Texas can expand data centers without raising electricity costs

A version of the following testimony was presented to the Texas House Committee on State Affairs on August 19, 2026.

At the time of this hearing, Texas is one of only two states that have paused new data center projects. However, Gov. Greg Abbott's executive order is not the same as a moratorium like the one New York Gov. Kathy Hochul recently signed into law. Instead, this is an effort to gather specific data and information on the large number of projects Texas currently has in the pipeline. Rather than singling out data centers for misguided new regulations and restrictions, the audit is intended to enforce existing rules, build public trust at a time of controversy, and ultimately support utilities and existing local and state authorities in continuing to make well-informed decisions.

With its interim charge to consider wide-ranging questions and policy matters concerning data centers, the House State Affairs Committee can serve the interests of Texans in the same manner. With few exceptions, data centers are like any other business development and should be treated with exactly the same laws, rules, and approval processes by local and state authorities. Nonetheless, the combination of new technology and public backlash creates a need for go-to sources of data and information to support those authorities in making decisions and building public trust.

The committee's instructions contain several questions about energy policy and the processes by which data centers connect to the electrical grid. The Electric Reliability Council of Texas (ERCOT) is currently considering over 474 gigawatts of new requests to connect to the Texas grid, with 90 percent of that requested capacity coming from new data center projects. Texas utilities already have robust procedures to manage the connection of new large-load customers, and the state already has a process underway in Senate Bill 6 and the Large Load Batch Study Process to consider capacity expansion and regulatory reform. The most important factor in processing those requests and connecting new projects in a way that does not increase rates or lower reliability for household customers will be building new grid capacity and infrastructure.

The large volume of new requests from data centers, along with the high power demand from individual projects, does suggest it is appropriate to require developers to pay for needed grid capacity and infrastructure upgrades themselves rather than seeing the state apply the customary approach of sharing these costs across all customers. This common-sense reform, also found in President Donald Trump's Ratepayer Protection Pledge and the House Ratepayer Protection Act, will mostly eliminate the risk that data centers will increase household electric bills and should be adopted by Texas.

Other changes to data center or large-load tariffs currently under consideration across the country, such as minimum monthly payments as high as 90 percent of a data center's projected demand, would be misguided and likely result in higher rates down the road. Data center developers have continued to innovate in the ability to shift computation across different locations and through time to minimize costs and maximize efficiency. Minimum monthly payments would remove or reduce these incentives and would not lead to ratepayer savings or protection above that attained by requiring developers to pay for their own capacity.

ERCOT and other authorities should also handle connection requests in ways that maintain or enhance developer incentives to bring their own power to the grid. Abbott's order rightly requests the amount of behind-the-meter power each project intends to generate. Because data centers and behind-the-meter generation both incorporate novel technology, important system-wide data have been hard to obtain. ERCOT and local authorities will benefit from this clearer view of the emerging technology and gain insight into how to best structure the approval process to encourage it. The data center boom will also push developers to finance the R&D necessary to improve the technology, likely to be used by many more customers in the future as innovation brings costs down.

Texas should welcome data center investment under the same rules as other businesses while requiring developers to cover their own grid upgrades required for their projects. By expanding capacity, improving transparency, and preserving incentives for flexible demand and new generation, Texas can improve reliability and protect consumers without sacrificing innovation and growth.