California Senate Approves Legislation to Protect California Ratepayers from Paying for Data Centers’ Energy Costs
SACRAMENTO – Yesterday, the California State Senate passed Senate Bill 57, authored by Senator Steve Padilla (D-San Diego). SB 57, the Ratepayer and Technological Innovation Protection Act, would protect California ratepayers and the state’s aggressive climate goals from increased costs as more companies develop data centers to meet the growing energy demands of artificial intelligence (AI).
“California ratepayers are already studying to make ends meet and expecting them to pay for the infrastructure and energy needs of wealthy tech companies is unconscionable,” said Senator Padilla. “Tech companies have plenty of capital to cover their own projects - forcing families to foot the bill is just another demonstration of their greed.”
Data centers consumed about 4.4% of total U.S. electricity in 2023 and are expected to consume approximately 6.7 to 12% of total U.S. electricity by 2028, according to the 2024 Report on U.S. Data Center Energy Use produced by Lawrence Berkeley National Laboratory. The massive energy demands of these data centers means that utility prices increase as the grid struggles to keep pace with need. The Mid-Atlantic regional grid where several data centers are housed is projected to see rate increases of up to 20 percent by this year, with the grid operator now paying $14.7 billion for power in the 2025/26 delivery year, compared to $2.2 billion in the year previous.
The cost of building the infrastructure to transmit the energy can be expensive and as reported by the New York Times, those costs are not always covered by the companies building the data centers, leaving ratepayers to foot the bill for pricey upgrades, only for the benefit of the tech company.
Power production has become one of the largest obstacles in tech companies expanding datacenters. Recently, Microsoft made a deal to reopen the Three Mile Island nuclear power plant to help meet the energy requirements of its data center infrastructure in the region. Virginia, which quickly became the national leader in data centers, is now grappling with severe energy shortages, higher risk of rolling blackouts, and is now trying to get demand under control. Virginia’s state audit commission found data centers and growing energy demand is likely to increase cost for other customers and recommends adjusting rates and creating a separate data center class so utilities could help insulate other customers for price hikes. Given this bottle neck, it is clear not all of the needs of the growing number of data centers across the country will be met by clean power.
In a recent interview with the Wall Street Journal, an executive at Siemens, a leading data center developer, said, “There isn’t enough green energy around the world to power data centers, and operators need to look elsewhere for a solution to the artificial intelligence energy-consumption conundrum.” As a result of this squeeze, tech companies have looked to fossil fuels to power their facilities, and it was recently announced that Exxon now plans to sell power specifically to data centers.
SB 57, the Ratepayer and Technological Innovation Protection Act, would require the PUC to establish a special tariff to protect other ratepayers from transmission costs that supply large load customers while meeting the state’s climate goals. The tariff will ensure electrical grid investments for data centers are fully recovered to ensure other ratepayers do not end up footing the bill. A tariff will ensure ratepayers do not have skyrocketing costs without increasing the state’s reliance on fossil fuels.
Senate Bill 57 passed the Senate by a vote of 25-9. The bill now moves to the Assembly.
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Steve Padilla represents the 18th Senate District, which includes the communities of Chula Vista, the Coachella Valley, Imperial Beach, the Imperial Valley, National City, and San Diego. Prior to his election to the Senate in 2022, Senator Padilla was the first person of color ever elected to city office in Chula Vista, the first Latino Mayor, and the first openly LGBT person to serve or be elected to city office. Website of Senator Steve Padilla: https://sd18.senate.ca.gov/