California Governor Gavin Newsom signed 7 bills that strengthen rules on AI data centres’ electricity and water use and how costs are shared.

Cryptopolitan, a blockchain media outlet, reported on Sept. 21 that the measures focus on making operators more clearly responsible for power rates, grid investment and water infrastructure burdens, rather than directly blocking data centre construction.

The package centres on requiring large data centres to disclose in greater detail the burden they place on local power grids and water supplies, and preventing them from passing those costs on to other consumers.

Among the bills, AB 1577 requires data centre operators to submit annual electricity use and operational information to the California Energy Commission and local regulators. AB 2383 revises the electricity rate system to allow recovery of costs from additional generation facilities and grid losses, while preventing those burdens from being shifted to other customers.

Rules on water use were also tightened. AB 2469 requires water supply conditions and potential shortages to be presented before local government approval, and makes applicants pay for needed water infrastructure improvements. AB 2619 requires companies seeking permits to report expected water use and, at permit renewal, to verify and submit actual use annually.

Grid connection and cost calculation rules will also be revised. SB 886 requires the California Public Utilities Commission to establish or amend tariffs and interconnection rules by Jan. 1, 2028. It includes provisions on calculating transmission upgrade costs and stranded-cost protection rules to apply to large data centres. SB 1168 also calls for a review of rate structures so data centres pay a fair share of transmission, distribution and load-related costs. SB 887 limits the application of exemptions that streamline environmental reviews for data centre projects and sets separate requirements for using fast-track procedures under the Environmental Leadership Act.

Newsom said the measures are meant to "keep Californians in the driver’s seat" and said he would not allow companies to profit at residents’ expense. The Data Center Coalition, in contrast, warned that such regulations would make California less attractive for new business and that projects could move to other states.

The legislation comes as data centre investment surges. The market is increasingly viewing access to electricity as a factor that shapes locations as much as capital raising. The International Energy Agency projected global data centre electricity consumption will rise to 950 TWh in 2030 from 485 TWh in 2025. As a result, physical constraints such as power grids, water and land are becoming more important in location decisions.

In major markets, available capacity is shrinking quickly. CBRE said the vacancy rate in the first quarter of 2026 was 0.3 percent in Northern Virginia, 1 percent in Atlanta, 2.2 percent in Chicago and 1.8 percent in Dallas-Fort Worth. Allianz Commercial counted at least 75 construction projects worth about $130 billion in the United States that were delayed or cancelled during the same period due to local opposition and other factors. It cited shortages of power, land and skilled labour, as well as permitting problems, as key reasons.

Europe is moving in a similar direction. The European Commission began a 12-week public consultation the same day on minimum performance standards for data centres. Responses are due by Dec. 14, and it plans to present legislation in the second quarter of 2027. It also unveiled a new energy-efficiency package based on a common EU rating system and label.

The key question is whether tighter regulation will curb investment in AI infrastructure or merely change where it goes. Developers are already reviewing energy projects using gas, hydropower, wind and solar in areas including Neuquen and Chubut in Argentina’s Patagonia. It is difficult, however, to conclude that California’s rules will immediately lead to projects leaving. The short-term impact depends on how implementing agencies enforce the laws, how much they affect costs and timelines, and whether other regions can provide power, fibre-optic infrastructure, funding and customers together.