California makes AI data centers pay for grid upgrades and disclose water use

Governor Gavin Newsom has signed a package of seven bills designed to stop AI data centers from passing electricity and water costs on to residents. The legislation directs the California Public Utilities Commission to create a dedicated rate class for data centers and requires operators to fund the grid upgrades and local water-system improvements their increased consumption demands.

Developers seeking to build new facilities must now submit detailed projections of water use, energy-efficiency data and drought-preparedness plans to local authorities. Only projects that meet defined thresholds for energy, water and fuel consumption qualify for an expedited permitting track — a mechanism intended to reward responsible planning from the outset.

Last week Newsom signed a separate executive order that accelerates development of a "kill switch" for AI systems, a mechanism meant to allow rapid shutdown of models if a safety risk emerges. The order addresses the operational safety side, while the new laws target the physical strain on infrastructure and resources.

In a press release Newsom contrasted the move with federal policy under the Trump administration, which he said is pursuing deregulation while local communities absorb the consequences: rising electricity demand, grid constraints, water consumption and pollution. The laws, he said, ensure Californians remain "behind the wheel" and that those profiting from data centers do not do so at the public's expense.