California Governor Signs Data Center Legislation; California Public Utilities Commission Will Address Implementation

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On September 21, 2026, Governor Newsom signed several data center laws, including  Senate Bill 886 (Padilla) and Assembly Bill 2383 (Zbur), that address interconnection and electric service for data centers.[1]  The legislation will go into effect on January 1, 2027.

The two bills adopt a new article, Article 14.7, titled the “California Technology Innovation and Ratepayer Protection Act”(Act), adding California Public Utilities Code §§ 945 through 945.9. 

The Act requires the California Public Utilities Commission (“Commission”) to adopt new tariffs or update existing rules to address the interconnection of and the provision of electric retail service to data centers, consistent with the requirements set forth in the Act, by January 1, 2028.

The Act requires the Commission to establish a tariff for the interconnection of data centers seeking to receive retail electric service at the transmission level that includes a number of specific requirements, including:

• Assigning cost responsibility for all transmission facility upgrades and usage to the data center, based on a methodology to be determined by the Commission. “To the extent permitted under federal law, these costs are to include transmission grid network upgrades needed to accommodate the interconnection of the data center or increase the flow of electricity across the grid.”[2]
• Allowing the data center to receive refunds for a portion of its initial contributions to interconnection costs, but only to the extent annual net revenues received by the electrical corporation cover the costs of energization, the costs of providing electrical service, and other costs allocated by the Commission to the data center. The refund shall not exceed 75 percent of the annual net transmission revenue received by the electrical corporation from the data center.[3]
• Requiring an early termination fee for any data center “that departs the electrical system within 10 years of the initial interconnection of the facility or fails to achieve adequate load ramp up, as determined by the Commission.”[4]

The new interconnection tariff shall only apply to a data center that enters into a new interconnection agreement to receive retail service at the transmission level on or after January 1, 2027.[5]  An electrical corporation may also submit an interconnection agreement for Commission approval (via an “exceptional case filing”[6]) for a data center seeking interconnection at the transmission level for those facilities that seek to obtain retail electric service after January 1, 2027, but before the Commission has approved an interconnection tariff pursuant to the Act.[7] 

The Act also would mandate that the Commission require each electrical corporation to file a new generation service tariff.[8]  The tariff must ensure that the data center pays for those incremental generation cost increases resulting from the data center’s load to prevent stranded generation costs.  The Act would require a minimum duration of the payment mechanism to be at least 10 years, and also requires fees for data centers that do not complete interconnection and early termination fees sufficient to ensure other ratepayers are held harmless, and a requirement for the payment of upfront collateral or prepayment for incremental generation cost increases resulting from data center load.  The new tariff is also required to provide an authorization for data centers to reduce generation funding requirements by installing “zero-emissions resources behind its meter,” as determined by the Commission.[9] 

The Act provides a number of exemptions to the generation tariff.  First, the Commission is tasked with setting a minimum peak electricity demand threshold for the tariff.  The threshold cannot be set higher than 25 megawatts.[10]  The tariff shall only apply to data centers that have demand at or above that threshold.  Second, the tariff shall not apply to (1) a publicly funded research facility, (2) a public safety facility, (3) a publicly funded national security facility, as identified by the Commission, (4) a publicly owned facility, or (5) a utility facility, including, but not limited to, a facility providing telecommunications services to the public by a terrestrial facilities-based telecommunications provider.[11]

Community choice aggregators (“CCAs”) and electric service providers (“ESPs”) are also required to “adopt a tariff for generation service for data centers,” by January 1, 2028.[12]  The same requirements outlined above for electrical corporations apply to CCA and ESP tariffs as well. 

The tariff requirements established by the Act overlap with several active Commission proceedings, and reflect some of the ongoing disputes in those proceedings over the interconnection of large loads. 

In November 2024, Pacific Gas and Electric Company (PG&E) filed an application (A.24-11-007) for Commission approval of a proposed Electric Rule 30, which would address the interconnection of new customers seeking retail electric service at transmission level voltages between 50 kilovolts (kV) and 230 kV.   PG&E’s existing interconnection rules govern distribution serviced connections, as transmission-level interconnections were rare and would be handled through an exceptional case filing, which seeks Commission approval of an arrangement that deviates from or is not contemplated by existing utility tariffs. 

That application is still pending, and will likely be the venue where the Commission will address the interconnection tariff requirements set forth in the Act. 

 The Commission also has an ongoing rulemaking, California Advanced Electric Rate Design (docket no. R.26-04-009) opened in April 2026, that will consider rate design issues for data centers and other large load customers.  This provides a venue for addressing the new generation service tariff for data centers mandated by the Act.

Now that the legislation has been signed, the Commission will become the focal point for development of interconnection and generation service tariffs for data centers, and will bear responsibility for establishing the details around the broad requirements set forth in the Act.

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[1] “Data Centers” are defined as “a facility, or part of a facility, that houses computing infrastructure … for the primary purpose of processing, storing, or distributing electronic data ….”   Publ. Util. Code § 945.1(a). 

[2] Publ. Util. Code § 945.3(a)(3).

[3] Publ. Util. Code § 945.3(a)(4).

[4] Publ. Util. Code § 945.3(a)(5).

[5] Publ. Util Code § 945.3(d).

[6] An “exceptional case filing” is a filing that seeks Commission approval of agreements or services that are not tariffed. 

[7] Publ. Util. Code § 945.9.

[8] Publ. Util. Code § 945.5.

[9] Publ. Util. Code § 945.5(a)(3)(D).

[10] Publ. Util. Code § 945.5(c).

[11] Publ. Util. Code § 945.5(d).

[12] Publ. Util. Code § 945.6.