California Bill Shields Ratepayers from Data Center Energy Costs
Source: sd18.senate.ca.gov
California just took a significant step to protect residents from rising energy bills. Governor Gavin Newsom signed Senate Bill 57 into law, addressing the impact of data centers on energy costs.
Examining Data Center Impact
Authored by Senator Steve Padilla, SB 57 directs the California Public Utilities Commission (CPUC) to study how data center growth affects ratepayers. The study will examine the increased grid demands driven by tech companies' AI development.
Protecting Communities
Senator Padilla emphasized the need to understand the impact of energy-hungry data centers on the grid and energy bills. The goal is to implement effective protections for communities facing rising utility costs.
AI's Energy Footprint
The boom in artificial intelligence relies on massive data centers. These centers consume vast amounts of energy and water, straining the electrical grid and requiring infrastructure investments.
Rising Demand, Rising Concerns
The rise of generative AI has caused data center demand to surge. Siemens, a major data center provider, reported a 50% jump in data-center business revenue within a year, highlighting this rapid growth.
Risk to Ratepayers
This growth puts residential ratepayers at risk, as California's grid is overburdened by sudden load increases. Ratepayers could also be liable for covering the costs of infrastructure built to meet this demand.
Ohio's Approach
Energy regulators in Ohio have already mandated that data centers pay more upfront for their power needs. Ohio, like other states, faces costly grid upgrades due to increased data center demands straining outdated infrastructure.
Significant Energy Consumption
Data centers consumed about 4.4% of total U.S. electricity in 2023. The 2024 Report on U.S. Data Center Energy Use from Lawrence Berkeley National Laboratory projects this could rise to 6.7–12% by 2028.
Rate Hikes on the Horizon
This surge in energy demand from data centers is driving utility price increases. The Mid-Atlantic regional grid, home to many data centers, projects rate increases of up to 20% this year.
Infrastructure Costs
The grid operator is now paying $14.7 billion for power in the 2025/26 delivery year, a significant jump from the previous $2.2 billion. The cost of building the necessary infrastructure can be high.
Who Pays?
These costs aren't always covered by the companies building the data centers. This leaves ratepayers to foot the bill for upgrades that primarily benefit the tech companies.
Looking Ahead
SB 57 enables the PUC to study how data center load growth shifts costs to other ratepayers by 2027. This study is crucial to prevent skyrocketing energy costs for residents.