Construction work takes place on a portion of land between Walnut and Larrison Road and north of Early Road on an $11 billion Amazon Web Services data center campus on Tuesday, June 17, 2025, between South Bend and New Carlisle.
Sacramento, California – California, long considered a bellwether of both technological innovation and climate leadership, finds itself in a complicated tug-of-war over the rise of artificial intelligence and the massive data infrastructure needed to sustain it. As data centers multiply, Sacramento lawmakers are scrambling to strike a balance between protecting ratepayers, maintaining environmental standards, and staying competitive with states that have fewer regulatory hurdles.
The debate centers on the energy demands of next-generation computing. Pacific Gas and Electric (PG&E) recently applied for a special tariff to accommodate the surge of new data centers expected to connect to its grid in Northern California. The utility projects these centers could require the energy equivalent of 6.5 million homes in the next decade—four times the output of Diablo Canyon, California’s last operating nuclear plant. Even more capacity could follow.
“This trend is absolutely real for us,” PG&E CEO Patti Poppe said in April, describing data centers as a potential windfall for utilities after years of declining demand due to energy efficiency improvements.
But the sheer scale of the anticipated load is forcing lawmakers and advocates to ask hard questions. Hunter Stern of the International Brotherhood of Electrical Workers noted the shift in expectations: “For years, California’s goal was to reduce emissions through efficiency… now we’re looking at unprecedented growth.”
Some see opportunity. If handled strategically, data centers could help stabilize the grid and reduce per-customer energy costs. Others worry about unintended consequences, such as increased pollution, stranded assets, and the possibility that fossil fuel usage will outpace the growth of renewable energy. On Tuesday, the NAACP announced plans to sue Elon Musk’s xAI over 35 natural gas turbines allegedly polluting minority communities in Memphis—an ominous sign of how these battles may spread.
To stay ahead of the curve, lawmakers have introduced targeted legislation. State Sen. Steve Padilla’s SB 57 would create a special rate category for large energy consumers like data centers. At the same time, Assemblymember Rebecca Bauer-Kahan’s AB 222 would require energy usage reporting from AI operators and mandate that the California Energy Commission monitor trends.
Both bills aim to promote sustainability and transparency. Yet major tech groups like the Data Center Coalition and the Silicon Valley Leadership Group oppose the proposals, warning that California could scare off investment at the very moment AI’s growth accelerates.
“We’re putting ourselves at a competitive disadvantage,” said Peter Leroe-Munoz of the Leadership Group. “Other states are actively making themselves more attractive.”
