data center

SACRAMENTO — After weeks of intense negotiation, state lawmakers on Friday reached a compromise on legislation to regulate energy use by California’s growing data center industry, action triggered by community anger over the facilities and fears of high utility bills in some communities.

The goal, according to legislators and advocates, is to protect consumers from growing electricity costs driven upward by the sprawling facilities and to track the centers’ immense energy and water consumption.

Business groups representing tech companies argued that some of the proposed restrictions and requirements, along with California’s high energy costs and lack of available land, would make it difficult for data centers to open in the state.

Municipalities risk missing out on tax revenues and jobs from the centers if the industry goes elsewhere, they said.

Two bills to regulate the controversial industry consumed the state Legislature in the final weeks of the 2026 session, drawing in Gov. Gavin Newsom and industry organizations and lobbyists representing some of the world’s most influential companies, including Google, Meta, Amazon and artificial intelligence firms such as Anthropic and OpenAI.

Proposed legislation by Sen. Steve Padilla (D-Chula Vista) and Assemblymember Rick Chavez Zbur (D-Los Angeles), finalized Friday, would establish special rules for data centers’ electrical use. The legislation requires the California Public Utilities Commission to create special rates and updated rules for data centers’ use of electricity, including the costs for new power for infrastructure upgrades.

The debate in Sacramento around the data centers centered on how much they should pay for power and infrastructure, and whether that should be mandated by the state Legislature or the California Public Utilities Commission, which regulates investor-owned utilities and is controlled by a board appointed by the governor.

Unlike some other states, California hasn’t seen an overwhelming wave of new large-scale data centers, nor have state leaders sought moratoriums such as the ones enacted by governors in Texas and New York.

An aerial view of a 49.5-megawatt data center under construction in Vernon last month.

(Myung J. Chun / Los Angeles Times)

Nevertheless, advocates focused on reforming the state’s utilities sought this year to seize the moment to enact tough regulations, including forcing data centers to pay for transmission upgrades and wildfire mitigation efforts.

Utility reform advocates and environmental leaders offered mixed reaction on Saturday.

Matthew Freedman, a senior staff attorney for The Utility Reform Network (TURN), praised the final language in the two bills, saying the legislation would prevent data center costs from “being foisted on other customers” while helping California meet its clean energy goals.

Monica Embrey, the founder of Affordable Energy Campaign, called the last-minute amendments “concerning.”

In particular, she pointed to a lack of clean energy requirements for data centers who use their own energy, and a provision that allows a utility to enter into its own agreement with a data center for energy in the interim period before the state finalizes its regulations.

A representative for the Data Center Coalition, whose members include Google and Microsoft, didn’t immediately respond to a request for comment.

Data centers have existed for decades but are rapidly expanding because of the rise of artificial intelligence, or AI. The centers help power everything from streaming services to videoconferencing calls.

Data centers in California are typically smaller than the mammoth, 500+-megawatt AI facilities making headlines in other parts of the country. Electricity costs and state regulations on gas-powered generators limit the vast majority of them to under 100 megawatts.

But as proposals increase in number, opposition has been fierce and growing.

A Public Policy Institute of California poll from July showed that 73% of residents oppose the construction of data centers in their communities.

Opposition centers on water use, air and noise pollution, and the potential for data centers to raise utility bills as they add strain to the grid requiring costly upgrades and new electricity supply.

The California Energy Commission expects data center electricity use, currently 2% of the state’s demand, to double in the next 10 years.

Monterey Park became the first city in the country in June to permanently ban data centers by a popular vote, and at least four other San Gabriel Valley cities have enacted moratoriums.

Southeast of L.A., Imperial County, Desert Hot Springs, and Palm Springs also voted on moratoriums, while Coachella permanently banned the facilities. In the Central Valley, Tulare County adopted a moratorium this month as residents voiced opposition to proposals to develop tiny data centers on local fairgrounds in the region.

And in San José, the state’s hot spot of data center development, residents flooded a recent public hearing to call for a moratorium while the city updates its data center standards.

Newsom last year vetoed legislation by Assemblymember Diane Papan (D-San Mateo) that would have required data centers to disclose and certify their water consumption. The governor said he was reluctant to impose “rigid” reporting requirements on the development of “this critically important digital infrastructure.”

Separate bills that would require the centers to disclose their energy and water use were recently approved by state lawmakers.

Like other state legislators, Papan said she wants to work with the centers, not ban them.

“I constantly say, ‘Help us help you.’ We will all get this right if we can just be transparent and methodical,” said Papan, whose district includes Silicon Valley.

Padilla’s district includes Imperial Valley, where a developer’s plans for a data center on 75 acres is sparking fierce backlash.

Advocates and lawmakers fought over two approaches on the issue of regulating data centers’ energy use.

A wider coalition of environmental groups supported the bill from Padilla, SB 886, sponsored by TURN, that would have required data centers to pay up front for broader power grid updates required to meet their demand. That approach made it into the final package.

TURN pointed to a recent transmission plan from California’s grid operator projecting that increased power demands from data centers in PG&E‘s service territory, where the majority of current and proposed data centers are concentrated, would create up to $1.8 billion in upgrade costs for the power grid, including transmission lines.

PG&E favored a less stringent approach. In an email earlier this week, a PG&E spokesperson argued SB 886 would “risk higher costs for customers and delay critical infrastructure needed to serve the state’s growing energy demand.”

The Data Center Coalition had opposed both bills for “singling out” one type of power user.

The high cost of land and power, as well as lack of available land, are just some of the reasons that California hasn’t seen a flood of data centers, said Khara Boender, a director of government affairs at the Data Center Coalition. She said dozens of states offer some type of exemption for data centers, but California does not.

Additional regulation in the Golden State, she said earlier this week, “would be another signal that the state is a more challenging place for data center development.”

AMARILLO, Texas — When Gina Hinojosa, the Democratic nominee for Texas governor, began her campaign last year, candidates weren’t talking about — or hearing about — data centers that power artificial intelligence.

But with barely three months until November’s contest, the perceived threat to rural life, ranchland and dwindling water supplies could become a defining issue for her long-shot challenge to Republican Gov. Greg Abbott, dividing conservative rural areas that have traditionally served as a counterweight to Democrats’ urban strongholds.

The backlash to energy-guzzling server warehouses is also shaping other statewide campaigns from Arizona to Ohio to New York, and even giving Democrats a glimmer of hope in Texas, where Republicans have dominated for three decades.

“There is this little issue that I recently started hearing about that I wanted to tell you about, in case you don’t know,” Hinojosa quipped to a Democratic Party-organized crowd of about 160 seated on fold-out chairs at an Amarillo social club in Texas’ panhandle. “It’s this issue of data centers.”

The crowd booed, and she went on: “They are owned by the richest men in the world. We’re all footing the bill. There are no rules. It is the wild west of data centers.”

The fast growth of massive data centers has already upended races for local offices across the country, often uniting conservatives and liberals in revolting against projects in their midst.

People don’t like the secrecy surrounding the projects or the prospect of air, noise, water and light pollution. They fear electric bills going up, wells going dry and losing open space, farmland or forest.

Now the ripple effects have spread to top-of-the-ticket races, where incumbents and challengers are trying to show that they hear an angry electorate.

In Ohio, Democratic nominee Sherrod Brown aired a television advertisement attacking Republican U.S. Sen. Jon Husted as the “face of data centers in Ohio” as people gather signatures for a statewide referendum to outright ban their construction.

In Wisconsin, a Democratic candidate for governor, Francesca Hong, is pledging to “tax the rich, fund our schools and stop AI data centers” as she campaigns for her party’s nomination in a crowded primary.

In Pennsylvania, Democratic Gov. Josh Shapiro is facing heat from some voters who feel like he’s been too welcoming to tech behemoths. Sam Burleigh, a Democrat whose rural community is fighting off data center projects, accused Shapiro of “allowing these data centers to come in and take over acres and acres of prime farmland.”

Texas is fertile ground for data centers

Any political unrest may be felt most acutely in Texas.

The state is poised to overtake northern Virginia as the largest global data center market by 2030, according to a report by commercial real estate giant JLL. It has lots of land, lots of energy and a friendly regulatory environment under Republican leadership.

In rural west Texas and its panhandle, gargantuan data centers are under construction, including one near Amarillo touted as the world’s largest. Some come with designs for natural gas-fired turbines to power them.

Rumors are flying about others popping up — Google, which is building four data centers in northwest Texas, sponsored moderated conversations with officials and business elite in Lubbock and Amarillo in recent weeks — and it is sowing an outcry across small cities, tiny towns and sprawling ranches where people vote overwhelmingly Republican.

Google says its investments are advancing American innovation, fortifying cybersecurity and boosting energy capacity, while President Trump has made data centers a top priority to help the U.S. compete against China for AI superiority.

But tech giants and developers can be secretive about their plans, making it impossible to know what will be built or what sort of pollution they’ll create, critics say. Some worry that data centers will destroy rural Texas’ low cost of living and sully sunsets and sweeping views that stretch toward the horizon.

Others say construction and an influx of workers are already causing havoc for ranchers and towns, driving up rents, snapping up farmland, illuminating the night sky, clogging roads and turning parts of rural Texas into industrial zones.

Opposition crosses partisan divide

Democrats are prominent among the data center critics, but so are Republicans, including Texas’ sitting agriculture commissioner, Sid Miller. They say there are many more Republicans who are quieter because they fear publicly opposing their governor and party.

“They’re upset with Greg Abbott,” said Suzanne Bellsnyder, a former Republican activist from Spearman who writes a syndicated column that advocates for rural Texas. “Whether that translates into voting against him, I don’t know.”

Abbott has aggressively advocated for big projects in Texas and, in November, he helped make Google’s announcement of a $40-billion investment there, saying, “Texas is the epicenter of AI development.”

Compounding that, Texas counties don’t have zoning authority — precisely the local land planning authority that communities around the country are increasingly using to fight off data centers.

Abbott seems to recognize that data centers are dividing his base. In recent weeks, he ordered regulators to take steps to ensure Texans weren’t paying higher electricity bills because of data centers and promised to push a legislative agenda next year to impose regulations on data centers.

At an East Texas campaign stop, Abbott said that includes taking away the state’s billion-dollar-plus-per-year tax break and preventing data centers from being built in “rural Texas neighborhoods.”

Hinojosa and others derided Abbott’s words about “rural Texas neighborhoods” as meaningless — “doublespeak that makes no sense to anyone,” Hinojosa said — and lacking urgency or seriousness.

“Now we have this gold rush of data centers in our communities,” Hinojosa said in an interview, adding that “people want a say, and I think that’s fair.”

As governor, she said she’d block a permit for a data center if it wasn’t a good deal for Texans or residents hadn’t gotten a say in the matter.

Abbott tries to soothe concerns

Abbott’s campaign season turnabout on data centers doesn’t seem to have soothed many.

Of great concern is the prospect that data centers will consume massive amounts of water and worsen drought conditions for ranchers and farmers in a state where water shortages already crippled the sugar cane industry.

“Oh, I guarantee you, it’s on everybody’s mind,” said Giles Dalby, a cattle rancher and a Republican county commissioner in west Texas.

Dalby, who raises Angus and Brangus cattle on ranchland that’s been in his family for 125 years, pointed to fast-growing cities where water authorities have had to go to greater lengths to procure water, including the “water wars” between San Antonio and ranchers several years ago.

Texas is increasingly steamrolling over landowner rights in the quest for public water, Dalby said, and that could mean that data centers get in line ahead of ranchers when shortages or rationing worsen.

Clayton Tucker, a rancher and the Democratic nominee for state agriculture commissioner, said his campaign events are consumed by talk of data centers. It doesn’t matter whether he’s meeting with Democrats or Republicans.

“This is the most cross-partisan issue I’ve ever seen in my life,” Tucker said.

Meanwhile, protest groups are springing up, including one in Lubbock that is led by Republicans. The founders, Stephen Sanders and Hallie Bertrand, like some other Republican opponents of data centers, say it’s possible or even certain they won’t vote for Abbott, although they may not necessarily vote for Hinojosa.

There is still time for Abbott to push through major legislation before the election and “be a hero,” Sanders said.

The big question is whether enough rural voters will turn against Abbott to give Hinojosa a shot. It’s hard to tell, Bertrand said, especially when some know nothing about the issue.

“They’ll just hit that button, Republican all the way down,” Bertrand said. “But I think it’s a step towards something that we have not seen in Texas in a long time, with people on the right switching to the left. Or scooting a little closer to the middle, maybe.”

Levy writes for the Associated Press.