California and Alabama Implement Strict Data Center Energy Laws
California and Alabama have enacted new regulations to ensure data center operators pay for infrastructure costs rather than shifting expenses to residential ratepayers.
Two major U.S. states have introduced legislation to regulate the energy and infrastructure impacts of data centers. On September 21, 2026, Gavin Newsom signed seven bills in California to establish comprehensive oversight of data center land, water, and energy use. The laws eliminate certain environmental exemptions, requiring most projects to undergo full review, and mandate annual reporting of resource consumption. By 2028, the California Public Utilities Commission must implement new tariffs to ensure operators cover all generation and infrastructure costs, including wildfire mitigation fees.
Simultaneously, a new law took effect in Alabama on October 1, 2026, targeting data centers requiring 150 megawatts or more. The Alabama Public Service Commission must now verify that these facilities pay for all incremental costs—including fuel, taxes, and transmission—while providing benefits to other utility customers. While the commission has already approved a contract for ADC Holdings, LLC, it continues to review agreements for Wooster, LLC and APLD BHM-01 LLC.
Despite these measures, transparency remains a point of contention in Alabama. The nonprofit Energy Alabama and local residents have criticized the heavy redaction of public contracts. Alabama Power argues that publishing negotiated terms could weaken its future bargaining position, while the state's rate freeze through 2029 may make it difficult for the public to verify if the law is successfully preventing residential rate increases.
