McNerney Introduces Bill to Protect Ratepayers from High Costs of Data Centers
SACRAMENTO – State Senator Jerry McNerney, D-Pleasanton, today introduced new legislation that would protect Californians from skyrocketing utility rates caused by data centers.
SB 1168 would impose a surcharge on data centers that use excessive amounts of energy. The funds generated by the energy surcharge would offset rate hikes on California residents and reduce rates for low-income families.
“Californians pay the second-highest utility prices in the country, and rates are expected to soar even higher because of the rapid growth of data centers around the state,” Sen. McNerney said. “Data center owners and their customers should bear the high costs associated with data centers, not California ratepayers. SB 1168 will ensure large energy users pay their fair share.”
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 massive amounts of 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 rapidly 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.
California residents already pay the second-highest price for energy in the nation, due to wildfire mitigation, extreme heat, and catching up on decades of deferred maintenance by the state’s investor-owned utilities. At a time when over 2 million Californians have past due utility bills, rates are expected to continue to rise.
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 ensure that data centers pay their fair share for excessive energy use by requiring data centers to pay a surcharge and directing the funds to help keep rates from increasing for all other ratepayers and paying down rates for low-income residents.
SB 1168 is expected to be heard in a Senate committee in the weeks to come.
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.
