Senator Padilla Introduces Legislative Package to Protect Ratepayers and Incentivize Green Energy At California Data Centers
SACRAMENTO – Today, Senator Steve Padilla (D-San Diego) introduced Senate Bills 57 and 58, two measures designed to provide better protections for California ratepayers from increased costs and the state’s aggressive climate goals as more companies develop data centers to meet the growing energy demands of artificial intelligence (AI).
“It is critical that fostering innovation does not come at the expense of higher costs on ordinary families and compromising our climate goals,” said Senator Padilla. “California is proud to be the home of Silicon Valley and its pioneers. This legislative package provides the state with the tools it needs to protect ratepayers while still championing that enterprising spirit.”
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 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. However, 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 rate structure to protect residential ratepayers and small businesses from the cost of building new transmission lines which supply data centers while meeting the state’s climate goals. The rate structure will allow companies to prepay expected energy consumption to accelerate grid interconnection while also ensuring the investments into the grid are fully recovered.
SB 58 would provide a tax credit to data centers utilizing at least 70% carbon-free energy, at least 50% of the energy supply from behind-the-meter sources, does not use diesel fuel, and utilizes recycled water cooling within five years of the certification effective date. It would also require the facility to use a skilled and trained workforce and an investment of at least two-hundred million dollars.
Throughout the upcoming legislative session, Senator Padilla will be holding a roundtable discussion with all stakeholders to ensure full participation from all parties and effective solutions from the legislation.
Both bills will be heard in the Senate in the coming months.
###
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/