The California Public Utility Commission approved a set of transmission infrastructure projects to support a 90-MW data center owned by Microsoft, but questions remain about whether the upgrades will increase or decrease ratepayer costs.

The transmission projects present “unique considerations” not fully addressed by certain existing electric rules, the CPUC said in a resolution approved at its Jan. 15 voting meeting. The resolution is based on advice letter 7635-E, which was submitted by Pacific Gas and Electric (PG&E) in July 2025.

The electric rules in question normally apply to distribution energization projects, but Microsoft’s data center is expected to have a 90-MW load — a “significant” amount that will require a new 115-kV transmission line and substation upgrades, the resolution says.

“Because the Microsoft project will be interconnected at the transmission level, Microsoft will pay lower electric rates than an equivalent large load customer that is connected at the distribution level and normally covered by the Rule 15 process, while at the same time potentially contributing to the need for broader transmission network upgrades in the region,” the commission said in the resolution.

Providing electricity to the new data center requires “significant costs but comes with the opportunity for significant revenue received by PG&E,” the resolution says.

If these revenues are large and consistent, other customers might need to pay less of PG&E’s overall revenue requirement, which could lower rates for PG&E customers, the resolution says. But if the revenues are small or are not received consistently, PG&E customer rates could increase, it says.

PG&E will complete the following work for Microsoft’s data center:

• • transmission upgrades at PG&E’s Los Esteros substation
  • a new 115-kV transmission line from PG&E’s Los Esteros substation to Microsoft’s Kaku substation
  • a design review of Microsoft’s Kaku 115-kV substation
  • an additional 115-kV transmission line from PG&E’s Los Esteros substation to Microsoft’s Kaku substation

PG&E could not determine which transmission facilities CAISO will control, according to the resolution.

The data center will operate at a continuous 90-MW load for 24 hours a day, 365 days a year, the resolution says.

Microsoft has also requested a second 115-kV line to provide redundant service; however, this project falls under a special facilities agreement and will not be paid by PG&E ratepayers at any point, the resolution says.

Microsoft also plans to install two natural gas-fired generators for critical load and emergency backup, the advice letter says.

Dirac BESS Approved

At the meeting, the CPUC approved also a 225-MW lithium-ion battery storage project for PG&E. The storage facility will provide resource adequacy capacity and has a planned online date of May 20, 2028, with a 15-year energy delivery commitment.

The storage facility’s capacity will replace Diablo Canyon Power Plant’s capacity when, and if, the nuclear plant is retired. The facility, called the Dirac Battery Energy Storage System, will be built by Aypa Power Development using the company’s subsidiary, Balsam Project.