Two bills authored by state Sen. Steve Padilla cleared Sacramento committees in the same week, putting California on course to become the first state with comprehensive data center regulations. The legislation arrives as communities from Monterey Park to Imperial County mount an escalating resistance to unchecked development.
The artificial intelligence boom that reshaped Silicon Valley is now reshaping the fight over California’s electric grid, water supply, and the rights of ordinary residents to know what is being built next door. For years, data centers — the massive server warehouses powering AI services, cloud storage, and digital infrastructure — expanded across California with minimal regulatory scrutiny. That era may be coming to an end.
Two bills that would curb the potential economic, environmental, and public health impacts of data centers on California residents cleared key hurdles in the state Senate this week. Senate Bills 886 and 887, both introduced by state Sen. Steve Padilla (D-San Diego), advanced from committee — the most significant legislative progress California has made on data center regulation to date.
The timing is deliberate. Communities across the state have been mobilizing to push back against data center development, particularly for projects slated to be built near residential areas. The bills represent Sacramento’s direct response to what has become one of California’s defining infrastructure conflicts: a collision between the AI industry’s insatiable appetite for power and land, and the residents, ratepayers, and local governments that bear the costs.
What SB 886 and SB 887 Actually Do
The two bills take distinct but complementary approaches to the same underlying problem.
SB 886 would require the California Public Utilities Commission to establish a special tariff to protect ratepayers from the transmission costs that supply large data centers while meeting the state’s climate goals. The tariff would ensure that electrical grid investments for data centers are fully recovered from data center customers — making certain that other ratepayers do not end up footing the bill. A tariff structure would protect ratepayers from skyrocketing costs without increasing the state’s reliance on fossil fuels.
SB 887 takes a carrot-and-stick approach to environmental protection. Data centers that meet strict criteria for water conservation and clean energy use can receive Environmental Leadership Development Project certification, granting them an accelerated environmental review process. Those that do not meet those standards would face full scrutiny under the California Environmental Quality Act.
SB 886 passed the Senate Energy Committee by a vote of 12-4 and now moves to the Appropriations Committee. SB 887 passed the Senate Environmental Quality Committee by a vote of 4-1 and now moves to the Senate Energy Committee.
Sen. Padilla was direct about the stakes: “California families cannot be left footing the bill for Big Tech’s infrastructure needs. Environmental degradation and runaway utility costs cannot be the price for development. These projects need to be built in a way that supports our grid and uplifts the communities in which they are built.”
Supporters of the legislation argue that with thoughtful planning, new data centers can benefit ratepayers, improve grid reliability, and minimize environmental harm — but only if California establishes standards now, before the buildout accelerates further.
The 18.7 Gigawatt Problem No One Is Ignoring Anymore
The urgency behind both bills becomes clear when the grid demand numbers are placed in context.
Developers have requested 18.7 gigawatts of service capacity for data centers in California — more than enough to serve every household in the state. That figure reflects an enormous amount of speculative capacity: data center developers often submit multiple interconnection requests to utilities that inject significant uncertainty into California’s transmission planning. A single developer may submit applications across different utilities, but only plans to build at one site. Regulators do not expect all of those projects to be built, but the scale of the requests is forcing the question of who pays for the grid upgrades required to serve even a fraction of them.
In May 2025, the California Independent System Operator approved a cluster of transmission network upgrades in the South Bay Area largely intended to serve 2.5 gigawatts of concentrated data center and electrification load growth between 2026 and 2039. The cost of those upgrades alone exceeds $2 billion.
PG&E now estimates it has enough capacity in its planning pipeline to push San Jose’s electricity use to almost three times its current peak, with 17 data center projects totaling approximately 1.5 gigawatts in the final engineering phase and projected to begin operations between 2026 and 2030. Most of those projects are concentrated in Silicon Valley and the greater San Francisco Bay Area, but the footprint is expanding rapidly into the Central Valley, Sacramento, and Southern California.
After other states experienced skyrocketing energy costs due to data center development, they have taken action to better protect their residents. Last year, energy regulators in Ohio determined that data centers must pay more upfront for their power demands. California’s legislation follows a national pattern — but the scale of demand in the state makes the policy stakes considerably higher.
Imperial County: A Ground-Level Battle Over CEQA and Community Rights
The most contentious data center fight in California is unfolding in the desert flatlands of Imperial County — a rural, majority-Latino farming community near the Mexican border that is already one of the most polluted air basins in the state.
Residents in Imperial County raised concerns after learning of a nearly 1-million-square-foot hyper-scale AI data center proposed for land close to housing and within a mile of several schools. Thousands of people signed a petition calling for more formal public participation and environmental review. The developer says the project does not require a full environmental review under CEQA as it is to be built on land zoned for industrial use.
The proposed complex would include a 950,000-square-foot data center building standing 35 feet tall, a large-scale battery energy storage system powered by Tesla Megapacks capable of supplying 862 megawatt hours, an electrical substation, and 100 natural gas-powered backup emergency generators to ensure continuous operation.
The CEQA exemption alarmed residents, who launched a community organization, Not in My Backyard Imperial, to protest the data center and demand an environmental review. “It feels like it’s us against the county,” said Fernanda Camarillo, a 27-year-old Imperial County resident with asthma, adding that she fears the facility would worsen the region’s already serious air quality problems.
Francisco Leal, another NIMBY Imperial member, described the personal stakes: the planned center would be built a few feet from his backyard. “It’s going to harm us,” he said. “It’s going to affect and degrade the quality of life of the people that live nearby.”
Gilberto Manzanerez, founder of Valle Imperial Resiste, a grassroots environmental collective, said the bills’ progress at the state level signals that Imperial County’s concerns are being heard beyond local government. “The fact that this is even moving at the Senate level means there is a true worry about these centers being built as fast as they are,” he said. “It shows a clear contrast to local officials who seemingly are eager to accept these types of projects without any proper protection policies in place.”
The City of Imperial filed a lawsuit against the county and the project developer in early December, asserting that the project required a rezoning and a conditional use permit, and therefore could not qualify for a CEQA exemption. The case management conference is scheduled for June 2, 2026. Padilla has been publicly pressing the Imperial County Board of Supervisors for answers about the CEQA exemption since December — and, as of mid-March, has not received a substantive response.
Monterey Park Votes to Put a Permanent Data Center Ban on the Ballot
The Imperial County conflict has a counterpart in the San Gabriel Valley, where Monterey Park — a majority Asian and Latino city of roughly 60,000 residents in Los Angeles County — has become a flashpoint for community resistance to data center development.
The pushback was triggered by an Australian asset manager’s plan for a 247,000-square-foot data center site with a new electrical substation and diesel generators. Residents voiced anger about the facility bringing noise and air pollution to the city, and consuming vast amounts of energy.
At its March 4 meeting, the Monterey Park City Council unanimously voted to place a measure on the June 2, 2026 ballot that would permanently prohibit data centers within the city. If approved by voters, the measure would amend the Monterey Park Municipal Code to ban all data center uses citywide.
The council also voted unanimously to extend the city’s existing moratorium on data center development. Under the extension, Monterey Park will continue to prohibit the acceptance, processing, or consideration of any data center applications through January 21, 2027. The moratorium is intended to prevent new proposals from advancing while long-term policy decisions are finalized. In April, the council is expected to consider an ordinance that would permanently ban data centers independent of the ballot measure.
Community organizers from No Data Center Monterey Park noted that as far as they know, no other city in California has taken such a strong approach to banning data centers, and that the work is not finished — the June 2 election still needs to be won to reinforce the ban.
Industry Versus Community: The Competing Arguments
The data center industry has not been passive in these debates. During the 2025 legislative session, major tech companies lobbied successfully to water down California’s previous attempt at data center regulation — reducing Sen. Padilla’s SB 57 from a ratepayer protection bill to a study requirement, with findings not due until 2027.
The developer behind the Imperial County project has been similarly aggressive. Sebastian Rucci, chief executive of Imperial Valley Computer Manufacturing, commissioned multiple studies he says found no or minimal harms from the proposed project. He has threatened to pull the proposal if a CEQA review is required, arguing that environmental groups weaponize the review process for financial settlements.
Industry proponents argue the economic case is compelling. PG&E has said that for every gigawatt of new data center demand it serves, electric customers could save between 1% and 2% on their monthly bills in the long term. The Imperial County developer has also said the facility would create 2,500 to 3,500 construction jobs and 100 to 200 permanent positions, and generate tens of millions of dollars in annual tax revenue for one of California’s poorest counties.
But ratepayer advocates and environmental groups argue that those potential benefits do not justify the transfer of infrastructure costs to households and small businesses. Matthew Freedman, staff attorney for The Utility Reform Network, called the bills’ protections critical, saying they ensure data center development benefits the electrical grid, consumers, and the environment.
What Comes Next for California’s Data Center Debate
SB 886 and SB 887 still have a considerable path ahead in the Legislature before they can become law — both bills now move to additional committees before a potential floor vote. The tech industry’s lobbying apparatus, which successfully gutted the 2025 version of this legislation, will engage again. Assembly Utilities and Energy Committee Chair Cottie Petrie-Norris has signaled interest in a parallel approach in the lower chamber, and additional data center bills from Sens. Jerry McNerney and Sasha Renée Pérez — SB 978 and SB 1168 — are also moving through the Senate, all touching on data center energy use and how utilities should charge large customers.
At the local level, the Monterey Park vote in June will be watched statewide as an early referendum on how far California communities are willing to go. Cities across the San Gabriel Valley and Southern California have already begun addressing the possibility of data centers landing in their zip codes, in what local observers describe as a spreading awareness of the development risks.
Padilla said that above all, what is important is providing answers to the questions many in the community are asking. “In the end, I think what I’m looking for, and I think what probably most of my constituents in that county are looking for, is making sure that we understand the elements of the project in its totality.”
California’s AI data center reckoning has arrived. The bills clearing Sacramento this week are the opening move in what will be a sustained fight over who controls the infrastructure powering the digital economy — and who pays for it.
