California lawmakers advance data center bills to balance industry, environmental concerns

Rising energy bills for ratepayers, exorbitant water use, feeding the big appetites of companies racing to power AI – debate on how to harness and accommodate the data center boom is sweeping the nation.

As developers clash with communities over hyper-scale data centers nationwide, two bills that would curb potential economic, environmental and public health impacts on residents have cleared hurdles in California.

Senate Bills 886 and 887, both introduced by state Sen. Steve Padilla, D-San Diego, advanced from committee this week. The Democrat’s district includes both San Diego County and Imperial County, where a proposal to build what would be one of California’s largest data centers is in a dispute about environmental review.

“That’s exactly the scenario that demands that we set standards for these types of projects,” Padilla said.

Senate Bill 886, dubbed the California Technology Innovation and Ratepayer Protection Act, would require the state Public Utilities Commission to institute a tariff that data center customers would have to pay. The other bill would require data center projects to abide by the California Environmental Quality Act while also providing an avenue to fast-track construction if they meet certain conditions, including using recycled water and avoiding the use of fossil fuel energy.

The Senate Committee on Energy, Utilities and Communications approved SB 886 on a 12-4 vote on Tuesday, and the Senate Environmental Quality Committee approved SB 887 on a 4-1 vote on Wednesday. 

This month the Little Hoover Commission – an independent oversight agency – published a report describing the challenges and opportunities of the data center boom. The authors offered 15 recommendations, including tariffs to protect ratepayers from rising power bills and provisions for limiting pollution in nearby communities, and pointed out that policymakers may, “face pressure to defer to powerful technology companies and utilities.”

The report said if “approached thoughtfully,” California has “a chance to align the interests of industry, government, and the public.”

Last year Padilla sponsored similar legislation to protect residents from rising rates as a result of data center expansion. His Senate Bill 57 was ultimately approved and signed by Gov. Gavin Newsom, though after significant last-minute revisions. At first it was written to establish an electric rate structure to protect consumers from price hikes. Instead it authorized the state Public Utilities Commission to conduct a study on how data centers affect ratepayers’ bills.

Padilla says this time, he believes the situation has shifted and that his bills stand a better chance of passing. He says that there is significantly more information about energy consumption, as well as environmental and public health impacts, that has emerged over the past year.

Opponents of Padilla’s new bills include organizations such as the Data Center Coalition and the Silicon Valley Leadership Group concerned about litigation delays for projects.

Padilla downplayed those risks, noting the bill provides a fast-track path for projects if developers meet certain environmental standards.

“If you meet high standards, you get a level of certainty in review that cuts down on this process. So it is a mutual benefit,” Padilla said.

He also said that protecting consumers and supporting industry are not mutually exclusive.

“If we put people on the moon with 1960s technology, we can figure out a way to be supportive of industry and innovation… and we can regulate them in a way that is common sense and protects people,” he said.

Communities across the state have been mobilizing to push back against data center development, particularly for projects slated to be built near residential areas.

Following public outcry, the Monterey Park City Council has enacted a temporary moratorium on data center development and voters there will consider a permanent ban in June.

Meanwhile, residents in Imperial County have raised their own concerns after learning of a nearly 1 million-square-foot hyper-scale AI data center proposed for land close to housing and within a mile of several schools. Thousands of people signed a petition calling for more formal public participation and environmental review.

The developer says his project doesn’t require a full environmental review under CEQA as it is to be built on land zoned for industrial use. That claim is being challenged in court.

“CEQA, which I believe is a disaster for California, it’ll kill it. It’s why California hasn’t had the growth,” Sebastian Rucci, the project’s developer said to inewsource.

It’s the kind of project that would face more scrutiny under Padilla’s legislation.

Padilla and the Imperial County Board of Supervisors have exchanged letters about the project.

In a December letter, Padilla posed numerous questions to the board, including on what basis the project would be exempt from CEQA. In February, he published a press release expressing his dismay for not having received answers to his questions.

Imperial County officials responded with a letter saying that they had tried to schedule a meeting with the senator which had yet to take place.

The county has declined requests for interviews regarding the data center project citing ongoing  litigation.

Padilla said that above all what is important is providing answers to the questions many in the community are asking.

“In the end, I think what I’m looking for, and I think what probably most of my constituents in that county are looking for, is making sure that we understand the elements of the project in its totality, not piecemeal,” Padilla said.

Christopher Scurries, an Imperial Valley resident living nearby the proposed project said that going through CEQA could alleviate the frustration many residents feel.

“If they had gone through that process, then we would know exactly what we’re dealing with,” Scurries said, “and it could have been to their benefit to know. 

But now we’re just angry.”