California lawmakers strike deal to make data centers pay for new power lines

California state lawmakers finalized two bills on Friday that direct the California Public Utilities Commission, the state agency that sets electric rates, to write special rate rules for data centers and decide who pays for the new power infrastructure those facilities need (Los Angeles Times).

The legislation, by Sen. Steve Padilla (D-Chula Vista) and Assemblymember Rick Chavez Zbur (D-Los Angeles), creates dedicated rules for how data centers connect to the grid and what they pay for grid upgrades. Lawmakers drafted the bills in response to community anger over new facilities and fears that data center electricity costs would land on residential ratepayers (Agri-Pulse).

The compromise preempts a tougher bill moving in the final weeks of the 2026 session. It also keeps California from copying the moratoriums that have passed in Texas and New York. The state has fewer large-scale data centers than those markets, but the deal answers a turf fight: the Legislature, not the CPUC, is setting the policy direction.

Tech industry groups representing Google, Meta, Amazon, Anthropic, and OpenAI opposed the package. They argued that restrictions layered on California's high energy costs and scarce land would push data center investment, tax revenue, and the jobs that come with it to other states (Los Angeles Times). Local officials echoed that warning, saying cities could miss revenue if developers move elsewhere.

The CPUC rulemaking is the next step. The unresolved question is who pays for the new transmission lines.