Governor Signs Seven Data Center Bills Addressing Energy And Noise Reporting, Water Use, Labor Standards, Electricity Rates, And CEQA Review

In the run-up to the November 2026 elections, the intertwined topics of data center development and artificial intelligence (AI) suddenly have become a significant focus of debate at the local, state, and federal level. State and local governments across the nation are rushing to implement moratoria to pause data center approvals. The California Legislature passed seven bills addressing data centers last session. On September 21, 2026, Governor Newsom signed all of them: AB 1577 (Bauer-Kahan), 2383 (Zbur), 2469 (Papan), and 2619 (Papan) and SB 886 (Padilla), 887 (Padilla), and 1168 (McNerney), representing a largely unprecedented legislative targeting of a single asset class.

As summarized below, the seven bills address five major topics: (1) data center energy use and associated impacts on electricity rates, (2) data center water consumption, (3) environmental review, (4) increased transparency, and (5) labor standards. The new laws take effect January 1, 2027. Four of the bills largely use a shared definition of a “data center” with similar exemptions for specified public projects, however, three of the bills contain no definition and likewise no explicit exemptions.

Notably, the bills do not modify the existing jurisdiction of the California Energy Commission (CEC) in permitting back-up generators of 50 megawatts (MW) or more, nor do they alter the existing zoning authority of local agencies in California over data center development. These bills add substantial new requirements to California’s environmental and regulatory framework, which already imposes significant procedural and substantive guardrails on data center development.

Notable provisions of the new laws include:

• Energy use disclosures at the entitlement stage and ongoing annual reporting to the CEC for data centers of 10 MW or more. (AB 1577)
• New requirements for city and county permits for data centers, including preparation of a water supply assessment and a water scarcity plan (AB 2469), and water use reporting tied to business licenses. (AB 2619)
• Detailed workforce disclosures at the time of application filing (AB 2469), and prevailing wage and skilled and trained workforce requirements for data centers interconnecting at high voltage levels. (SB 886)
• New interconnection rules for data centers, assigning data centers responsibility for transmission upgrades and imposing early termination fees. (SB 886)
• New data center generation service tariffs for utilities, community choice aggregators, and electric service providers, including minimum payments and termination fee requirements. (AB 2383)
• Direction to the California Public Utilities Commission (CPUC) to assess rate structures that ensure data centers pay for transmission and distribution upgrades and load increases. (SB 1168)
• A prohibition on the use of categorical exemptions under the California Environmental Quality Act (CEQA) for data center projects. (SB 887)
• Eligibility for environmental leadership development project certification for data centers meeting stringent energy, sustainability, community benefit, and labor requirements. (SB 887)

Each of the bills is described below in more detail.

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New Data Center Reporting Obligations For Energy, Noise, and Facility Size (AB 1577)

AB 1577 establishes new reporting requirements for owners and operators of data centers with an electrical capacity of 10 MW or more. AB 1577 defines “owner or operator” as “the inpidual or entity responsible for overseeing daily operations for the entire data center facility, regardless of the inpidual parties that may rent or host equipment at the facility.” The reporting obligations are triggered at two points in time: (1) disclosures to the local agency upon application for a discretionary permit for the construction or operation of a data center; and (2) reporting to the CEC upon energization of the data center.

Energy and Noise Disclosures Upon Application for a Discretionary Permit

When applying for a discretionary permit, entitlement, or land use authorization for the construction or operation of a data center, either the owner or operator must provide the local agency with its “best available estimates,” at the time of submission, of the data center's expected:

• annual energy consumption,
• annual quantity of electricity generated onsite inclusive of behind-the-meter primary and back-up power generation, and
• average and maximum sound levels measured at the point along the property boundary where the average sound level attributed to the data center is highest.

Most if not all of this information would be disclosed and evaluated as part of the typical CEQA review process for a data center project, but the new reporting obligation requires this information be provided earlier in the entitlement process.

Ongoing Reporting of Energy, Cooling Equipment, and Facility Information

AB 1577 directs the CEC to establish two reporting processes for data center owners and operators, although the bill does not establish a deadline for this action.

• Upon Data Center Energization and Following Any Substantive Change to Previously Reported Information: A data center owner or operator must submit to the CEC the name of the data center, physical address, name and contact information for the owner or operator, year and month the data center began operating, total floor area, floor area occupied by IT equipment, anticipated electrical peak capacity, and anticipated quantity of electricity generated and consumed onsite, including both behind-the-meter primary and backup power generation.
• Annually Following Energization: A data center owner or operator must submit to the CEC the facility’s maximum electrical load, installed IT equipment electrical capacity, total energy consumption, power usage effectiveness (the ratio of total energy consumption to energy used by IT equipment), participation in demand flexibility programs, refrigerant types, cooling degree days, quantity of electricity generated and consumed onsite including both behind-the-meter primary and backup power generation, quantity of fuel by type consumed by onsite generators or other fuel-based energy systems, and energy storage type, capacity, and chemistry. The annual reporting obligations will also apply to existing data centers. This information must be disaggregated by month over the reporting period unless otherwise specified by the CEC.

Publication, Confidentiality, and CEC Electrical Load Assessment

AB 1577 requires the CEC to publish the submitted information annually in an anonymized and aggregated format on its website. The bill also directs the CEC to establish a process for the owner or operator to identify information it claims is exempt from disclosure, and it prohibits the CEC and local agencies from disclosing data center information in a manner that would reveal personally identifiable information or energy consumption data for a specific data center customer.

Beginning in 2029, AB 1577 requires the CEC to include in its integrated energy policy report and subsequent biennial reports an assessment of electrical load trends for data centers, providing a projection of future load trends, potential net peak load demands, and recommendations for mitigating data center electricity consumption impacts on grid capacity and reliability, greenhouse gas emissions, and recommended energy efficiency and demand response measures.

The reporting obligations of AB 1577 do not apply to publicly funded research facilities, public safety facilities, publicly funded national security facilities, publicly owned facilities, or other specified utility facilities.

Water Consumption & Water Supplies (AB 2469 and AB 2619)

AB 2469 and AB 2619 address data center water consumption and associated water supply planning. Concerns over water use relate to the type of equipment used to cool servers in data centers. Facilities being built in California today, however, predominantly use closed-loop cooling systems which continuously re-use water and avoid the daily water use and discharge associated with many evaporative cooling systems.

AB 2469 - Permit Conditions for Water Supply

AB 2469 prohibits a city or county from approving a discretionary or ministerial permit or other entitlement for the construction of a data center, or for an expansion that increases a data center’s maximum peak water use, unless all of the following requirements are met:

• The applicant provides (1) a water supply assessment for the construction or expansion, (2) beginning January 1, 2028, a “water scarcity plan” identifying measures to be implemented at different drought levels (an abnormally dry year, a moderate drought year, a severe drought year, an extreme drought year, and an exceptional drought year), including staged withdrawal reductions, nonessential use curtailment, recycling and reuse, thermal load reductions, and temporary load shedding where necessary, (3) projected water use and water efficiency measures, and (4) disclosures regarding estimated workforce needs for the project (described in the Workforce Reporting & Labor Standards section below).
• The applicant assumes the full cost of any water conveyance, treatment, storage, or distribution infrastructure improvements necessary to serve the project, as determined by the water supplier.

Notably, AB 2469 does not define “data center,” sets no size threshold, and contains no exemption for public facilities.

AB 2619 - Water Use Reporting Tied to Business Licenses

AB 2619 requires a data center owner or operator, before applying to a city or county for an initial business license or permit, to provide its water supplier a good faith estimate of expected water use, the anticipated water source, and projected water use for the maximum day, maximum month, and average year. Upon renewal of a business license or permit, the owner or operator must report the data center’s water use for the prior calendar year, including total water use and direct water use. For direct water use reporting, the owner or operator must report the facility’s cooling system type and the volume of water withdrawn, delivered, or otherwise used onsite for data center operations, including cooling, sanitation, irrigation, and any other operational use, identified by source, including potable water, nonpotable water, or recycled water. The bill contains no exemption for public facilities.

AB 2619 – Water Shortage Contingency Plans

AB 2619 also amends the Urban Water Management Planning Act with respect to urban water supplier water shortage contingency plans. The bill specifies that the “current year unconstrained demand” used in such plans must now include the “unconstrained demand of data centers, irrigation, and other large users."

Workforce Reporting and Labor Standards (AB 2469 and SB 886)

AB 2469 prohibits a city or county from approving a permit or other entitlement for the construction of a data center, or for an expansion that increases a data center’s maximum peak water use, unless the applicant provides disclosures regarding estimated workforce needs associated with the data center project, including: (1) workforce composition, (2) job classifications, (3) employment duration, (4) wage ranges and benefits, (5) the proportion of the workforce residing in the county where the project is located, and (6) the proportion of the workforce within the state. Workforce information associated with operation of the inpidual data center may not be available at this early stage, and the developer entitling and constructing a data center can differ from the operator of the facility post-construction.

SB 886 requires data centers interconnecting at high voltage levels to certify that their facilities meet the prevailing wage and labor requirements of Public Resources Code sections 25545.3.3(a) and (b) and 25545.3.5(a) through (e). These provisions will require data centers owners and operators to certify that they will pay prevailing wages and employ a skilled and trained workforce for construction of their facilities. The bill also includes certain enforcement provisions and recordkeeping obligations unless the project construction is subject to a project labor agreement meeting the requirements of these Public Resources Code sections. The labor requirements only apply to a data center that enters into a new interconnection agreement to receive retail electric service at the transmission level on or after January 1, 2027, generally considered to be transmission lines operating at 50 kilovolts or higher, and does not apply to data centers connecting at the distribution level. Most medium- and large-scale data centers interconnect at the transmission level and, therefore, will be subject to these requirements.

Electricity Rates and Interconnection (SB 886, SB 1168, and AB 2383)

SB 886, AB 2383, and SB 1168 address the costs of data center interconnection and energy demands. As described below, these bills require the CPUC and utilities to establish new interconnection rules that require data centers to pay for the costs of transmission facility upgrades needed for their interconnection to the grid, as well as cost increases that result from utility procurement of new energy resources required to meet their electricity demands. The bills are intended to limit the potential for data center electricity demands to increase electricity costs for residential and other existing customers.

SB 886 - Interconnection Tariffs & Labor Standards

SB 886, known as the California Technology Innovation and Ratepayer Protection Act, requires the CPUC to adopt new interconnection rules for data centers, aimed at ensuring data centers pay the costs associated with their energy demands. SB 886 provides that the new interconnection rules must, among other things:

• Require data centers to pay all costs of any transmission facility upgrades needed for interconnection.
• Impose early termination fees if a data center project leaves the grid or underperforms on the requested load (i.e., electricity demand) within 10 years of interconnection.

These requirements apply to data centers entering into new interconnection agreements at the transmission level on or after January 1, 2027. For data centers seeking interconnection before the new tariff is established, utilities can seek CPUC approval of inpidual interconnection agreements that are consistent with the above requirements.

SB 886 also requires that, in establishing new interconnection rules, the CPUC evaluate the risks and benefits of the tariff to other non-data center ratepayers, with the goal of preventing cost shifts to those customers.

AB 2383 - Transmission, Distribution, and Generation Service Tariffs

AB 2383 establishes additional requirements for the new tariff framework for data centers. Specifically, it requires utilities to:

• Establish both transmission-level and distribution-level tariffs for data centers that require data centers to pay a reasonable share of costs for wildfire mitigation, wildfire liability, electrification and environmental programs, and other societal cost obligations typically collected from distribution-level ratepayers.
• Establish generation service tariffs that ensure each utility can procure generation resources that meet the State’s clean energy targets while also ensuring that data centers pay for energy generation cost increases resulting from their electricity demand. To address generation cost increases, AB 2383 requires utilities to include the following:
  • Fees for data centers that do not complete interconnection, as well as early termination fees sufficient to ensure that other ratepayers are held harmless for costs incurred to serve the data center.
  • Upfront collateral or prepayment for incremental generation cost increases resulting from the data center’s load.
  • Minimum payment requirements to ensure that other ratepayers are held harmless for costs incurred to serve data centers that consume less energy than anticipated.
  • Incentives to reduce these funding requirements for data centers installing zero-emissions resources behind the meter to support energy demands.

These requirements apply to data centers with peak energy demands of at least 25 megawatts. AB 2383 also extends similar tariff requirements to community choice aggregators and electric service providers.

SB 1168 - Assessment of New Rate Structures

SB 1168 directs the CPUC to analyze rate fairness, including assessing opportunities for rate structures to: (1) ensure data centers pay their reasonable share of transmission and distribution costs, (2) ensure data centers pay their proportionate share of load increases and procurements needed to reliably serve them while maintaining consistency with the applicable integrated resource planning requirements, and (3) alleviate cost pressures on residential ratepayers.

Exclusion from CEQA Categorical Exemptions & ELDP Eligibility (SB 887)

SB 887 makes two significant changes to how CEQA applies to data centers: it prohibits the use of categorical exemptions for data center projects, and it makes qualifying data center and geothermal powerplant projects eligible for certification as environmental leadership development projects (ELDPs).

No Categorical Exemptions for Data Centers

SB 887 prohibits the use of categorical exemptions under CEQA for any project carried out or approved by a public agency in furtherance of the development and operation of a data center. The prohibition does not apply to publicly funded research, public safety, publicly funded national security, publicly owned, or utility facilities, or to research facilities of independent institutions of higher education. As a practical matter, most data centers are unlikely to qualify for categorical exemptions in any event, but this prohibition evidences a growing trend of legislation targeting a single asset class.

ELDP Eligibility for Specified Data Center Projects

SB 887 establishes a new ELDP category for data centers that meet stringent energy, sustainability, community benefit, and labor requirements, including: (1) paying in advance the full cost of interconnection; (2) not increasing in-state fossil fuel consumption; (3) including zero-carbon energy storage with at least four hours of capacity at 100 percent of forecasted peak demand; (4) using onsite zero-carbon energy storage to provide demand response services to the electrical grid; (5) relying on behind-the-meter zero-carbon generation to the “maximum extent feasible”; (6) entering into an enforceable commitment to fully pay all grid investments, including new generating capacity, backed by an early termination fee; (7) using recycled water and water-efficient or waterless cooling; (8) relying on 100 percent zero-carbon electricity to serve its hourly energy needs within five years of initial operations, 75 percent of which must be newly developed; (9) entering into community benefits agreements with community-based organizations, such as workforce development and training organizations, labor unions, community foundations, local governmental entities, or California Native American tribes; and (10) meeting specified labor standards. The Office of Land Use and Climate Innovation (LUCI) must develop uniform statewide standards for satisfying these conditions.

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The seven new data center bills evidence that in response to growing public concern, California lawmakers are looking more closely at the environmental and energy footprint of this asset class. The new reporting obligations are more than a compliance formality. Disclosure requirements often lay the groundwork for regulation, and the information collected pursuant to these bills likely will shape the next round of state and local rules. Owners, developers, operators, and investors who understand what they are reporting, and how it may be used by regulators, will be in the best position to influence what comes next.