California lawmakers blew past a midnight deadline on Monday night to push through two bills meant to stop data center operators from quietly sticking everyday utility customers with the bill for their massive power needs. Assembly Bill 2383 and Senate Bill 886 both passed along party lines and now sit on Governor Gavin Newsom's desk, awaiting his signature or veto by the end of September.
What the Bills Actually Do
Both measures direct the California Public Utilities Commission to set a special rate structure for large data centers, according to KCRA. AB 2383, introduced by Assemblymember Rick Chavez Zbur under the name the Fair Share in Energy Act, requires electrical corporations, community choice aggregators, and electric service providers to adopt separate generation and transmission tariffs for new large load customers taking service on or after January 1, 2027. Both AB 2383 and SB 886 also create new permitting and transparency rules for data center developers, per the same KCRA report.
Under the compromise framework the two bills establish, the CPUC has until July 1, 2027, to finalize those special tariffs, according to KQED. That deadline leaves the commission with wide discretion over how strictly it separates data center costs from the rest of the grid — a detail that will determine whether the legislation actually protects ratepayers or simply delays the fight by a year.
Lawmakers Clash Over Costs and Competitiveness
State Sen. Ben Allen argued the measures strike a proper balance, saying they should avoid placing a new burden on other ratepayers and the water system, the KCRA report notes. Republican Sen. Suzette Valladares pushed back, saying the bills go beyond disclosure and warning they could create another permitting hurdle while California competes for AI investments and good-paying jobs; she also said a city or county cannot approve a permit until the requirements are satisfied. Most Republicans ultimately rejected both bills, while Democrats approved them.
The stakes behind that disagreement are considerable. Data from the California Independent System Operator, cited by consumer advocacy group The Utility Reform Network, projected that rising data center power demand in PG&E's territory alone could trigger up to $1.8 billion in transmission upgrade costs, according to the Los Angeles Times. Pacific Gas and Electric opposed rigid statutory mandates during negotiations, arguing that adding large data center loads could actually reduce general residential electric rates by 1 to 2 percent per gigawatt if grid expansion costs are properly distributed across new high-volume power users, the Times reported.
A Third Bill Tackles Environmental Review
Lawmakers also approved companion legislation Sunday, Senate Bill 887 from Sen. Steve Padilla, which eliminates categorical California Environmental Quality Act exemptions for data centers while creating an expedited judicial review path for zero-carbon, grid-beneficial facilities, according to Manatt, Phelps & Phillips. Together, the three bills represent Sacramento's broader strategy of regulating both the environmental permitting and the utility rate sides of the state's data center boom.
Why the Pressure Built This Year
The debate did not emerge in a vacuum. In March, the Little Hoover Commission released a study urging state lawmakers to require tech firms and data center developers to absorb their own grid-connection costs, noting California's electricity rates were already the second-highest in the nation, per KQED. A Public Policy Institute of California poll released in July found 73 percent of surveyed Californians opposed building data centers in their local communities, KQED also reported.
That public resistance showed up locally, too. Frustrated by unregulated projects, multiple California cities imposed their own restrictions in 2026 ahead of the state deal, including a 45-day freeze in Commerce and a voter-passed ban in Monterey Park, according to The Business Journal. Meanwhile, an analysis of state disclosures published by CalMatters found that utilities, tech companies, and industry trade groups spent millions of dollars lobbying the Legislature during the first half of the year as the legislation moved through Sacramento.
What Happens Next
Newsom has said he would discuss data centers further as the bills reached his desk, but he has not indicated how he will act. He now has until the end of September to sign or veto both AB 2383 and SB 886. The California Energy Commission's 2026 planning forecast projects data centers will grow from roughly 1,000 megawatts, or 2 percent of peak electricity demand in California ISO territory, to 4,500 megawatts, or 9 percent of peak demand, by 2040 — a trajectory that will keep the tariff fight relevant long after this month's deadline passes.
