California will require data centers to disclose energy and water use starting next year

California turns data center disclosure into law

According to The Verge, California Governor Gavin Newsom signed seven bills on Monday that will force data center operators in the state to report their energy and water use, with some disclosures beginning next year. The laws respond to mounting public frustration that the facilities underpinning the AI boom are largely invisible to the communities hosting them: outside the operators themselves, almost nobody reliably knows how much power these sites draw or how much water they consume.

What the new package requires

The legislation splits into two groups. Three bills, Senate Bill 886, Assembly Bill 2383 and Senate Bill 1168, direct the California Public Utilities Commission to establish dedicated electricity rates for data centers. The goal is to make operators, rather than other utility customers, cover the cost of new grid infrastructure built to serve power-hungry facilities. AB 2383 also nudges operators toward greater use of renewable energy.

The remaining bills target disclosure and accountability. AB 1577 requires monthly reporting of data center energy consumption. AB 2619 and AB 2469 mandate water disclosures, and AB 2469 also makes operators financially responsible for infrastructure upgrades needed to serve their facilities. SB 887 removes categorical exemptions from the California Environmental Quality Act, meaning data center projects must now go through environmental review.

The rate question nobody can currently answer

Mark Specht, senior manager for the climate and energy program at the Union of Concerned Scientists, told The Verge that trying to obtain basic information about data centers has been "extremely frustrating." He co-authored a fact sheet this year laying out two competing scenarios for California's grid. In one, surging electricity demand, expensive new transmission connections and the risk of overbuilt infrastructure, if AI demand falls short of projections, leave ordinary utility customers footing the bill. In the other, data centers spread the fixed costs of grid maintenance across more customers and bring bills down for everyone.

The catch, per the fact sheet, is that the savings in the second scenario depend on data centers contributing to lower-voltage distribution system costs. Large facilities routinely avoid those charges by connecting directly to the high-voltage transmission system instead. Specht said he would not claim data centers have raised electricity costs so far, and they may even have lowered them, but the numbers needed to prove either case simply do not exist. That is the gap AB 1577's monthly reporting is designed to close, and Specht argues it is better to act before the impact is felt broadly.

Water data stays patchy

The water picture is even murkier. Researchers at Santa Clara University, led by environmental science professor Iris Stewart-Frey, contacted every water provider in districts that host data centers while studying impacts on water-stressed communities. Every provider refused to share usage data, citing privacy regulations, and the researchers found very few data centers in the state had publicly available environmental impact reports. That opacity matters more as hyperscale facilities shift away from affluent urban areas toward rural regions where small water systems and lower-income communities have less capacity to absorb added demand.

The new laws only partly close this gap. As The Verge reports, AB 2619 and AB 2469 require water disclosures only when operators apply for permits or business licenses, so there will be no year-over-year picture of actual consumption. A disclosure made during a cool, wet year may understate what a facility needs in hot, dry periods, and it becomes difficult to track whether usage is growing or whether sustainability commitments are being honored. Stewart-Frey nonetheless called the package a step in the right direction, noting that Newsom vetoed a similar water disclosure bill last year before public concern over data centers intensified. The AI buildout, she told The Verge, "is not a force of nature" and is something that can be regulated.

Why it matters

California has assembled one of the most far-reaching disclosure regimes yet applied to the data center industry, and its structure offers a template for other states confronting AI-driven strain on power grids and water supplies. For cloud and colocation providers, the practical consequences are immediate: dedicated utility rates change the economics of siting large facilities in the state, responsibility for water and grid upgrade costs shifts onto operators, and consumption figures that were previously internal become part of the public record. Perhaps most significantly, regulators, researchers and ratepayers will finally have the data needed to test industry sustainability claims and to determine whether the AI infrastructure boom is raising or lowering the bills of everyone around it.