Regulators Aim for New Data Center Grid Connection Rules in August

An April 9 hearing by the Texas House Committee on State Affairs offered an early look at how lawmakers and regulators may approach the next phase of data center growth, with testimony from the Electric Reliability Council of Texas (ERCOT), the Public Utility Commission of Texas (PUCT) and industry representatives centered on grid access, transmission costs and the role of private generation in supporting new large-load development.

Committee members were told the hearing was intended as an initial review of data center development and investment, with additional public testimony expected later in the interim. Regulators also outlined an aggressive timeline for the new interconnection framework, with ERCOT aiming to put batch-zero rules before its board by June, seek PUCT approval in July and begin the first batch study in August.

The clearest message from the hearing was that ERCOT no longer sees its existing large-load interconnection process as workable at the current pace of requests. ERCOT CEO Pablo Vegas told lawmakers the large-load queue has climbed past 410,000 megawatts, with about 87 percent of that tied to data centers, and said the one-project-at-a-time study model is creating uncertainty as multiple developments in the same area alter transmission requirements midstream.

In response, ERCOT is proposing a batch-study process that would evaluate projects together, assign available transmission capacity over time and require developers to meet higher thresholds to hold their place in the queue. ERCOT said projects seeking a place in the new process may need to show site control, equipment orders and financial commitments to hold transmission capacity, as Texas tries to distinguish viable projects from speculative ones.

The hearing also made clear that state leaders are preparing to revisit how the cost of that build-out is assigned. PUCT Chairman Thomas Gleeson said the commission is moving away from the current four coincident peak model and is considering changes that could include more coincident peaks, different intervals and even new rate classes to distinguish traditional industrial customers from the “ultra-large loads” now entering the market. Gleeson said the goal is to ensure the cost of new transmission does not fall on residential ratepayers.

A third theme was that Texas may increasingly favor projects that bring some of their own power. Vegas told lawmakers ERCOT is looking for ways to accelerate interconnection for data centers that develop behind-the-meter generation or can reduce load during periods of grid stress. Industry witnesses backed that approach, arguing that colocated generation and more flexible operations could help projects move faster while providing relief in constrained parts of the system.