California has enacted a series of new laws aimed at regulating the state’s expanding data center industry, addressing rising concerns about the environmental and economic impacts of these facilities. Governor Gavin Newsom signed seven bills on Monday that focus on energy and water use reporting, as well as establishing new rules for data center electricity consumption.
The legislation marks a shift for Newsom, who last year vetoed similar measures requiring data centers to disclose water usage, citing concerns about imposing blanket reporting requirements without fully understanding the potential effects on the industry. However, growing public opposition and increasing scrutiny of the data center sector, driven in part by the rapid expansion of artificial intelligence (AI) infrastructure, have prompted lawmakers and the governor to take a more regulatory approach.
One key law directs the California Public Utilities Commission to develop special requirements and rates specifically for data centers’ electricity use, including costs associated with new power infrastructure and grid upgrades. This move is intended to ensure that data centers bear the financial burden for the utilities and services they demand, rather than having these costs subsidized by other ratepayers.
Additional bills require data centers to annually report their energy usage and efficiency data to the California Energy Commission, which will then make the information publicly available. Laws targeting water consumption impose new disclosure requirements on operators seeking business licenses or permits, mandating estimates of water use and sources. Developers must also submit water assessments and scarcity plans, and cover costs related to any necessary water system upgrades.
The legislative push addresses longstanding concerns about the lack of transparency surrounding data centers’ resource consumption. Researchers from the University of California, Berkeley, have highlighted a scarcity of public data on water use by these facilities, with some local officials previously entering into nondisclosure agreements with developers. Environmental advocates argue that tracking such information is essential to evaluating local water capacity and sustainability.
The new laws have received mixed reactions. Ratepayer advocacy groups praised the measures for protecting consumers and ensuring that the substantial energy demands of data centers do not come at the expense of residents or utility systems. Mark Toney, executive director of the Utility Reform Network, emphasized that the legislation requires data centers to contribute fairly to infrastructure and wildfire mitigation costs.
Conversely, representatives of the data center industry expressed concern that the regulations could hamper California’s competitiveness in attracting new facilities. Khara Boender, director of government affairs at the Data Center Coalition, said the laws introduce uncertainty and potential duplicative requirements, possibly driving investment, job creation, and clean energy projects to other states.
Data center development continues amid strong public opposition and local restrictions. A growing number of California cities and counties—such as Monterey Park, Palm Springs, and Tulare County—have enacted moratoriums or bans on new data centers, reflecting widespread community concerns over resource use, environmental impacts, and neighborhood quality of life. Despite resistance, some cities like San José remain actively engaged in courting data center investments, underscoring the ongoing tension between economic development and regulatory oversight in the state’s approach to managing this rapidly growing industry.