California tightens rules on AI data center energy and water use

California Governor Gavin Newsom on Sept. 21 signed a package of seven bills that tighten rules for AI data centers operating in the state. The laws require the California Public Utilities Commission to establish a separate rate classification for data centers and make those facilities responsible for financing necessary upgrades to local electrical and water infrastructure. The package is intended to stop the expansion of utility costs being passed through to residential customers.

Under the new measures, developers proposing data centers must provide local governments with estimates of their expected water use along with documentation about energy-efficiency plans and preparations for drought conditions. The bills also set thresholds for energy, water, and fuel consumption that projects must meet to access a faster, streamlined approval process.

The legislation arrives amid broader state actions to increase oversight of AI systems; Newsom signed an executive order the prior week to accelerate development of an AI “kill switch.” In a press release quoted in reporting, Newsom framed the bills as keeping Californians “in the driver’s seat” and preventing those profiting from data centers from imposing costs on communities.

The package reflects a regulatory approach that makes data center operators accountable for the infrastructure impacts of their operations and gives local authorities more information when reviewing proposals. The new CPUC rate class and the requirement that data centers pay for grid and water upgrades are central to shifting the burden of expansion costs away from residents and local utilities.