The Overview

If you're a California electricity customer, a new state law requires regulators to look at whether data centers are paying their fair share of grid costs, or whether those costs are landing on your bill instead. California's Data centers: rate structures, SB 1168 became law when Gov. Gavin Newsom (D) signed it Sept. 21. ​

California's data-center expansion is straining the grid and raising questions about who pays for the new infrastructure those facilities require, according to CalMatters; Bloomberg reported that wholesale electricity costs near some data centers ran as much as 267 percent higher than five years earlier, with those costs passed on to customers.

What the Law Does

The law directs the California Public Utilities Commission, which already sets rates for the state's utilities, to assess opportunities for rate structures that ensure data centers pay a reasonable share of transmission and distribution costs. Those rate structures would also cover data centers' proportionate share of load increases and of the power procurement needed to reliably serve their operations. The law also asks that such structures relieve cost pressure on residential ratepayers.

A California Energy Commission forecast anticipated an additional four to six gigawatts of data-center demand by 2035, according to CalMatters, underscoring the scale of the cost question the law asks regulators to address. Climate Action California described the law as establishing a public tariff for data centers and providing procedural protections for other ratepayers.

Legislative Status

Sen. Jerry McNerney (D) authored the bill. The Senate Energy, Utilities and Communications Committee passed it 13-4 on April 13. The Senate Appropriations Committee passed it 5-2 on May 14, and the full Senate passed it 30-9 on May 27. Both Assembly committees passed it unanimously: 18-0 in Utilities and Energy on June 24, and 15-0 in Appropriations on Aug. 5. The full Assembly passed it 78-0 on Aug. 28, and the Senate concurred in Assembly amendments 38-0 on Aug. 30.

McNerney said the law "helps ensure that data centers absorb the costs of their excessive energy use, not California ratepayers." In an announcement about the data-center bills, Gov. Gavin Newsom said: "This legislation will prevent data centers from shifting costs onto everyday ratepayers."

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