California enacts laws requiring AI data centers to fund energy and water upgrades

California Gov. Gavin Newsom signed seven bills designed to address the energy and water impacts of AI data centers, requiring operators to fund upgrades to local power grids and water systems. The laws task the California Public Utilities Commission with creating a new rate classification for data centers, ensuring they bear the costs of infrastructure improvements rather than passing them to residents.

The package includes provisions requiring proposed data centers to disclose estimated water use to local governments, along with information about energy efficiency and drought planning. Operators must also meet unspecified energy, water, and fuel consumption requirements to qualify for a streamlined approval process, according to the legislation.

Newsom framed the laws as a response to rising electricity demand, grid constraints, and water use tied to data centers. In a press release, he stated that the measures ensure Californians "remain in the driver’s seat" and prevent operators from profiting at public expense.

The bills were previously reported by the Los Angeles Times and signed by Newsom amid broader state efforts, including an executive order to accelerate the creation of an AI "kill switch."