California Enacts Seven Data Center Bills, Effective January 1, 2027: New Tariff, Entitlement, and Disclosure Rules for Hyperscalers, Developers, and Power Producers

On September 21, 2026, Governor Newsom signed into law seven data center bills, which primarily take effect on January 1, 2027. Three of the bills (SB 886, AB 2383, and SB 1168) form a single tariff regime administered by the California Public Utilities Commission (CPUC).

SB 886

California Technology Innovation and Ratepayer Protection Act

SB 886 adds a new Article 14.7 to the Public Utilities Code, providing that the CPUC must establish or update data center tariffs by January 1, 2028, covering interconnection, retail service, transmission, distribution, and generation. (SB 886, § 1; Pub. Util. Code § 945 et seq.) These tariffs must prevent stranded costs and cost shifts from transferring to nonparticipating customers. (§ 945.2(b)(2).)

The bill also requires the CPUC to establish a transmission-level interconnection tariff (§ 945.3(a)) that:

• Requires disclosure of duplicate interconnection applications in other utility territories or jurisdictions (§ 945.3(a)(2)).
• Assigns cost responsibility for all transmission upgrades and usage to the data center under a CPUC methodology. Shared network upgrades will be included to the extent federal law permits (§ 945.3(a)(3)).
• Limits refunds of upfront contributions to 75% of the utility’s annual net transmission revenue from that customer, which is tied to actual load materialization (§ 945.3(a)(4)).
• Imposes an early termination fee if the customer leaves within 10 years or fails to ramp load. The fee would not be less than the revenue gap over the 10-year term (§ 945.3(a)(5)).

Pursuant to the new requirements, customers must certify compliance with the prevailing wage and skilled-and-trained workforce program’s labor standards (PRC §§ 25545.3.3(a)-(b), 25545.3.5(a)-(e)) whether or not the customer uses the related opt-in program (§ 945.3(b)). Utilities must also publish maps showing where data centers can interconnect without major upgrades (§ 945.3(c)). This interconnection tariff (Section 945.3), including the labor certification, applies only to data centers entering into new transmission-level interconnection agreements on or after January 1, 2027 (§ 945.3(d)). The remainder of SB 886 is not limited as to the date. For data centers that are seeking service after January 1, 2027 but before the tariff is ultimately approved (§ 945.9), utilities may seek CPUC approval of individual contracts.

AB 2383

Data Center T&D and Generation Tariffs

AB 2383 is a companion bill to SB 886, which adds certain defined terms, a transmission and distribution (T&D) tariff, a generation tariff, and community choice aggregator (CCA) and energy service provider (ESP) obligations (Pub. Util. Code §§ 945.1, 945.4, 945.5, 945.6, 945.8).

For investor-owned utilities (IOUs), the CPUC must require each IOU to file a T&D tariff (§ 945.4) and a generation tariff (§ 945.5(a)) that:

• Requires data centers to pay incremental generation costs caused by their load, through a mechanism lasting at least 10 years (§ 945.5(a)(3)).
• Includes fees for failing to complete interconnection, early termination fees, upfront collateral or prepayment, and a minimum-payment floor based on projected load (§ 945.5(a)(3)(A)-(C)).
• Lets data centers reduce their funding obligation by installing behind-the-meter zero-emission resources (§ 945.5(a)(3)(D)).
• Requires reporting of planned onsite generation investments and bars compensation for onsite generation that shifts costs to others (§ 945.5(a)(4)-(5)).

The generation-tariff threshold is set by the CPUC but cannot exceed 25 MW of peak demand (§ 945.5(c)). The T&D tariff has no stated threshold (§ 945.4).

CCAs and ESPs must adopt their own data center generation tariffs by January 1, 2028, with parallel requirements and the same 25 MW cap (§ 945.6(a)-(b)).

The bill exempts certain facilities from the generation tariff, including publicly funded research, public safety, publicly funded national security (as identified by the CPUC), publicly owned, and utility facilities (§ 945.5(d)). The T&D, CCA and ESP tariffs do not have corresponding exemption lists.

SB 1168

Data Center Rate Structures

SB 1168 directs the CPUC to assess rate structure options, but does not mandate any specific tariff (Pub. Util. Code § 901). The stated goal of the bill is to ensure data centers pay a reasonable share of T&D costs regardless of interconnection level, pay their proportionate share of load growth and procurement, and help ease cost pressure on residential ratepayers (including CARE and FERA customers) (§ 901(a)-(c)). The bill cites that CAISO expects that energy use will grow by 2.3 GW by 2030 (in the context of data center demand), noting that in 2024 there were approximately 2,300 MW of data center capacity applications through PG&E alone (SB 1168, § 1(a)).

AB 1577

Data Center Reporting to the CEC and Local Agencies

AB 1577 provides certain reporting requirements and applies to facilities of 10 MW of capacity or more. Obligations apply to the owner or operator running the entire facility, not to individual tenants (Pub. Resources Code § 25302.10(a)(2)(B), (a)(3)).

The bill requires a one-time California Energy Commission (CEC) filing at the time of energization (and at any subsequent time there’s a substantive change) that includes the name, addresses, operator contact, start date, total and IT floor area, peak capacity per the interconnection request, and onsite generation (§ 25302.10(b)(1)).

An annual CEC filing is also required, which must be broken out by month and specify peak load, installed IT capacity, total kWh, PUE, demand flexibility participation, refrigerant types, cooling degree days, onsite generation, fuel burned by type, and energy storage details (§ 25302.10(b)(2)).

The CEC publishes this data annually in anonymized, aggregated form (§ 25302.10(d)) and must include a data center load assessment in the 2029 Integrated Energy Policy Report and in later biennial reports as the CEC determines (§ 25302.10(c)).

Operators can identify information they claim is exempt from disclosure under existing law (although the bill creates no new exemptions). Operator submissions do not waive any privilege or trade secret protections, and customer-specific energy data cannot be released (§ 25302.10(e); Gov. Code § 7927.303(a), (d)).

When applying for a discretionary local permit, operators must provide to the city or county their estimated annual kWh, onsite generation by type, and average and maximum sound levels (dBA) at the property line (Gov. Code § 65909.3(a)).

Similar to the exemptions under AB 2383 regarding generation tariffs, AB 1577 exempts certain public and utility facilities (also including cable and internet service providers) (§ 25302.10(f); Gov. Code § 65909.3(d)).

AB 2469

Water Disclosures as a Condition of Local Approval

AB 2469 establishes mechanisms to facilitate water disclosures by providing that cities and counties cannot approve a discretionary or ministerial permit for a new data center, or an expansion that raises peak water use (Gov. Code § 65964.7(b)), unless the applicant provides:

• A water supply assessment under Water Code Part 2.10 (§ 10910 et seq.) (§ 65964.7(b)(1)(A)).
• A water scarcity plan with staged drought measures (required starting January 1, 2028) (§ 65964.7(a), (b)(1)(B)).
• Projected water use and efficiency measures (§ 65964.7(b)(1)(C)).
• Workforce disclosures, including composition, job classifications, duration, wage ranges and benefits, and the share of workers living in the county and in the state (§ 65964.7(b)(1)(D)).

The applicant must assume the full cost of water conveyance, treatment, storage, or distribution upgrades, as determined by the water supplier (§ 65964.7(b)(2)). However, simply satisfying these conditions alone does not entitle the applicant to approval (§ 65964.7(b)(3)). Notably, this bill contains no definition of data center nor any express size threshold (§ 65964.7).

AB 2619

Water Reporting Through Business Licenses

AB 2619 sets forth additional water reporting requirements and covers data centers of all sizes across three tiers:

• Type I Data Center (Hyperscalers >10,000 servers or >25 MW power consumption)
• Type II Data Center (2-25 MW power consumption)
• Type III Data Center (<2 MW power consumption)

(Bus. & Prof. Code §§ 16000.4(a)(1), 16100.4(a)(1)).

Before applying for an initial city or county business license, or an equivalent permit, the operator must provide its water supplier a good-faith estimate of its expected water use, source, and projected volumes for max day, max month, and average year, under penalty of perjury (§§ 16000.4(b)(1), 16100.4(b)(1)). The same estimates must appear on the license application itself (§§ 16000.4(b)(2), 16100.4(b)(2)).

At the time of renewal of the permit, the operator must report the prior year’s total and direct water use by source (potable, nonpotable, recycled) and identify the cooling system type (§§ 16000.4(b)(3), 16100.4(b)(3)).

The bill also provides that urban water suppliers must now factor data center demand into their annual supply and demand assessments (Wat. Code § 10632(a)(2)(B)(i)).

SB 887

CEQA Treatment of Data Centers

SB 887 defines “data center” for CEQA and confirms CEQA applies to data center entitlements (Pub. Resources Code §§ 21061.6, 21080.08). The bill bars categorical exemptions for data center projects, and exempts publicly funded research, public safety, national security, publicly owned, utility, and independent-college research facilities (§ 21084(f)(1)-(2)).

Pursuant to the bill, the Governor may certify a data center as an environmental leadership development project (§ 21180(b)(5)(A)) if the lead agency certifies that the project satisfies the following requirements:

• Prepays full interconnection costs (§ 21180(b)(5)(A)(i)).
• Does not increase in-state fossil fuel consumption (§ 21180(b)(5)(A)(ii)).
• Maintains zero-carbon storage of at least 4 hours at 100% of forecasted peak, used for demand response (§ 21180(b)(5)(A)(iii)-(iv)).
• Relies on behind-the-meter zero-carbon generation to the maximum extent feasible (§ 21180(b)(5)(A)(v)).
• Has an enforceable commitment to pay all grid investments, including new generation, with an early termination fee (§ 21180(b)(5)(A)(vi)).
• Uses recycled water and water-efficient or waterless cooling (§ 21180(b)(5)(A)(vii)).
• Runs on 100% zero-carbon hourly electricity within 5 years of operation, of which 75% must be newly built (§ 21180(b)(5)(A)(viii)).
• Enters into a binding community benefits agreement with local organizations (§ 21180(b)(5)(A)(x)).
• Meets the Energy Commission opt-in program requirements (PRC §§ 25545.3, 25545.3.3, 25545.3.5) (§ 21180(b)(5)(A)(xi)).

Additionally, the bill provides that the Office of Land Use and Climate Innovation must write uniform statewide standards for these conditions (§ 21180(b)(5)(B)).

Foley’s Data Center team will continue to monitor and report applicable updates in due course.