California bills and federal actions focus on data center water, energy, and grid costs: Key takeaways

Water and energy use and costs are quickly emerging as key regulatory issues for data center development. The trend is reflected in a suite of bills recently introduced in California:

• Assembly Bill (AB) 1577 mandates monthly reporting of water and energy metrics.
  
  
• Senate Bill (SB) 886 creates a dedicated tariff requiring data centers to bear their full grid interconnection and clean energy costs.
  
  
• AB 2619 establishes water-use reporting tied to business licensing and integrates data center demand into statewide water shortage planning.

Meanwhile, the state’s latest water plan sets an unprecedented supply target tied to climate adaptation.

At the federal level, the United States Environmental Protection Agency (EPA)’s newly released Water Reuse Action Plan 2.0 specifically identifies data center cooling as a priority for recycled water expansion.

Together, these developments signal that data center developers may expect heightened scrutiny on these environmental matters.

AB 1577: Monthly reporting of water and energy metrics

Introduced by Assembly Member Rebecca Bauer-Kahan in January 2026, AB 1577 would require data centers with an installed electrical capacity of 500 kilowatts or more to submit monthly operational data to the California Energy Commission, including power usage effectiveness, waste heat data, and onsite energy generation. The bill would require that the same operational data be submitted to local agencies when applying for discretionary permits or land-use approvals.

In addition, while presently removed from the express monthly reporting requirements in recent bill amendments, data centers would need to report on total annual water consumption and annual potable water consumption when applying for discretionary permits. Notably, the bill expressly authorizes use of information submitted for discretionary permits for various purposes, including, but not limited to, "environmental review," such as under the California Environmental Quality Act (CEQA).

The bill also directs the Energy Commission to 1) assess data center electrical load trends in its 2029 Integrated Energy Policy Report and 2) annually publish reported data in an anonymized, aggregated format. Confidentiality protections prohibit disclosure of customer-specific data.

SB 886: Dedicated tariff and clean energy requirements for data centers

SB 886, introduced by Senator Steve Padilla in January 2026, would require the California Public Utilities Commission (CPUC) to establish a dedicated tariff for data centers receiving transmission-level service with peak demand of at least 25 megawatts.

Key requirements include:

• Full cost responsibility for all transmission upgrades triggered by interconnection
  
  
• Prefunding a 15-year contract for new zero-carbon energy resources (with an option for behind-the-meter compliance)
  
  
• Mandatory participation in demand response programs where authorized by the CPUC and where it does not result in net costs to participating customers
  
  
• Early termination fee for customers that depart within 15 years or fail to achieve projected demand

The bill would also require utilities to publish maps showing where data centers can interconnect without costly transmission upgrades. SB 886 passed the Senate Committee on Energy and Natural Resources in March 2026 and after recent amendments, is now back before the full Senate for further review.

A companion bill, SB 887, would 1) confirm that CEQA categorical exemptions do not apply to data center projects and 2) create an expedited judicial review pathway for projects meeting clean energy and water efficiency standards under California’s Environmental Leadership Development Project program.

AB 2619: Water-use reporting and efficiency standards for data centers

Introduced by Assembly Member Diane Papan in February 2026, AB 2619 would require data center operators to disclose projected water use to their water supplier and on business license applications, under penalty of perjury, before obtaining a business license in any California city or county.

Upon license renewal, operators would be required to report actual annual consumption, including a novel “indirect water use” metric of the water consumed to generate the electricity used by the facility.

The bill also directs the California Department of Water Resources and the Energy Commission to develop best practices for data center water efficiency by January 2029 – including closed-loop cooling, non-potable water use, and rainwater capture. The bill would require urban water suppliers to incorporate data center demand into their annual water shortage assessments and contingency plans.

AB 2619 passed the Assembly Water, Parks, and Wildlife Committee in April 2026.

California Water Plan 2028: Statewide supply targets

California launched the California Water Plan 2028 in February 2026 pursuant to SB 72, establishing for the first time a statewide interim planning target of 9 million acre-feet of additional water supply by 2040.

The plan focuses on building watershed-scale, supply-and-demand datasets; setting measurable supply targets; and developing place-specific adaptation strategies.

Notably for data center developers, these improved statewide datasets may influence how agencies frame baseline conditions and cumulative water supply impacts during CEQA review, particularly in supply-constrained regions.

Federal: EPA Water Reuse Action Plan 2.0

On April 16, 2026, the EPA released the Water Reuse Action Plan 2.0 (WRAP 2.0), a renewed federal framework emphasizing water re-use for industry, the technology sector, and energy production.

Action 3.10 specifically directs EPA to compile and share best practices for industrial cooling systems so that states can permit recycled water for data center cooling more readily. WRAP 2.0 also includes Geographic Information System-based mapping tools for alternative water sources and rural water re-use infrastructure funding.

Key takeaways

The regulatory landscape for data center water and energy use continues to shift. In California, this shift combined with pending legislation would make water-use data a required input at every stage of the project lifecycle – from business licensing and discretionary permitting through CEQA review and ongoing operations.

California Governor Gavin Newsom vetoed a similar bill (AB 93) in October 2025, citing a lack of understanding of the “full impact on businesses and the consumers of their technology.”

Federal signals – particularly EPA’s focus on recycled water for data center cooling – reinforce this direction and may create new supply pathways. They shape expectations for water stewardship that data center developers may encounter in future permitting conditions and mitigation requirements.

These trends are not unique to California. Similar legislation is underway in multiple states. Developers with multi-state portfolios are encouraged to build water and energy transparency into their project planning nationwide.

DLA Piper’s Environment, Health and Safety practice group continues to monitor these developments and their implications for data center developers and operators nationwide. For more information about California’s proposed data center reporting requirements, or how similar initiatives may affect current or planned projects across the US, please contact any of the authors.