California Moves to Regulate Data Center Water Use and Power Costs

In the final week of the 2026 session, California lawmakers approved a suite of bills tightening oversight of data-center water and electricity consumption. The measures include:

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• AB 2469 – bars local governments from approving new or expanded data centers unless developers disclose water-use plans and finance required upgrades.

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• AB 2619 – requires annual reporting of water sources and usage when seeking or renewing a business license, with penalties for false statements.

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• AB 1577 – adds a similar reporting requirement for overall energy consumption.

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• SB 886 – directs the California Public Utilities Commission to set requirements for facilities drawing at least 25 MW, making them responsible for the generation additions and grid upgrades their demand creates, and obligating a “reasonable share” of wildfire-prevention fees.

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• SB 887 – links faster state environmental review to a commitment to match every hour of electricity use with carbon-free power within five years, with at least 75 % from newly built clean sources, and to provide zero-carbon backup power.

The Cool Down

All bills now await Governor Gavin Newsom’s signature.

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Data centers, which host the computing power behind AI and cloud services, account for roughly 2 % of California’s electricity demand and could double that share within a decade. Their water consumption runs into billions of gallons annually, prompting concerns in drought-prone regions. Governor Newsom previously vetoed a similar water-disclosure bill; the current proposals reflect growing bipartisan pressure for greater transparency.

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• Facilities using at least 25 MW trigger SB 886 requirements.

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• An Assembly analysis estimates the cost of statewide water-use guidelines at $2 million in the first year, then $1 million annually.

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• A Public Policy Institute of California survey found a majority of residents oppose new data-center construction in their neighborhoods.

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• Local bans have taken effect in Monterey Park and Coachella.

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State Senator Steve Padilla framed the bills as a middle-ground approach, rejecting calls for an outright ban while emphasizing the need to protect consumers from utility-cost spikes. Assemblymember Diane Papan highlighted the goal of transparency and urged developers to share water-use data so communities can assess feasibility. The California Public Utilities Commission is expected to draft the tariff and demand-response rules mandated by SB 886.

The Cool Down

The Data Center Coalition, represented by Western government-affairs director Khara Boender, argued that the bills single out data centers and should instead apply to all large non-agricultural water users. The League of California Cities, the California State Association of Counties, and the Rural County Representatives of California opposed AB 2469, contending it undermines local governments’ permitting authority. The Santa Clara Valley Water District expressed support for the increased data to aid planning.

Calmatters

The package is now on Governor Newsom’s desk. If signed, the water-disclosure and infrastructure-cost provisions would take effect by early 2028, while the electricity-tariff rules under SB 886 would be implemented through utility-commission rulemaking in the coming months. Stakeholders—including local governments, water agencies, and the tech industry—are preparing for the compliance timeline outlined in the bills.

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