Texas pauses ERCOT data-center grid approvals while regulators audit power, water and tax demands

Gov. Greg Abbott directed Texas regulators on August 3, 2026, to pause grid-approval processing for new data-center projects advancing through the Electric Reliability Council of Texas’ interconnection queue while the state reviews their power, water, ownership, tax and community-impact demands.

The directive does not create a blanket statewide ban on data-center construction or every form of project approval. It applies to projects seeking connection through ERCOT, which manages about 90% of the state’s electric load. The Public Utility Commission of Texas and ERCOT are responsible for carrying out the review.

What the audit will examine

Abbott directed the agencies to verify who owns each project and whether it is seeking state or local tax incentives. They also must examine projected annual and peak electricity use, how a facility will generate power and whether it will provide on-site generation.

The requested review includes projected annual and peak water use, water sources, cooling systems and cooling operations. Regulators are also being asked to examine measures intended to reduce effects on nearby communities, including noise mitigation, lighting controls and emergency-response coordination.

Abbott said projects that fail applicable PUCT, ERCOT or state-law requirements should be denied connection to the Texas grid. That is the governor’s stated direction; the directive does not show that any particular project has already been rejected under the new audit.

Texas’ queue includes far more than built data centers

ERCOT is tracking more than 1,800 large-load projects representing more than 474 gigawatts of requested electricity, according to The Texas Tribune’s account of ERCOT data. Abbott characterized about 90% of new power requests as data centers.

Those figures describe requests in an interconnection queue, not committed demand, operating facilities or projects guaranteed to be built. The queue total is more than five times Texas’ record peak demand, but proposals can change, wait for approvals or never reach construction.

The size of the queue matters to residents because decisions about generation, transmission and grid upgrades can affect electricity planning and how infrastructure costs are allocated. Abbott’s separate June directive told state officials to require data centers to fund the electric infrastructure needed to serve them and to protect residential ratepayers from those costs.

ERCOT pauses its Batch Zero review

The directive interrupts ERCOT’s newly established “Batch Zero” process for large electricity users. The PUCT approved the framework in June for qualified projects of 75 megawatts or more, grouping them into a single study so ERCOT could evaluate future demand, available grid capacity and needed transmission upgrades together.

The framework also includes pathways for large customers that build on-site generation to supply some or all of their electricity and for customers willing to curtail power use when local transmission constraints arise. Facilities that are truly islanded and have no grid connection generally fall outside ERCOT’s interconnection process, although they may still face other state requirements.

ERCOT said it paused the Batch Zero review after Abbott’s directive. Before the pause, ERCOT expected to notify Batch Zero applicants of their classifications in August 2026. The agencies have not announced how long the audit will take, exactly which projects will be covered or how Batch Zero applications will be handled during the pause.

Water data remains limited

Water planning is another reason the review matters beyond the electric grid. The PUCT developed a survey with the Texas Water Development Board seeking information on data-center water consumption, cooling systems, water sources, electricity demand and whether facilities are connected to the grid or use on-site power.

The Texas Tribune reported that PUCT staff notified 377 companies about the survey and received 28 responses. The responses are intended to inform long-term state water planning. State law requires the PUCT to share the data with the water development board and state environmental regulators and submit a report to the governor and Legislative Budget Board by the end of 2026.

Limited information can make it harder for state and local officials to estimate future water demand, evaluate community effects and compare proposed projects with available utility capacity. It also complicates questions about whether public tax incentives are producing benefits that justify their costs.

What the order does not settle

The directive is not enacted legislation, a completed audit or a permanent set of PUCT rules. Its practical reach also varies across Texas.

Projects building independent power supplies may not be affected in the same way as facilities seeking a traditional ERCOT connection. ERCOT does not cover the entire state, including El Paso and other areas served outside its territory.

The directive also does not establish a public timetable for the audit or explain how the agencies will enforce the requested disclosures. The next signals will come from PUCT and ERCOT guidance, information required from developers, treatment of Batch Zero projects and any effort by lawmakers to establish permanent standards.

For now, proposed data centers moving through ERCOT’s interconnection queue may face delays or additional review. Construction of data centers statewide has not been prohibited by the August 3 directive.

Sources

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