Legislation to Protect California Ratepayers from Paying for Data Centers’ Energy Costs Signed into Law
SACRAMENTO – Today, California Gavin Newsom signed into law Senate Bill 57, authored by Senator Steve Padilla (D-San Diego). SB 57 directs the California Public Utilities Commission (CPUC) to conduct a study to examine the impact data center development and expanded grid demands with have on California ratepayers as tech companies work to meet the growing energy demands of artificial intelligence (AI).
“California families are already struggling with rising utility bills as it is,” said Senator Padilla. “We need to better understand what the impacts of these energy and resource hungry data centers will be on our grids and our energy bills, so we can enact effective protections for our communities.”
The AI boom is powered by massive data centers. Those data centers while driving the AI revolution, also consume massive amounts of energy and water, putting enormous strain on the electrical grid and require massive investments into the electrical grid infrastructure. The recent rise of generative artificial intelligence has driven a corresponding growth in data center demand, with Siemens, a leading data center provider, reporting their data-center business revenue jumping 50% in a year. This puts residential ratepayers’ energy reliability at risk as California’s grid is overburdened by the sudden load growth and are liable for stranded assets built to meet that demand.
Recently, energy regulators in Ohio determined that data centers must pay more up front for their power demands. Ohio and other states are already facing expensive grid upgrades as increased demand from data centers have strained outdated infrastructure.
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.
SB 57 authorizes the Public Utilities Commission (PUC) to conduct a study on the extent load growth from data centers results in cost shifts to other ratepayers by 2027. This study is critical to ensure ratepayers do not have skyrocketing energy costs while not increasing the state’s reliance on fossil fuels.
Senate Bill 57 passed both houses of the Legislature last month.
To learn more about SB 57 and Senator Padilla’s efforts to protect California ratepayers from increasing energy costs, click here and here.
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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/