Bills Protecting Ratepayers from Data Center Costs and Incentivizing Sustainable Tech Infrastructure…

SACRAMENTO – This week, the California State Senate passed Senate Bills 886 and 887, two measures authored by Senator Steve Padilla (D-San Diego) designed to protect California ratepayers from the potential increased costs and environmental damage caused by data centers.

“Done correctly, these massive infrastructure projects can support the grid and provide economic opportunity for the community. However, we have seen when these projects are unchecked, they cause skyrocketing energy costs for consumers and environmental damage,” said Senator Padilla. “Californians and the local community cannot be the collateral for wealthy companies to plunder for record-breaking profits.”

After other states experienced skyrocketing energy costs due to data center development, they have taken action to better protect their residents. Last year, energy regulators in Ohio determined that data centers must pay more up front for their power demands. Recently, the newly elected Governors of both Virginia and New Jersey announced their states would be seeking ways to make data centers “pay their fair share.”

Even President Trump and tech companies have recognized the need for ratepayer protections from stranded assets and recently major tech corporations committed to pay for their grid infrastructure and negotiate their own rate structure with utilities. SB 886 takes this voluntary commitment by tech companies and puts it into statute in California.

SB 886 would require the California Public Utilities Commission (CPUC) to establish a special tariff to protect ratepayers from the transmission costs that supply large data centers 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 would protect ratepayers from skyrocketing costs without increasing the state’s reliance on fossil fuels.

SB 887 would allow data centers to be eligible for Environmental Leadership Development Project (ELDP) certification if they meet the criteria as well as some additional requirements specific to data centers regarding water use, clean energy, and paying full infrastructure costs. ELDP certification grants the applicants accelerated environmental review. Certified data center applicants can go online faster while also protecting surrounding communities from health and environmental impacts. The bill would also clarify data centers are not ministerial projects exempt from California Environmental Quality Act.

The legislative package is co-sponsored by ratepayer advocacy group TURN and environmental advocacy group Net-Zero California.

“The massive increase in forecasted data center deployments across the state requires the Legislature to take swift action to protect ratepayers and ensure that the addition of these new facilities is beneficial, and not harmful, to the achievement of the state’s electric affordability and greenhouse gas reduction targets.” said Matthew Freedman, Staff Attorney at The Utility Reform Network (TURN). “SB 886 and SB 887 include critical conditions to protect electricity customers from bearing additional costs attributable to the data center boom.”

“Data centers present both key risks and opportunities for Californians. Without sufficient protections, the state's electricity affordability crisis will be badly exacerbated--an unfortunate outcome occurring in multiple other states.” said Sam Uden, Co-Founder and Managing Director, Net-Zero California. “But with protections, that state can reap the economic and innovation benefits of data centers while safeguarding the environment and driving down energy bills. SB 886 and SB 887 provide a framework for affordable and clean data centers in California aligned with leading academic research on data centers. We thank Senator Padilla for his leadership on this issue.”

To learn more about SBs 886 and 887 and Senator Padilla’s efforts to protect California ratepayers from increasing energy costs, click here and here

SB 886 passed the California State Senate by a vote of 27-8. SB 887 passed the California State Senate by a vote of 29-9. The two bills now move 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/