SAN JOSE — PG&E filed a proposal with state regulators seeking approval to build wide-ranging electricity upgrades in San Jose to serve Microsoft’s future data hub in the South Bay.
Microsoft aims to develop a data center at 1657 Alviso-Milpitas Rd. In 2017, the company paid $73.2 million for the 65-acre site on the north side of State Route 237 between Zanker Road and Coyote Creek.
Microsoft has requested that PG&E provide “transmission-level service” to serve the data center, according to a state regulatory filing by PG&E.
PG&E CEO Patricia Poppe mentioned the proposed power upgrade during a July 31 conference call to discuss the company’s second-quarter financial results.
“We recently filed for approval to serve Microsoft’s planned 90-megawatt data center project in San Jose,” Poppe told Wall Street analysts. “This is just one of many smaller projects in our pipeline.”
Oakland-based PG&E aims to install 115-kilovolt transmission upgrades at its Los Esteros Substation to provide the requested electricity service, according to a PG&E filing with the state Public Utilities Commission.
The investor-owned utility is also requesting that the state PUC approve the installation of a new 115-kilovolt transmission line to connect another power facility to serve the data center.
“The expected hours of operation for the Microsoft Project are 24 hours per day, 365 days a year,” PG&E stated in the filing with the California regulatory agency. Microsoft hopes to launch the data center’s operations in January 2027.
Microsoft will pay for some of the costs involved with these upgrades, according to regulatory documents.
“An additional new 115-kilovolt transmission line and associated facilities will provide dedicated, redundant backup service at Microsoft’s request and expense,” PG&E stated in the state filing.
PG&E didn’t detail the overall cost of the Microsoft-related work.
The power company, however, did emphasize the need for speed on the PUC’s part to approve the upgrade proposals.
“In order to achieve Microsoft’s proposed January 2027 operation date, PG&E estimates that construction must begin no later than January 2026,” PG&E stated in the regulatory filing.
The tight timeline has emerged partly because some PG&E facilities would have to be de-energized, or taken offline temporarily, in order to perform substation upgrades.
“To mobilize and schedule PG&E’s resources and teams to perform the Microsoft work, PG&E is requesting a decision on this advice letter by no later than Nov. 30, 2025, so that PG&E can interconnect the Microsoft Project in a timely manner,” PG&E stated in the regulatory filing.
This work appears to be just one component of what would become a number of projects that PG&E is planning in San Jose to provide electricity services for major projects that include both data centers and residential developments.
In July, San Jose and PG&E announced a plan whereby PG&E would commit to major improvements in its electricity grid that serves the Bay Area’s largest city.
The commitment, in the view of San Jose and PG&E, could spur private investment, produce new development projects, improve electricity reliability, expand the tax base, and rein in monthly bill increases.
These efforts could bolster a plan by Westbank to develop combinations of housing towers next to data centers at multiple locations in downtown San Jose. The projects would feature configurations whereby excess heat from the data hubs would provide electricity for the adjacent residences.
PG&E is convinced it can ride a wave of demand for new data center projects in its northern and central California service territories, including the Bay Area.
“Our data center pipeline continues to grow,” Poppe said.
Poppe noted that in the January-through-March first quarter, that data center pipeline reflected demand for 8.7 gigawatts of electricity. Now, PG&E has launched a fresh study of the data center requirements and has found demand has jumped 14.9% in just a few months.
“We’re actively working 10 gigawatts through various stages,” Poppe said. “That’s healthy growth since last quarter and a nearly triple increase since this time last year.”
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