According to the authors of the newly released report, California faces a serious risk of “stranded assets” if the state builds massive electricity infrastructure for data centers that eventually close or move away. This scenario would leave regular utility customers responsible for paying off expensive power lines and substations that are no longer being used by the companies they were originally intended to serve.
The report warns that “should these facilities close, relocate, or become obsolete as technology advances, ratepayers could be left paying for ‘stranded assets’—power plants, substations, or transmission lines that no longer serve customers.” Furthermore, the authors note that “if demand decreases or data centers relocate, Californians could be left paying for unused energy infrastructure.”
In simple terms, these stranded costs occur when the state spends billions on equipment to meet the high energy needs of a specific data center. If that business later leaves the state or uses less power because of more efficient technology, the equipment stays on the grid but no longer has a customer to pay for it. Because California’s utility system typically spreads costs among all users, these unpaid expenses are then passed on to households and small businesses through higher monthly power bills.
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.
