California lawmakers have recently focused renewed attention on the rapid growth of data centers, driven in large part by cloud computing and artificial intelligence capacity demands. Concerns about grid reliability, electricity costs, and environmental impacts prompted a flurry of legislative proposals in the 2024–2025 session. The result, however, is a more incremental regulatory approach than many industry participants initially expected. This post highlights what has passed, what stalled, and what data center developers and operators should be monitoring going forward.
SB 57: A New CPUC Study, Not New Rate Structures
The most significant enacted measure is Senate Bill 57 (SB 57) (formally known as the Ratepayer and Technological Innovation Protection Act), which directs the California Public Utilities Commission (CPUC) to study and identify opportunities to prevent or mitigate the impacts of data center electricity demand on utility ratepayers.
Specifically, the CPUC must evaluate whether the costs of grid infrastructure built to serve large data centers are being shifted to residential and small business customers. The CPUC’s findings are due by January 1, 2027.
Notably, SB 57 does not impose new charges, special rate classes, or operational requirements on data centers. Earlier versions of the bill contemplated more prescriptive outcomes, including ratepayer protections and cost-allocation mechanisms, but those provisions were removed before enactment. As passed, SB 57 reflects a legislative preference for developing a factual record before pursuing more aggressive regulation.
Transparency Proposals Remain in Play
While SB 57 is now law, other proposals aimed at increasing transparency around data center and AI-related energy use remain under consideration.
One such measure, Assembly Bill 222 (AB 222), would require data center operators to report energy consumption and efficiency metrics—such as Power Usage Effectiveness (PUE)—to the California Energy Commission. The bill would also require disclosures related to energy used for AI model training and operation, including the portion of that energy consumed within California.
AB 222 has not yet been enacted, but it signals continued legislative interest in collecting detailed information about the scale and growth of data center electricity demand.
What Didn’t Advance—and Why
A number of more aggressive proposals failed to move forward or were substantially narrowed during the legislative process. These included bills that would have
- established mandatory energy efficiency standards for data centers;
- created special electricity rate structures targeting large computing facilities;
- required expansive water-use and environmental disclosures; and
- offered or conditioned clean energy incentives tied to data center operations.
The fate of these measures underscores lawmakers’ concerns about balancing grid and environmental objectives with California’s competitiveness as a destination for data center investment.
Key Takeaways for Data Center Stakeholders
California’s recent legislative activity reflects a measured, information-gathering approach rather than immediate regulation. For now,
- no new data center–specific rate structures or charges are in effect;
- regulatory focus is on studying cost impacts and improving transparency; and
- the groundwork is being laid for potential future action.
Data center developers and operators should view these developments as an early signal of increased scrutiny rather than a final policy outcome. The CPUC’s SB 57 study, along with any reporting obligations that may emerge from pending legislation, could significantly influence future rate design, permitting, and disclosure requirements.
Why This Matters
California’s SB 57 study and pending transparency proposals reflect a broader regulatory trend: policymakers are increasingly evaluating data centers not only as technology infrastructure, but as major energy and environmental actors. Energy planning, AI regulation, and sustainability compliance are converging—and future requirements are likely to draw from all three areas.
Looking Ahead
California remains a bellwether for data center regulation nationally. While the state has stopped short of imposing binding requirements in the current cycle, the conversation is far from over. Stakeholders should expect continued legislative and regulatory attention—particularly as AI-driven electricity demand accelerates and as the CPUC’s findings come into focus.
Morgan Lewis will continue to monitor developments and provide updates through Data Center Bytes.