California lawmakers reach deal on data center power rules, grid costs
The compromise orders the CPUC to set special rates and pushes more grid upgrade costs onto data center developers. Central Valley counties could see fewer pass-through charges.
California lawmakers reach deal on data center power rules, grid costs
Key Takeaways
- Lawmakers struck a Friday deal to regulate data center electricity costs and rates.
- SB 886 by Sen. Steve Padilla and a companion bill by Assemblymember Rick Chavez Zbur anchor the package.
- The plan directs the CPUC to write special rates and charge developers for grid upgrades.
- CAISO estimates up to $1.8 billion in transmission upgrades in PG&E territory.
- Tulare County has a moratorium on data centers while it studies local proposals.
$1.8 billion. That is the California grid operator’s estimate for transmission work tied to rising data center demand in PG&E territory, where most current and proposed sites sit. If those costs land on general bills, cities like Fresno, Modesto, and Stockton feel it first. A late-Friday compromise in Sacramento aims to put more of that tab on data center developers and to have the California Public Utilities Commission set special rates for the industry.
Lawmakers and advocates say the goal is simple, to protect other customers from higher bills and to track big power and water draws from the facilities. The deal came together Friday, Aug. 28, after weeks of pressure from tech companies and utility reform groups at the Capitol.
What the bills do
Two measures form the backbone. SB 886 from Sen. Steve Padilla of Chula Vista, and a companion by Assemblymember Rick Chavez Zbur of Los Angeles, tell the CPUC to create data center-specific electricity rules and rates and to spell out who pays for new power and upgrades. The package carries through the idea that developers cover broader grid work their projects trigger. Separate transparency bills on energy and water reporting also cleared the Legislature this session.
Matthew Freedman with The Utility Reform Network called the language a guardrail so data center costs aren’t "being foisted on other customers." The Data Center Coalition objected to singling out one class of power users. Tech giants including Google, Meta, and Amazon, plus AI firms Anthropic and OpenAI, had lobbyists in the mix.
Why this matters in the Valley
Most of the growth pressure sits in PG&E’s service area, which includes much of the Central Valley. CAISO’s planning document pegs as much as $1.8 billion in transmission spending tied to data centers in that footprint. Not the other ratepayers.
Closer to home, Tulare County adopted a moratorium in August while residents and the county study small data center proposals at local fairgrounds. If the CPUC orders developers to shoulder more upgrade costs, local officials from Visalia to Madera will have a clearer view of who pays for lines and substations when projects come knocking.
PG&E argued this summer that the stricter Senate plan could push up costs and slow needed work. Utility reform groups counter that without clear rules, bills in places like Merced and Fresno could creep up as the grid is retooled for a handful of very large customers.
Who pushed, who balked
Gov. Gavin Newsom’s team took part in the endgame. Environmental groups lined up behind Padilla’s approach on paying for upgrades. Business groups said tight rules, high power prices, and limited land already make California a hard place to build, and they warned that the state could miss jobs and tax revenue if builders go elsewhere.
Assemblymember Diane Papan, whose earlier water disclosure bill was vetoed last year, said she wants cooperation, not bans. "Help us help you," she said.
On a bench outside the hearing room, a yellow legal pad sat crumpled next to a cold paper cup.
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