and local government actions, including moratoriums on data center construction in some areas. Governor Newsom's office highlighted that the laws are intended to give communities more information about the energy, water, workforce, and land use of proposed data centers, allowing them to better assess the economic costs and benefits. Opponents of the bills, including some industry groups, have expressed concerns that the new regulatory burdens could impact California's competitiveness as a global technology hub and potentially drive investments to other states. However, supporters argue the measures are necessary to protect consumers from utility rate increases and environmental impacts. The CPUC is expected to begin rulemaking on the new rate classifications, with decisions shaping siting, contracts, and efficiency priorities for data center operators in California.