Legislature Greenlights McNerney’s Bill to Ensure Data Centers Pay Their Fair Share
The California Legislature today approved Sen. Jerry McNerney’s SB 1168, which is designed to protect Californians from skyrocketing utility rates caused by data centers.
SB 1168 would direct the California Public Utilities Commission (CPUC) to examine data centers’ use of excessive amounts of energy and ensure that Californians don’t face rate hikes as a result.
“Californians’ utility bills are among the highest in the nation, and the rapid growth of data centers is threatening to send rates through the roof,” said Sen. McNerney, D-Pleasanton. “SB 1168 will help ensure that data centers bear the costs of their excessive energy use, not California ratepayers.”
SB 1168 won bipartisan approval in the state Senate on a 38-0 vote after the Assembly approved it unanimously. The bill now goes to the governor’s desk.
Data Centers not only use massive amounts of energy, but they commonly cause utilities to construct infrastructure upgrades to handle the increased power demand. The utility upgrades, in turn, are expected to be paid by all California ratepayers.
Although Silicon Valley innovation has been a major driver of the state’s economy, the industry’s insatiable need for data has led to the proliferation of data centers. According to DataCenterMap, California is home to the third most data centers in the United States. As artificial intelligence continues to progress, the need for additional, larger data centers will only increase.
The California Independent System Operator expects data center load to grow by 2.3 gigawatts by 2030. As shown in the 2025 Integrated Energy Policy Report, data centers have already requested 18.7 GW of power from the state’s utilities, enough to power 18 million homes.
This accelerating demand for power, especially because of the explosive growth of AI, along with the necessity for transmission and distribution upgrades to deliver that power, could end up raising utility rates for all Californians.
According to Stanford University, over $37 billion was spent on AI infrastructure in 2024 alone. A report from McKinsey estimated an investment total of $5.2 trillion in data centers by 2030 to power artificial intelligence. This level of investment shows that AI companies and investors have the means to cover their own costs without harming all ratepayers.
SB 1168 would require the CPUC to assess methods to:
- Ensure data centers pay their fair share for transmission and distribution upgrades
- Ensure data centers pay for their share of load increases
- Alleviate rate pressures on residential customers.
Sen. Jerry McNerney’s 5th Senate District includes all of San Joaquin County and Alameda County’s Tri-Valley. He is also chair of the Senate Revenue and Taxation Committee and is a member of the Energy, Utilities and Communications Committee and the Privacy, Digital Technologies, and Consumer Protection Committee.
