California Legislature passes two watered-down bills to regulate data center water use, energy costs

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California lawmakers started the year signaling they were ready to get tough on data centers, aiming to protect the environment and electricity ratepayers. Nine months later, they have little to show for it.

Of four data center bills in play, two never made it out of the Legislature, including one that would have required data centers to publicize their power use and another that would have provided incentives for them to use more clean energy.

Two others are on Gov. Gavin Newsom’s desk, but in substantially reduced form. One mandates disclosure of water use by data center operators, although now in a way that may elude public access. Another originally aimed to protect energy customers from shouldering infrastructure costs driven by data centers but now merely lets regulators figure out if that is happening.

Data centers have the seemingly mundane job of storing and transmitting the contents of the internet. But the drab, largely windowless facilities are becoming a growing public policy concern. At least one is involved every time you watch a TikTok video or shop on Amazon.

In recent years, demand for artificial intelligence, and especially new general purpose systems like ChatGPT, caused such server farms to multiply. That means more water to cool semiconductors used to train and deploy AI models and more power plants and transmission lines, leaving state regulators increasingly concerned about stress on reservoirs and potentially higher power bills for residential customers.

Those concerns are not confined to California; communities and regulators in several states have made moves toward transparency requirements or efficiency standards. Michigan in 2024 enacted a law to require water use disclosure and the mayor of St. Louis enacted new rules earlier this month.

California is home to one of the largest concentrations of existing data centers in the world, and more projects are on the way. Pacific Gas and Electric, the largest power supplier in the state, reported this spring that it saw a 40 percent jump in data center hookup requests. In July the California Public Utilities Commission voted to streamline data center project applications.

One of the bills now with the governor, Senate Bill 57, authorizes the state public utility commission to assess whether data center loads shift costs to other customers like renters and homeowners.

Initially that bill from Democratic Sen. Steve Padilla of Chula Vista sought protections like those recently approved in Oregon and Ohio to ensure data center costs aren’t passed on to households.

But amendments by the Assembly Appropriations Committee in late August changed the bill to eliminate a special pay structure for data centers. A requirement that the commission assess how data centers shift costs to ratepayers was also reduced to an authorization, effectively granting the utility commission authority that it already had. Commission officials told CalMatters they’re using that power.

The changes soured at least one early backer on the bill. The Utility Reform Network supported the proposal initially for its protections of small businesses and residential ratepayers. The group still thinks the governor should sign it into law to track the impact of data centers, but “unfortunately lobbyists for data centers successfully gutted the bill,” said TURN director of race, equity, and legislative policy Adria Tinnin. “It doesn’t allow us to do anything to actually protect ratepayers from the impacts of data centers.”

PG&E initially opposed the bill, but retracted opposition after changes last month. In August, with support from the California Public Utilities Commission, PG&E adopted a rule that requires new customers for large projects – two-thirds of which are data centers – to cover initial costs of transmission lines instead of passing those costs on to ratepayers.

Big Tech-backed organizations such as the Data Center Coalition and the Silicon Valley Leadership Group continue to oppose the bill. They say the state public utility commission already assesses prospective projects.

If signed into law, Assembly Bill 93 will require data center operators to share with their water supplier how much water they estimate they will consume when they apply for or renew a business license or permit. It also directs state agencies to develop water use efficiency guidelines and best practices for data centers, and for businesses to self-certify that they comply with them. It was written by Diane Papan, a Democrat from San Mateo and chair of the assembly committee on water, parks, and wildlife. An environmental group last year sued the Bay Area city of Pittsburg over a data center development, citing water concerns. A community group also raised the issue in relation to a data center near the Salton Sea.

The same Big Tech groups that are fighting the consumer cost bill are also opposed to the water legislation, saying sharing water use data could divulge trade secrets and harm the competitive edge of businesses.

Data center water use is a concern in part because many of the facilities are located in drier areas and can consume hundreds of thousands of gallons of water a day. From Southern California to San Jose in the Bay Area, roughly 17 data center projects planned in California as of May are in areas where water stress is high or extremely high, according to reporting by Bloomberg.

A Stanford University study released in April found that Los Angeles and Northern California rank among some of the most popular locations in the U.S. for future data center projects, alongside drought-stricken areas fighting over the fast-draining Colorado River like Phoenix and Las Vegas.

Water concerns have been a key reason behind recent opposition to data centers in Arizona, Georgia, New Mexico, Pennsylvania, Texas, and Virginia, said University of Virginia assistant professor Lauren Bridges, who tracks local and state data center regulation across the U.S. “Because we don’t have any information from the industry about specific site usage, it makes it almost impossible to know what’s going on and how it might impact them,” she said.

It’s unclear how much water is consumed by data centers and the AI systems within them, said University of California, Riverside professor Shaolei Ren, a prominent researcher of AI’s impact on the environment and public health. Google and OpenAI have claimed their models use only a few drops of water per query. A study coauthored by Ren, meanwhile, concluded that AI can consume roughly 16 ounces of water in a series of queries by one user in one sitting.

Ren thinks the proposed water regulation will help shed new light on the question while enabling California’s tech industry to continue to thrive.

But it’s not that simple, said Masheika Allgood, a Silicon Valley water activist who has spoken out against a data center project in San Jose and created an online tool to calculate data center water consumption.

An amendment to the bill tells data center operators to share their water use data with water suppliers rather than government officials. Allgood has found that data center operators and most tech companies don’t share details about how much water they take from local aquifers and is not sure water suppliers will either. Without such data, it will be harder for people who oppose a data center to spark public discussion or organize their community.

“I can look up the applications, that’s public record, but giving it to the water supplier, I have to go to them directly and ask for this information,” she said. “That’s not transparency for people.”

Linda Gordon, an attorney and climate researcher for the UC Berkeley Human Rights Center, said she supports the proposal and legislation that increases transparency of any kind.

In ongoing work Gordon is conducting with Allgood on the environmental impacts of data centers, she’s found gaining access to water use data difficult, and that some water agencies refuse to share that data, citing a court decision decided roughly a decade ago. Since nothing in Papan’s bill specifically addresses whether the data will be available to the public, it’s unclear whether the disclosure in the bill will help inform researchers, journalists and communities concerned about the water consumption of data centers.

She hopes that language in the law that requires the California Department of Water Resources develop efficiency standards will in turn empower local agencies to develop ways to evaluate the water use footprint of a data center and whether they ought to approve or deny a project.

“More disclosure is great but how that information gets used is also important to understand if it will actually make a difference,” she said.

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This story was originally published by CalMatters and distributed through a partnership with The Associated Press.