California Lawmakers Pass Bills Requiring Data Center Water and Energy Disclosures

Late Monday night in Sacramento, the California State Legislature wrapped up its 2026 session by passing a sweeping package of at least five major bills aimed at the rapidly expanding data center industry. Driven by the massive computing demands of artificial intelligence, the new legislation requires developers to disclose their exact water and energy usage before breaking ground on new facilities.[1][4]

Assembly Bill 2469, authored by Assemblymember Diane Papan, prohibits local governments from approving new or expanded data centers unless developers provide a detailed water scarcity plan and a comprehensive use assessment. The assessment must account for water intake in exact gallons per day, detailing maximum and average demand over a 12-month period. Crucially, the bill mandates that tech companies cover 100 percent of the cost for any new water pipes, treatment facilities, or storage required for their operations.[3]

The passage of AB 2469 marks a significant legislative persistence. One nearly identical measure was vetoed last year by Governor Gavin Newsom, who cited concerns about imposing rigid reporting requirements on critical digital infrastructure. However, growing community backlash over the environmental footprint of these facilities shifted the political momentum this session. 'We will all get this right if we can just be transparent and methodical,' said Papan, whose district includes Silicon Valley.[2]

Beyond water, lawmakers also targeted the strain data centers place on the state's electrical grid. Senate Bill 886, introduced by Senator Steve Padilla, directs the California Public Utilities Commission to establish a distinct electricity rate specifically for data centers. Follow-up legislation, including Senate Bill 887, will require data centers to undergo a full environmental impact report before approval.[1][4]

A companion measure, Senate Bill 1168 authored by Senator Jerry McNerney, further reinforces this firewall by requiring the CPUC to examine the industry's excessive energy consumption and ensure that local residents do not face rate hikes as a result. The legislation also mandates that data center operators pay upfront for the broader power grid updates required to meet their immense demand.[1][2]

Business groups and tech industry lobbyists argued throughout the session that the new restrictions, combined with California's already high energy costs and limited land availability, could drive future data center development out of the state. They warned that municipalities risk losing out on significant tax revenues and jobs if companies choose to build their infrastructure elsewhere.[2]

For local advocates and environmental groups, the legislation represents a necessary safeguard. In communities like the Imperial Valley, where a proposed 75-acre data center has sparked fierce opposition, residents have demanded transparency regarding how these facilities will impact local resources. The new laws ensure that municipalities have the data required to make informed zoning and permitting decisions.[2][3]

The legislative package now heads to Governor Newsom's desk for final approval. If signed, the new classification system for large consumptive use facilities will fundamentally alter how digital infrastructure is built across California's 58 counties, setting a potential precedent for other states grappling with the physical footprint of the artificial intelligence boom.[2][3]