California SB 886: Who Pays for Data Center Transmission

California SB 886 puts the question of who pays for data-center transmission into state law. The Governor approved the bill on September 21, 2026, and it was chaptered as Chapter 438. It directs the California Public Utilities Commission to set new tariffs or update electric rules for “participating customers” on or before January 1, 2028, and it requires a transmission-level interconnection tariff that, for data centers, assigns cost responsibility for transmission upgrades to the customer. Section 945.2 gives the CPUC until January 1, 2028 to establish those tariffs or rules, so what the law sets today are requirements and deadlines. (SB 886 chaptered text)

For utilities, co-ops and suppliers that plan transmission and substation work around large loads, the useful part is the detail. California SB 886 sets refund limits, a termination fee floor and a public map requirement for transmission-level data center service, and those section 945.3 terms apply only to data centers entering new transmission-level agreements on or after January 1, 2027.

What California SB 886 requires of the CPUC

The new Public Utilities Code section 945.2 sets the deadline and the guardrails. On or before January 1, 2028, the CPUC must establish new tariffs or update existing electric rules for interconnecting participating customer facilities and for retail, transmission, distribution and generation service to them. In doing so it must, at a minimum:

• evaluate the risks and benefits of the tariffs to nonparticipating customers;
• ensure the tariffs prevent stranded costs for, or cost shifts to, nonparticipating customers;
• for an unbundled customer, show generation-related charges as a separate line item on the bill.

SB 886’s duties run to the CPUC, electrical corporations and participating customers. Its text does not mention publicly owned utilities.

The transmission interconnection tariff: cost, refunds and exit fees

Section 945.3 is where the money terms sit. The CPUC must establish a tariff for a participating customer seeking retail service at the transmission level. Under section 945.3(d) it applies only to data centers, and the tariff must do all of the following:

1. Disclosure. A data center applying to an electrical corporation must disclose whether it has applied for the same data center in other utility territories or jurisdictions, and list each instance.
2. Upgrade cost responsibility. Cost responsibility for all transmission facility upgrades and usage goes to the participating customer, using a methodology the CPUC will determine. To the extent federal law permits, those costs should include shared network upgrades needed for the interconnection or to increase flow across the grid.
3. Capped refunds. The customer can get back part of its initial contribution only as actual annual net revenues cover energization, service and other allocated costs. Refunds track how much of the load actually materializes and cannot exceed 75 percent of the annual net transmission revenue the utility receives from that customer. The statute notes this may delay full refund recovery.
4. Early termination fee. A customer that leaves the system within 10 years of initial interconnection, or fails to achieve adequate load ramp-up as the CPUC determines, owes a fee that should not be less than the revenue gap against its originally projected demand and energy use over the minimum 10-year term.

Two more provisions matter to planners. Each electrical corporation must publish and update maps showing where participating customers can interconnect without significant, costly and time-consuming transmission upgrades. And section 945.3 applies only to a data center that enters a new interconnection agreement for transmission-level retail service on or after January 1, 2027. For a data center seeking transmission-level service after that date but before the tariff is approved, section 945.9 lets a utility file an exceptional case contract, which must still meet the article’s requirements.

AB 2383 adds the generation side

A second bill, AB 2383 (Zbur), was approved the same day and chaptered as Chapter 435. Its Legislative Counsel’s Digest says the CPUC must require each electrical corporation to file a transmission and distribution service tariff and a generation service tariff for participating customers. Each community choice aggregator or electric service provider must adopt a generation service tariff for data centers on or before January 1, 2028. (AB 2383 chaptered text)

This article covers SB 886 and AB 2383 only.

Texas took a different route the same day

Texas acted on September 21 too, by letter rather than statute. Governor Abbott directed the Texas Commission on Environmental Quality “to pause the issuance of all permits related to data center projects until ERCOT completes its review,” and wrote that data center projects “must cover all electrical infrastructure costs.” The letter asked TCEQ for a compliance update by October 19, 2026, which is a reporting date, not a restart date. (Governor’s letter to TCEQ) Our ERCOT Batch Zero review covers how that letter fits with ERCOT’s verification process and the PUCT’s adopted large-load rule.

The difference is in form. The Texas statement is a directive about permits and a policy expectation. California’s is a statutory instruction to its regulator, with specific refund, fee and timing terms the CPUC must build into a tariff.

What this means for project and equipment planning

This section is our reading, not something the statute says. SB 886 does not mention distribution equipment, lead times or orders.

• Dates to track. January 1, 2027 marks which new transmission-level agreements fall under section 945.3. January 1, 2028 is the CPUC’s deadline for the tariffs. Neither date is a purchasing deadline.
• Where to look first. Once the utilities publish the section 945.3(c) maps, they become a public record of where large loads can connect without major transmission work. Projects in those areas may move on a different schedule from those that need upgrades.
• What to confirm on a named project. Whether the agreement predates January 1, 2027, whether it is an exceptional case contract under section 945.9, and what upgrade scope and cost assignment it carries. Keep projects without a signed agreement separate from committed work when you build a forecast.

California’s process also sits alongside CAISO’s own large-load work on technical requirements. Our CAISO large load requirements analysis tracks that record separately.

The Feeder is our free weekly briefing on utility procurement signals. Subscribe here.

Related Reading

• ERCOT Batch Zero: Verify the Project, Deposit Terms and Next Gate
• Pennsylvania Large Load Tariff: ‘But For’ Cost Allocation
• CAISO Large Load Requirements: Reading the September Draft