Large electrical load projects

What is a large electrical load customer? 
We’ve served large energy users in the region for many years. Our established policies and processes help evaluate projects, plan service and protect existing customers from costs tied to infrastructure needed to support new or growing large customers. Along the way, we continue to support business investment and regional economic development while helping ensure the cost of serving a new large customer is not shifted onto existing customers.

SMUD works closely with developers early on to understand their energy needs, encourage and support energy-efficient designs, assess grid impacts, and plan infrastructure accordingly, ensuring we can meet project needs responsibly. A large customer is simply a very big electricity user. We generally consider this to be 50 megawatts or more, because a customer of that size is served by our high-voltage transmission system. Most of our largest customers to date have topped out around 20 megawatts, so newer large customer project requests at 50 megawatts and greater, represent a bigger scale than we have historically served.
Large customer projects require more planning, engineering and infrastructure than typical commercial development. Serving these projects can include the need to build a new substation and/or install new transformers, similar to how road improvements are necessary to serve a growing neighborhood or commercial area.

Can a large electrical load customer benefit other customers?
Yes. Some large customers can reduce or shift their energy use during peak-demand hours. That flexibility lowers the amount of power SMUD has to buy at the most expensive peak times while generating new revenue, which helps keep rates low for everyone. This demand management can also help improve system efficiency and reliability. Additionally, customers moving to or expanding their business in the Sacramento region bring economic development benefits through jobs and tax revenue.

Is a large electrical load project currently planned in Sacramento?
There is not an approved large electrical load project currently planned in Sacramento. We do have developers exploring 2 potential projects that could require more than 50 megawatts of electricity, but they’re still in the very early feasibility stages. A request for a feasibility or transmission study does not mean a project has been approved. In fact, they’re not even fully designed at that stage. The studies help inform whether projects are technically and financially feasible within the customer’s required timeline.

Any large electrical load project must receive land-use approval from the appropriate city or county authority before anything moves forward. If a project is approved, we’re legally obligated to provide electric service. We continue engaging thoughtfully with developers and local leaders to understand potential grid impacts and infrastructure needs while ensuring SMUD customer protection is in place.

How does SMUD work with these large customers?
We engage early. Because available capacity is not the same across our service area, some locations are better suited than others for large customers. Our dedicated commercial development team walks large projects through the process, and every large customer project starts with a transmission study to understand costs and impact on the grid before anything moves forward without risking the reliability of the entire system. These projects take time and careful planning – they don’t happen overnight.

Who pays for the infrastructure? Will my rates go up?
We have a process for extending service and assigning related costs  to help protect existing customers.
To ensure new large electrical load customers are handled consistently, we are working on a new policy for customers requesting 50 megawatts and above, to protect existing customers from cost of serving these new larger customers.

Large load projects may require major infrastructure like substations and system upgrades. SMUD assigns these costs to the new customer, not existing ones. The upcoming large-load policy will clearly spell out safeguards and guardrails to allocate costs to the new large customer.

How is SMUD preparing for more large electrical load customers? 
We’re planning ahead. We’re developing a large-load policy for customers requesting 50 megawatts and above – expected to go to our Board of Directors in early 2027. It will detail how we’re protecting affordability and reliability for all customers. As part of our broader planning for regional growth, we're also investing roughly $600 million in substation upgrades to maintain reliable service while keeping rates among the lowest in California.

As a community owned, not-for-profit electric service, we’re committed to growing responsibly while protecting the affordable, reliable, world-class service our community deserves.

What are SMUD’s priorities in serving large electrical load projects? 
Protecting our customers is our top priority. As a community-owned, not-for-profit electric utility, our goal is to improve the lives of all our customers by providing safe, reliable and affordable power, while insulating current customers from potential costs of new large electrical load customers. We also work with potential large electrical load customers to design projects that maximize benefits for all customers. For example, if a large electrical load customer can shift their usage out of peak hours, it minimizes the amount of energy we need to purchase during peak hours when costs are highest, which helps us keep rates low for all customers.

When do you start working with potential large electrical load customers? 
We engage early and proactively with potential large electrical load customers, typically well before the project is submitted for land‑use approval from cities or counties. Early engagement gives us the chance to understand a project’s unique energy needs, evaluate system capacity at different locations and determine whether new infrastructure might be needed. This early work also helps us to ensure the costs needed to serve these customers are not shifted to other SMUD customers.

Early consultation allows us to maintain safety and reliability, protect the grid, and clearly communicate roles and responsibilities to developers as they navigate land-use processes led by local governments.

Why won’t SMUD disclose the company, location or other details about every large electrical load project application? 
We protect all confidential customer information as required by law. Things like name, company, location, address, contact info and other identifying information is kept confidential per Public Utility Code 8380-8381, which specifically protects private customer information – residential and commercial.
Maintaining the privacy of customer information is also standard practice for most companies and industries and is governed by several state and federal laws including the California Consumer Rights Protection Act and the California Constitution.

In some circumstances, privacy of certain information may also be required by non-disclosure agreements (NDAs). NDAs are important in business attraction projects for several reasons. Companies scouting new locations often don’t want competitors, current landlords, employees or investors to know they’re considering new operations and/or locations until decisions are finalized. They also protect sensitive business data like incentive negotiations to prevent premature market reaction, which is important for publicly traded companies.

In cases with potential large electrical load customers, we require early feasibility studies, meaning some of the proposals may not work or change in size, scope or location before a project even comes to fruition.

Are data centers new to Sacramento?
No. Data centers have operated in our region since around 2000, and more than a dozen are here today.  Due to SMUD’s proximity to the Bay Area and the region’s seismic stability, they support everyday services that our region relies on - banking, hospitals, telecommunications and technology. These data centers play an important role in supporting many essential community services we rely on every day. Data centers support health care apps to send you a text message with lab results, rather than having to wait for a doctor’s call. They also enable your bank to text “was this you?” seconds after a suspicious charge, before you even notice it. 

What’s new is the larger, AI-driven type that provides computing power. AI technology is increasingly becoming part of everyday life for many people, whether through their direct use or as part of the services and devices they rely on, which makes responsible planning and infrastructure review all the more important.

Is Sacramento about to become a giant data-center hub?
It’s highly unlikely. The “hyperscale” AI data center campuses drawing attention can be 1 gigawatt or larger. That’s enough to power more than 750,000 average American homes for a year. Unlike some parts of the country such as Northern Virginia, Texas or Arizona where conditions have supported rapid data center growth, and Bay Area communities where data centers make up a huge share of electricity demand, Sacramento is seeing more diverse and more evenly distributed growth across a variety of industries, and much smaller data center growth.

Does SMUD approve data centers?
No. Local city and county governments make land-use decisions including zoning, permitting and environmental review. Once a large electrical load project, including data centers, is approved, SMUD is obligated to provide power. Large load projects may require major infrastructure like substations and system upgrades. SMUD assigns these costs to the new customer, not existing ones. The upcoming large-load policy will clearly spell out safeguards to allocate costs to the new large customer without risking the reliability of the entire system.

Who decides whether a data center gets built here?
SMUD does not make zoning, permitting and land-use decisions. They’re made by local city and county governments through their own environmental approval processes. Community questions about land-use and environmental concerns like, water, traffic and neighborhood impacts are addressed by those jurisdictions. SMUD works with project developers and local agencies early in the process to understand energy needs, assess grid impacts and identify what infrastructure may be required.

Once a local jurisdiction approves a project, we are obligated to serve it, but if the expected demand exceeds what can be reliably and safely provided, SMUD will communicate those constraints early in the planning and project feasibility process. Our role is to provide clear, early input on feasibility, so stakeholders understand the infrastructure requirements and implications, such as costs and timelines.

What’s the difference between a traditional data center and a hyperscale data center that supports artificial intelligence (AI) operations?
Traditional data centers are the type of facilities that have operated in Sacramento for decades. They generally use much smaller amounts of electricity and have steady, predictable load profiles. Most operate in the 5–20-megawatt range, and they support everyday computing services like telecommunications, banking, hospitals and cloud storage, social media streaming services and media storage.

Hyperscale AI data centers are massive, industrial-scale facilities designed to support advanced AI processing. These loads can reach 500–1,000 megawatts and the facilities have very different design, cooling and power‑delivery needs. We’re not seeing hyperscale AI data center proposals in Sacramento, and the level of interest here is considerably smaller than in other states around the nation.

What kinds of things in daily life do data centers support?
We’ve operated data centers since the early 2000s. Data centers support an innovative economy and the technologies people depend on to work, learn, communicate, access public services and participate in modern life. There are many different types of data centers, which store, process and transmit the information behind:

• Online banking and financial systems
• Hospitals, health care platforms and medical record systems
• Telecommunications services and internet connectivity
• Cloud computing tools used by local businesses
• Social media, entertainment platforms and everyday apps
• AI‑driven services and digital tools
• Streaming Services

These kinds of facilities have operated in Sacramento for decades and play a critical role in keeping community services running smoothly.

How are you coordinating with other regional leaders on the topic of large electrical load projects?
Large electrical load projects above 50 megawatts are an emerging issue – requiring the growing need for coordination on a regional level. We’re committed to working with our regional partners to ensure that we’re taking a thoughtful approach to our large electrical load policy and how it impacts the entire region. We’re committed to community/stakeholder engagement to ensure that we continue to balance the needs of our community’s growing electrical demand, that we can support business growth, protect customers from cost shifts and continue to provide some of the lowest rates in California. We held a virtual forum for the public on Aug. 13, and you can view the presentation here. We’re committed to working with our regional partners to ensure that we’re taking a thoughtful approach to our large electrical load policy and how it impacts the entire region.

How can customers provide input on SMUD’s large electrical load policy?
We’re committed to the community. We’ve already met with some community stakeholders to hear what kinds of things they’d like to see in our policy. We have heard a range of ideas and are continuing the conversation with more customers and stakeholders in the coming months. As our policy is developed, we’re committed to an open and transparent process. For comments or questions, please email LLPolicy@smud.org.