Abbott directs PUC, ERCOT to shield residential ratepayers from data center grid costs

Gov. Greg Abbott on Wednesday directed the Public Utility Commission of Texas and the Electric Reliability Council of Texas to take immediate action to prevent data center expansion from driving up electricity bills for residential customers, issuing a letter that sets hard deadlines for regulators and previews a legislative agenda for next session.

“Data centers must operate in ways that reduce costs for residential electricity customers, do not drain water needed for our communities, and take into consideration the needs of our neighborhoods,” Abbott said.

What Abbott directed

In a letter dated today to PUC Chairman Thomas Gleeson and ERCOT CEO Pablo Vegas, Abbott issued three immediate directives:

The PUC must take action to ensure data center grid interconnections result in reduced residential electric bills; require data centers to fully fund all electric infrastructure costs tied to their operations so no residential ratepayer bears those costs; and, together with ERCOT, review existing authority to identify steps that can be taken to safeguard Texans, their property, and resources.

The PUC and ERCOT must submit a joint memorandum to the Office of the Governor no later than July 17, summarizing actions taken under existing authority, identifying statutory limitations, and recommending any legislative changes needed to meet the governor’s objectives. The PUC must separately initiate action to reduce residential ratepayer transmission costs by July 31.

Legislative agenda

Abbott also outlined what he intends to pursue with the Legislature next session, pledging to work on bills that would:

codify PUC requirements that data centers pay their own infrastructure costs; ensure data centers add to Texas electric capacity rather than simply increasing demand; require all new data centers to use water-efficient technologies such as closed-loop cooling systems; require large data centers to annually report electricity and water usage to the PUC; repeal sales tax exemptions and other outdated incentives for data centers; and require data centers to reduce neighborhood impacts through setbacks, noise-reduction technology, and similar measures.

Context

Abbott acknowledged that Senate Bill 6, passed last session, took steps to balance economic growth and consumer interests by requiring large loads — including data centers — connecting to the ERCOT grid to meet financial, planning, and operational standards supporting long-term system reliability. He said more must be done.

Abbott framed the directives around Texas’ economic growth, saying the state’s success has made it a magnet for data center development — growth that he said requires oversight to ensure everyday Texans are not burdened with infrastructure costs driven by that expansion.