In April 2026, the California Public Utilities Commission (CPUC) initiated a comprehensive rulemaking to modernize electric rate design across the state. A central focus will be how California should design electric rates for data centers and other large, transmission‑connected loads.

For public officials responsible for economic development, infrastructure planning, energy policy, or environmental oversight, this rulemaking warrants close attention. The outcomes may shape where and how large digital infrastructure develops in California — while also affecting electricity costs borne by other customers.

Why Data Centers Are a Focus

Data centers are among the fastest‑growing sources of electric demand statewide, driven by cloud services, artificial intelligence, and digital infrastructure needs. These facilities often require large, continuous loads and may necessitate upfront investments in transmission, distribution, and reliability infrastructure. This rulemaking meets Senate Bill 57 (2025) requirements for assessing the potential cost impacts of new data center loads.

The CPUC has identified a risk that existing rate structures may not appropriately reflect the system costs created by rapid load growth, raising concerns about:

• Cost shifts to residential and small‑business customers
• Stranded utility investments if large customers alter operations or exit
• Localized grid reliability challenges

As a result, the rulemaking will address the question of whether current commercial and industrial rate designs remain sufficient for data centers — or whether new approaches are needed.

Policy Questions Under Consideration

The rulemaking raises several issues relevant to local governments and utility customers:

• Whether dedicated rate tariffs or customer classifications should be developed for data centers
• How to recover infrastructure and wildfire‑related costs in ways that are equitable and predictable
• Whether long‑term service agreements, fixed charges, or revised demand charges are appropriate for large loads
• How rate design can encourage load flexibility without discouraging investment

These questions intersect with broader policy goals, including economic competitiveness, environmental objectives, and grid reliability.

Implications for State and Local Decision‑Making

For jurisdictions considering or hosting data center development, this proceeding may influence:

• Local land‑use and permitting decisions tied to energy availability
• Utility infrastructure planning and coordination
• Long‑term fiscal and economic development strategies

The rulemaking aims to balance these considerations in the context of rising electricity bills, which are already under pressure from wildfire mitigation and climate resilience investments among other things.

How to Participate

This proceeding is slated to continue over the next 24 months. Workshops, staff proposals, and formal decisions will clarify whether California moves toward distinct rate structures for data centers and other large customers. All interested agencies, businesses, consumer groups and individuals may submit opinions and advice to inform future policies and recommendations.

This ratemaking is a key component of ongoing, statewide efforts to ensure that California can support digital infrastructure growth while maintaining fairness, affordability, and system integrity — a balance that will have lasting statewide implications.