California makes AI data centers pay their own grid and water costs

Gov. Gavin Newsom signed seven bills requiring AI data centers to pay for upgrades to local power grids and water systems, rather than passing those costs onto residents. The laws direct the California Public Utilities Commission to create a new utility rate classification for data centers and require proposed facilities to disclose estimated water use, energy efficiency, and drought planning to local governments.

Data centers must meet energy, water, and fuel consumption thresholds before qualifying for a streamlined approval process. Newsom framed the package as a state response to federal deregulation. "While the Trump administration moves toward deregulation, communities are left to deal with the consequences — higher electricity demand, grid constraints, water use, and pollution," he said in a press release.

Last week, Newsom separately ordered an expedited process for an AI "kill switch."