New Laws Add Requirements for Data Center Approvals

SACRAMENTO — Developers seeking approval for new California data centers will have to document water supplies, disclose projected jobs, and take responsibility for necessary water-system improvements under legislation Governor Gavin Newsom signed September 21. The facilities house computer equipment that processes, stores, and distributes electronic data.

The seven-bill package addresses issues raised in the Mountain Messenger’s earlier coverage of a rumored data center at the former Loyalton mill site: water, electricity, noise, and local employment. Neither the Messenger nor Sierra County could confirm the existence of a plan for a data center in the Loyalton area.

The laws take effect January 1, 2027, with later deadlines for some requirements.

Documenting the water supply and jobs

Assembly Bill 2469 makes water and workforce information a condition of local approval. Before a city or county can approve a permit for construction of a data center, the applicant must provide a water-supply assessment, projected water use, and proposed water-efficiency measures. The requirement also covers expansions that increase maximum peak water use.

It applies both to discretionary approvals, in which officials exercise judgment, and ministerial permits, issued when established requirements are met.

The assessment uses an existing Water Code process that examines whether supplies can meet the project’s demand alongside existing and planned uses over 20 years, including normal and dry years. If groundwater would supply the project, the assessment must address the basin, pumping, and supply sufficiency. Where no public water system can be identified to serve a project, that process assigns preparation of the assessment to the city or county after consultation with relevant water agencies.

Applicants must also disclose the types of workers and jobs anticipated, employment duration, wage ranges and benefits, and the share of workers expected to live in the county and in California. Those details would give officials a basis for examining both construction employment and continuing operations.

The applicant must assume the full cost of required improvements to convey, treat, store, or distribute water to the project, as determined by the applicable water supplier.

Beginning January 1, 2028, applicants must also provide a water-scarcity plan describing responses to worsening drought. The law calls for measures including reduced withdrawals, recycling and reuse, reduced cooling demand, and temporary reductions in computing load where necessary.

A companion measure, Assembly Bill 2619, requires owners or operators to report good-faith water-use estimates under penalty of perjury when applying for an initial business license, equivalent instrument, or permit. The disclosures identify the anticipated water source and demand for the maximum day, maximum month, and average year. An owner or operator must provide those estimates beforehand to its water supplier, defined in the law as a community water system or urban water supplier.

On renewal, the operator must report the preceding calendar year’s water use and identify the cooling system. That creates a later record of actual use alongside the estimates supplied at the outset.

Disclosing electricity use and noise

For covered facilities with electrical capacity of at least 10 megawatts, Assembly Bill 1577 adds disclosures when an owner or operator applies for discretionary permission to construct or operate a data center.

The application must include estimates of annual energy consumption, electricity generated onsite by source, and average and maximum operating noise at the property-boundary point with the highest average sound level. Onsite power estimates include primary and backup generation.

Local officials may use that information for land-use decisions, infrastructure planning, and environmental review. The law exempts publicly owned facilities and several public-service, research, and utility categories. Covered operators must also report operating data to the California Energy Commission through a process the commission will establish.

Completing environmental review

Beginning January 1, 2027, Senate Bill 887 removes categorical-exemption options of the California Environmental Quality Act for ordinary commercial data centers. It also expressly requires agencies to apply the act before approving data center development or operation. Covered projects must follow the state’s existing review process, generally starting with an initial study to identify potential environmental effects and determine how much further analysis is needed.

Arranging and paying for electrical service

The electricity laws add financial commitments for data centers seeking power. Senate Bill 886 and Assembly Bill 2383 require service rules designed to make covered data centers pay the costs of connecting to the grid and obtaining additional power, protecting other customers from those expenses.

Developers covered by the rules would face upfront payments or financial guarantees and minimum charges based on the power they expect to use. Power-supply payment arrangements must last at least 10 years, with fees for projects that fail to connect or end service early. These commitments are intended to cover costs even if a facility uses less power than expected.

The requirements depend on the facility’s power demand, provider, and grid connection. The two laws’ requirements for electric utilities exclude electric cooperatives.

The California Public Utilities Commission must establish or update the service rules by January 1, 2028. Senate Bill 1168 separately directs the commission to examine rates that recover data centers’ share of electricity-system costs and ease pressure on household bills.

The local decision

For any future Sierra County application, the studies and disclosures would feed into a local decision. Under the county’s published application process, planning staff circulate the project for agency comments, complete environmental analysis, and present a recommendation at a Planning Commission hearing. The hearing must receive at least 10 days’ notice through newspaper publication, mailings, and public postings.

The commission may approve a permit, impose conditions, or deny it. Its decision may be appealed to the Board of Supervisors.