California Advances Two Bills to Make Data Centers Pay Their Grid Costs

California is advancing a legislative package that would require data centers to pay for the electrical grid capacity they demand, with days remaining before the state session closes on August 31. Bills SB 886 and SB 887, authored by Senator Steve Padilla, cleared a key committee last week, according to Canary Media.

Both bills passed the full Senate by votes of 27-8 and 29-9, according to Senator Padilla's office. The dispute reflects the scale of the artificial intelligence boom: Pacific Gas & Electric (PG&E) projects up to 10 gigawatts of additional data center demand over the next decade, enough to power approximately 7.5 million homes. Legislators aim to ensure that burden does not fall on residential customers, who already face high electricity rates.

The central mechanism sits in SB 886: it would require the California Public Utilities Commission (CPUC) to set rules requiring data centers of at least 25 megawatts to cover the cost of new generation, grid upgrades, and a share of wildfire mitigation charges and environmental programs. The bill also includes a demand response program that would require them to stop drawing power from the grid during supply emergencies. SB 887 offers accelerated environmental review in exchange for the facility sourcing 100% of its hourly consumption from carbon-free sources within five years, obtaining 75% from new construction, and using batteries rather than diesel generators as backup. PG&E opposes SB 886, while the Data Center Coalition, the industry trade group, questions whether the clean energy targets are achievable.

How the package resolves before August 31 will set a reference point for other markets across the continent. In Mexico, the debate over who absorbs the cost of new demand from nearshoring-linked data centers is only beginning, with rules that have yet to define the governing criterion.

This article was written with artificial intelligence assistance based on verified sources and reviewed by a human editor before publication.