Abbott Directs Utility Regulators to Address Data Center Costs

Gov. Greg Abbott has directed Texas utility regulators and the state’s grid operator to take steps aimed at keeping residential customers from paying infrastructure costs tied to data center expansion.

In a June 10 directive to the Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT), Abbott said the rapid scale of data center development requires oversight to ensure Texans are not burdened with infrastructure costs and that residential electric bills are not negatively affected as data centers connect to the state grid.

The governor directed PUCT to take action to ensure data center interconnections result in lower residential electric bills and to require data centers to pay for all electric infrastructure costs needed to serve their operations. Abbott also directed PUCT and ERCOT to review their existing authorities and identify actions they can take to safeguard Texans, their property and resources.

The governor’s office said the directive is aimed at making sure data centers operate in ways that reduce costs for residential electricity customers, avoid draining water needed by communities and account for neighborhood needs. The announcement comes as large-scale computing facilities have become a larger part of the state’s energy and infrastructure planning.

In a letter to PUCT Chairman Thomas Gleeson and ERCOT CEO Pablo Vegas, Abbott said Senate Bill 6 set financial, planning and operational standards for large loads connecting to the Texas electricity grid, including data centers, but said additional action is needed. He directed PUCT and ERCOT to consider measures that would prevent data centers from shifting development risks and costs onto Texans, require sustainable resource management and minimize adverse impacts on local communities.

The agencies must submit a joint memorandum to the governor’s office by July 17 summarizing actions taken under existing authority, identifying statutory limitations and recommending legislative proposals. PUCT must also initiate action by July 31 to reduce residential ratepayer transmission costs.

Abbott said he will work with lawmakers next session to codify the protections and ensure data centers add to Texas’ electric capacity rather than only increasing demand. His proposed legislative priorities include requiring new data centers to use water-efficient technologies such as closed-loop cooling systems, requiring large data centers to annually report electricity and water usage data to PUCT, repealing outdated or unnecessary incentives for data centers and requiring measures such as setbacks and noise-reduction technology to reduce impacts on neighboring communities.

The directive places PUCT and ERCOT at the center of a state policy discussion over how Texas should manage data center growth while limiting costs for residential and small-business customers.