Texas Governor Moves to Protect Ratepayers as Data Center Demand Surges

AUSTIN, Texas — Governor Greg Abbott has directed state energy regulators to ensure Texas’s booming data center industry pays its own way, as artificial intelligence facilities strain the state’s power grid and water supplies. The governor set a July 17 deadline for the Public Utility Commission and ERCOT to deliver a memorandum on how to make data center connections reduce residential electric bills and require the facilities to fund their own infrastructure.

The scale of the demand is unprecedented. Texas currently hosts roughly 300 operational data centers, with more than 100 under construction and at least 100 more planned. ERCOT, the state’s grid operator, reports that 87 percent of projects seeking grid connection approval are data centers, with total capacity forecast to surpass 70 gigawatts by 2030 — enough electricity to power tens of millions of homes.

ERCOT CEO Pablo Vegas has stressed that the next two to three years are critical for building new power infrastructure. The grid operator has shifted from a first-come, first-served to an evidence-based queue management system, requiring developers to demonstrate site control, permits, financing, and equipment orders to separate committed projects from speculative requests.

Texas is the epicenter of AI development, where companies can pair innovation with expanding energy. We must ensure that America remains at the forefront of the AI revolution, and Texas is the place where that can happen.

Water is an equally pressing concern. Data centers in Texas consume an estimated 25 billion gallons annually, and not all facilities report their usage. A University of Texas at Austin white paper warns that as computing densities rise, the heat generated demands cooling solutions heavily reliant on water. The Texas State Water Plan does not currently account for projected data center demand, and the Houston Advanced Research Center notes that existing unmet water needs of 4.8 million acre-feet could be compounded by the industry’s unknown requirements.

Abbott has laid out legislative priorities for lawmakers to codify: require data centers to fund their own electric infrastructure, mandate water-efficient technologies such as closed-loop cooling for new facilities, require annual reporting of electricity and water usage, repeal the state’s 6.25 percent sales tax exemption for qualifying data centers, and impose setbacks and noise-reduction standards to protect nearby communities. The Data Center Coalition has acknowledged there is no one-size-fits-all approach to facility design, cooling technology, or regulation.

Van Alstyne, located about 50 miles north of Dallas spanning Collin and Grayson counties, has a population of roughly 5,500. The city is home to an APS manufacturing plant that brought 175 jobs, and its position between major growth corridors makes statewide infrastructure policy especially relevant.