Texas makes data centers put up $50,000 a megawatt before ERCOT will study them

A new Texas rule requires data centers and other very large electricity users to put money down before the state's grid operator will consider their request to connect.

The Public Utility Commission of Texas adopted the large-load interconnection standards on Sept. 18. Under them, a customer seeking a new connection of 75 megawatts or more to the grid run by the Electric Reliability Council of Texas, or ERCOT, must first sign an intermediate agreement with its utility and make a set of disclosures about the project. It must also "post financial security in the amount $50,000 per megawatt." Only then can the load be included in an ERCOT interconnection study. The rule, 16 TAC §25.194 under Project No. 58481, took effect Oct. 8.

The rule implements Senate Bill 6, which the Texas Legislature passed in 2025 after data center requests swamped the state's planning process. It applies to projects not yet energized when the rule took effect. That includes existing sites that expand past 75 MW for the first time, sites already above 75 MW that add 75 MW or more, and loads that co-locate with a power plant. Customers also pay a $100,000 study fee, and any unused portion is refunded after the study.

The final rule is lighter than the version staff first proposed. In February, commission staff recommended $100,000 per MW in security at the study stage and a further non-refundable interconnection fee of $100,000 per MW. In March, Chairman Thomas Gleeson warned that $100,000 a megawatt "may unintentionally create a barrier to market entry for all but the largest hyperscalers in the world" and urged the commission to halve it. The version it published for comment cut both charges to $50,000 per MW. The adopted rule keeps the security at that level and drops the non-refundable fee. In its adoption order, the commission said financial security "remains a requirement to protect against stranded infrastructure costs and is not a 'fee.'" It also rejected a call from the state's Office of Public Utility Counsel to raise the security back to $100,000 per MW.

A second payment comes due when the customer signs its standard large-load interconnection agreement. It must then post security equal to the greater of $50,000 per MW of contracted peak demand or the grid-upgrade costs assigned to it by the interconnection study. Cash posted earlier can be credited toward that amount. The customer must also pay all of its direct connection costs in cash, invoiced by the utility before the work is done, and that money is not refundable.

The security comes back in stages. Utilities must return 20% of the remaining balance when the customer energizes, and the rest in 20% steps as the customer meets the milestones in its agreement. A customer that ERCOT allocates no capacity gets its security back, less any amounts it owes, if it withdraws before the deadline to sign. A customer that withdraws after receiving some capacity loses 20% of the security tied to that capacity. A customer that gives false or inaccurate information can forfeit its security and lose its allocated capacity.

The rule arrives while new data center connections in Texas are on hold. In an Aug. 3 letter, Gov. Greg Abbott noted that ERCOT was considering about 474 gigawatts of requests to connect, roughly 90% of them from data centers. He directed the commission and ERCOT to conduct "a comprehensive verification and audit of all data centers advancing through ERCOT's interconnection process before any additional data centers are approved to move forward." ERCOT paused its transitional "Batch Zero" study of large loads that day. It also stopped approving energization for data centers and cryptocurrency mining sites of 75 MW or more that are not yet connected. On Aug. 20, the commission granted ERCOT exceptions to deadlines in its planning rules so the audit could proceed. On Sept. 21, Abbott directed the Texas Commission on Environmental Quality to "pause the issuance of all permits related to data center projects until ERCOT completes its review," adding that no other state agency "shall move forward with regulatory approvals related to data centers until this information is acquired." The agency must report on its compliance by Monday, Oct. 19.

ERCOT sent utilities conditional classifications for the Batch Zero queue on Sept. 3. It placed 362 large loads, totaling about 192 GW, in the queue's two categories, and left out 373 projects totaling 302 GW. Final decisions on which projects stay in will depend on the audit. ERCOT is also collecting community-impact information, such as water use, on-site power and public incentives, from data centers of 25 MW or more that are not yet energized. It expects about 461 data center loads to receive those requests.

ERCOT will file both reports with the commission by Dec. 10 under Project No. 59142, and its timeline lists the commission's Dec. 17 open meeting as the next step. ERCOT says it is still working out how the pause will affect the Batch Zero study, which was originally due to finish by April 9, 2027.

For developers, the rule puts a price on a place in line. Projects already in Batch Zero still have to sign the standard agreement and post its security to keep the capacity ERCOT gives them. When ERCOT reopens its queue, any new project of 75 MW or more will have to post $50,000 per megawatt before it is studied.