California lawmakers take their big swing on data centers

The Legislature passed seven bills in an effort to stop the facilities from straining the state’s water and electricity systems.

SACRAMENTO, California — California lawmakers are rushing to rein in data centers, passing seven bills in the final week of the state’s legislative session to put stricter rules on an industry whose rapid buildout has sparked backlash across the country.

The measures, the last of which were passed just hours after President Donald Trump called Monday for communities to embrace data center development or risk becoming “backwards and poor,” represent California’s most significant response yet to growing public criticism of the facilities.

The measures would require data centers to report energy and water use to government agencies, undergo environmental impact reviews ahead of construction and pay special electricity rates designed to prevent them from passing costs onto other electricity customers.

Gov. Gavin Newsom, speaking to reporters after Trump’s social media post championing the spread of data centers, said, “If we’re going to do it, we’re going to do it right.”

“The president has a let-it-rip mindset,” the California governor said. “He’s not doing the industry any service by completely turning his back on public opinion.”

The passage of the bills marks a turn for California politicians, who have stayed relatively quiet on the topic of data centers, even as the massive buildout of server farms across the country has animated statehouses from New York to Illinois to Texas. Newsom, who had previously avoided data center debates, allowing his energy agency to quietly work on the issue, signaled a sharper focus on the facilities in recent weeks, saying they “ran roughshod” over Virginia, a national hub for the facilities.

“We have a number of projects that are obviously generating a lot of headlines and controversy and concerns about, not just electricity consumption, but obviously water consumption as well,” Newsom said in August. “We believe that all of these investments, the costs, should be borne by the companies.”

Meanwhile, a slew of California municipalities have imposed data center moratoriums in recent months as public outcry against the facilities has increased.

As the nation’s technology capital, California ranks third in the country in terms of the number of operating data centers, but its industry has grown more slowly than other states.

The most controversial bills in the California package were SB 886, by state Sen. Steve Padilla, and AB 2383, by Assemblymember Rick Zbur, both of which would require the state to create a special electricity rate for data centers. After the Newsom administration proposed a series of amendments, negotiations with lawmakers grew complicated, but the two Democratic authors ultimately cut a deal to incorporate the recommendations and move their pair of bills together as a package.

“Together, they make sure that data centers are paying their fair share,” Zbur said.

However, some electricity customer advocates and environmentalists warn that the last-minute changes leave open the possibility that the facilities won’t be powered by renewable energy and could find loopholes to avoid covering some costs to the electricity grid.

“This proposed set of legislation is a small step forward, but actually falls far behind what other states are doing to protect their [electricity] ratepayers and the climate,” said Monica Embrey, founder of the advocacy organization the Affordable Energy Campaign.

The other data center bills include Assemblymember Rebecca Bauer-Kahan’s A B 1577, which would require the facilities to report their energy use to the government; Assemblymember Diane Papan’s AB 2619 and AB 2469, which would require data centers to disclose information about their water use to government officials; SB 1168, by state Sen. Jerry McNerney, which would require state regulators to find opportunities for data centers to pay their reasonable share of costs for maintaining the electricity grid; and Padilla’s SB 887, which would ensure that the facilities are not exempt from environmental review.

The Data Center Coalition, which represents the industry, opposed the entire set of bills, arguing that they unfairly singled out a single sector and that lawmakers should allow state regulators to develop rules on their own.

Last year, Newsom signaled his own hesitation to heap regulations onto data centers, vetoing a water use disclosure bill and noting that California should be “well positioned to support the development of this critically important digital infrastructure.”

But on Monday, he signaled that his position had shifted.

“We have been working with the Legislature on a number of these bills that landed fairly well,” Newsom said. “You’re seeing states all across this country leaning in. We’ll be leaning in.”

Tyler Katzenberger contributed to this report.