The Texas Tribune reported on the unexpected spike in data center development in Texas, which protestors argue “will spike Texans’ electric bills and make the grid less reliable” and “suck up massive amounts of water, emit constant noise and spew pollution from on-site, gas-fueled power plants and backup generators.”
As data centers continue to be a hot topic around the country and in Texas, Gov. Greg Abbott (R) has directed state regulators to see that residents are not stuck paying for expensive grid upgrades tied to the rapid expansion of data centers, reported Texas Scorecard. In a letter to Public Utility Commission of Texas Chairman (PUCT) Thomas Gleeson and The Electric Reliability Council of Texas (ERCOT) CEO Pablo Vegas, the governor conveyed his concern.
PUCT and ERCOT must submit a joint memorandum to the governor's office by July 17, 2026, summarizing what they can do under current law, spelling out statutory limits, and recommending legislative changes to implement his objectives. They are also to review what can be done “to safeguard Texans, their property, and resources.”
Brent Bennett of the Texas Public Policy Foundation says the intent of the governor's letter is good, but there is a catch.
"There's a balance, especially when it comes to public utilities, like the grid or water systems. There's definitely a need for regulation preventing socialization of costs. In fact, privatizing more costs — if done in a correct manner, if the cost allocation is done correctly — is a more market-oriented way than just socializing everything," Bennett states.
He addresses how privatization of costs works.
"Instead of uplifting these costs of the whole system and allocating it to customers, you take a certain chunk of those costs and allocate them in terms of the fees. When that data center connects to the grid, they pay a fee to interconnect based on their usage, and that fee goes toward kind of system upgrade costs,” Bennet explains. “The sum of those fees is put towards reducing the amount of costs that are then uplifted to the rest of the system.”
Abbott has also said he would back requirements that all new data centers use water-efficient technologies, such as closed-loop cooling systems, and that large facilities annually report their electricity and water usage data to the PUCT.
