California Utilities Seek Decision on Electricity Rates Amid Data Center Energy Demands

The Little Hoover Commission held a significant hearing on California electricity costs on July 24, 2025, focusing on the implications of rising energy demands and the potential restructuring of electricity rates. Key discussions centered around the ongoing stakeholder process regarding the rate of return for electric investor-owned utilities and Southern California Gas Company, with a decision expected by the end of the year.

The commission is currently evaluating the utilities' capital structures, including their debt and equity ratios, as part of this process. This evaluation occurs every three years and considers market conditions and competitive proxy groups to adjust the cost of capital effectively.

Another major topic was the proposal for a regional electricity grid, which aims to enhance access to diverse energy sources for California's load-serving entities, including investor-owned utilities and community choice aggregators. This regional market could allow California to leverage renewable resources from neighboring states, particularly during peak demand times.

The meeting also addressed the growing impact of data centers, particularly those supporting artificial intelligence, on electricity consumption and rates. The commission acknowledged that these facilities consume vast amounts of energy, potentially leading to significant increases in electricity rates. Some states, like Virginia, are already considering separate rates for data centers due to their high energy demands. The commission is actively exploring how to manage this surge in demand while ensuring reliability and adherence to clean energy goals.

Overall, the discussions highlighted the challenges California faces in balancing energy supply, demand, and costs, particularly in light of emerging technologies and regional energy strategies. The commission's ongoing evaluations and decisions will play a crucial role in shaping the state's energy landscape in the coming years.