Regulators should mitigate data center water consumption by mandating detailed usage reporting and requiring the implementation of sustainable resource management plans, according to the authors of the newly released report. The document indicates that while advanced cooling technologies can lower demand, legislative oversight is essential to protect local supplies from the cumulative strain of clustered facilities.
The report notes that “mandating water-use reporting by data centers has emerged as a prominent policy theme,” citing examples where states have sought to link “data center tax exemptions to, among other things, the development of a sustainable water-use plan.”
In simple terms, this means moving away from a system where companies keep their water usage secret and instead requiring them to prove they are using water responsibly to receive government benefits or permits. By enforcing these rules, officials can encourage the industry to adopt high-tech cooling systems or use recycled graywater rather than pulling from the same drinking water sources used by local families and farms.
The Little Hoover Commission published its report ‘Data Centers and California Electricity Policy’ in Sacramento in March 2026. Led by Chair Pedro Nava, the oversight agency outlines a strategic framework to integrate energy-intensive data centers into the state’s grid without compromising ratepayer affordability or climate targets.
