After decades of relatively static consumption, electricity demand in the U.S. is on the rise. The scale of this demand is hard to overstate. As is its potential impact on data center customers and natural gas producers alike.
In October 2025, the Electric Reliability Council of Texas (“ERCOT”) reported to the Public Utility Commission of Texas (the “PUCT”) that an estimated 205 gigawatts of “Large Load” customers were currently in its interconnection queue. A “Large Load” is a customer with a demand threshold of 75 MW. See ERCOT Nodal Protocols § 2. ERCOT said approximately 70% of the wattage in its queue was attributable to data centers alone.
Who are these acronyms, and why do they matter? ERCOT is an independent system operator for a region serving more than 27 million Texas electricity customers. As is most relevant here, ERCOT manages access to and distribution within the electric grid under its remit. The PUCT is the Texas state agency with responsibility for regulating electricity, among other utilities, and overseeing ERCOT. For those interested in learning more, ERCOT makes regular and periodic reports to the PUCT under a case styled Project No. 55999, “Reports of the Electric Reliability Council of Texas.”
Data Center Demand is Not Slowing Down
While Texas welcomes such booming business, the rapid growth in demand for access to our grid is placing pressure on both the transmission system and resource adequacy. According to recent reporting by research consultancy The Brattle Group, in some instances, Large Loads either outpace available transmission capacity—requiring wait-time for transmission system upgrades—or they exceed anticipated additions of generation full-stop.
The growing tension between resource demand and system availability has given rise to a solution uniquely suited to Texas: co-locating Large Loads with natural gas power generation. Co-location generally means an end-use customer physically connects to an existing (or planned) generation facility on that customer’s side of the point of interconnection (“POI”) to the transmission system. In a February 2026 report, the Institute for Energy Research, a nonprofit that studies global energy markets, forecasted that natural gas will be the major power generation and fuel source for data centers by 2027. Reporting from the Global Energy Monitor from January 2026 estimated that Texas is home to nearly a third of the country’s planned natural gas power generation capacity—more than 80 gigawatts. Of these planned projects, nearly half (40 gigawatts) are dedicated exclusively to data center campuses.
Texas Regulators are Keeping Pace
Recent legislative and regulatory developments, including the enactment of Senate Bill 6 (“S.B. 6”), have imposed new requirements applicable to Large Load customers pursuing new or expanded interconnection, or planning to co-locate with existing natural gas generation. Since passage, S.B. 6 has been codified as Texas Utilities Code §§ 35.004(c-1)–(c-2), 37.0561, 39.002, 39.169–.170). The new requirements impose additional regulatory processes and timing considerations that must be accounted for in the development, structuring, and interconnection of Large Load projects.
In total, S.B. 6 introduced new provisions to the Public Utility Regulatory Act (“PURA”) that directly affect how Large Load customers develop and operate in ERCOT. PURA is codified as Texas Utilities Code §§ 11.001–66.017. These new provisions are summarized below.
New Interconnection Standards and Cost Sharing
S.B. 6 established interconnection standards for Large Load customers by requiring various financial commitments from those customers, including payment of transmission screening study fees, provision of financial security, contribution in aid of construction (“CIAC”), advance funding for equipment and services, and other forms of financial commitment. See PURA §§ 37.0561(d)–(h). Further, S.B. 6 directed the PUCT to adopt rules requiring Large Load customers in the ERCOT region to bear an appropriate share of the costs incurred by the serving utility to interconnect their loads. See id. at § 35.004(c-1). In response to this directive, the PUCT opened Project No. 58481, “Rulemaking to Implement Large Load Interconnection Standards Under PURA § 37.0561,” in July 2025 to implement both that section and PURA § 35.004(c-1).
S.B. 6 further provides that electric cooperatives and municipally owned utilities (“MOUs”) that have not implemented customer choice must pass through to Large Load customers the reasonable costs associated with their interconnection. See PURA § 35.004(c-2).
Co-Location with Existing Generation
Under PURA § 39.169(a), a power generation company (“PGC”), MOU, or electric cooperative must submit notice to ERCOT before implementing a net metering arrangement between an existing stand-alone, dispatchable generation resource (registered as of September 1, 2025) and a new Large Load customer. ERCOT must study the system impacts of the proposed arrangement, including any reduction in generation available to the grid, and submit its findings and recommendations to the PUCT within 120 days of receiving all required information. See id. at § 39.169(d).
The Commission must approve, deny, or impose reasonable conditions on the proposed arrangement within 60 days of receiving ERCOT’s study, as necessary to maintain system reliability, including transmission security and resource adequacy. See id. Conditions may include requiring the Large Load to curtail during certain events, requiring the generation resource to make capacity available to ERCOT, or ensuring customers are held harmless for stranded or underutilized transmission assets. See id. at § 39.169(d)(1)–(3). If the Commission does not act within this period, the arrangement is deemed approved. See id. at § 39.169(e). For dispatchable generation resources, the Commission must require that any capacity made available to ERCOT prior to the arrangement continue to be made available at ERCOT’s direction in advance of anticipated emergency conditions. See id. at § 39.169(d).
Two exemptions apply. The requirements do not apply if (1) the generation resource was majority-owned by the parent company of the Large Load customer as of January 1, 2025, or (2) the generation resource’s ERCOT registration included a co-located Large Load at the time of energization. See id. § 39.169(b)(1)–(2).
These requirements were implemented through 16 Tex. Admin. Code (“TAC”) § 25.205, which the PUCT adopted on March 26, 2026, under Project No. 58479, “Rulemaking for Net Metering Arrangements Involving a Large Load Co-Located with an Existing Generation Resource Under PURA § 39.169.” This rule prohibits implementation of a qualifying net metering arrangement without Commission approval and establishes the applicable procedural and study requirements. See 16 TAC § 25.205(c).
Mandatory and Voluntary Curtailment of Large Load Customers
Under PURA § 37.0561, ERCOT may issue curtailment or dispatch instructions to co-located facilities only where two conditions are met: the arrangement involves a new or expanded interconnecting Large Load, and the co-located generation is capable of serving at least 50% of the Large Load’s on-site demand without exporting to the grid. See PURA § 37.0561(d). Even then, ERCOT may issue such instructions only before or during a “grid emergency” and only after all available market services, other than frequency responsive service, have been exhausted.
Finally, PURA § 39.170(a) allows a utility to curtail new Large Loads interconnecting after December 31, 2025, during firm load shed events.
ERCOT is Developing the “Batch Study” Process
For new co-locating arrangements between a Large Load and natural gas generation resource, PURA § 39.169 and 16 TAC § 25.205 require the approval of the PUCT, subject to the aforementioned exemptions. See PURA § 39.169(a).
Additionally, because ERCOT must study any type of Large Load interconnection request, it has proposed a “Batch Study” process to evaluate clusters of projects together rather than on a one-off basis. Currently, the transmission adequacy studies for new Large Load Interconnection (“LLI”) requests are conducted individually by Transmission Service Providers (“TSPs”). ERCOT has noted that this approach has resulted in the need to restudy some LLI requests one or more times due to outdated study assumptions as other requests in the area meet milestones to be considered “must study” loads. Re-studies have created uncertainty and risk for developers and have slowed the process to interconnect. Accordingly, as of February 2026, ERCOT is engaging with stakeholders on the development of a new ERCOT-led Batch Study process.
Ultimately, the aim of the Batch Study approach is to improve efficiency and ensure interconnection impacts are assessed not by individual TSPs but rather on a system-wide basis.
Too Soon to Tell Impact of “Batch Study” on Large Loads
For Large Loads, this means interconnection feasibility may depend not only on an individual project’s characteristics but also on the broader queue of pending requests.
Because the Batch Study process remains under active development, stakeholders with pending or contemplated interconnection requests should monitor ERCOT’s ongoing workshop and study process closely, as decisions regarding study methodology will directly shape project timelines, costs, and feasibility.
As discussed above, PURA § 37.0561 and PURA § 35.004(c-1) require various financial commitments from Large Load customers approved by the PUCT. See PURA § 37.0561(f), (h)(1)–(4). And, the PUCT opened Project No. 58481 to serve that process. Although Project No. 58481 is currently pending, the Proposal for Publication (PFP) for that project—released in March 2026—lowered the applicable financial security deposit and the non-refundable interconnection fee from $100,000/MW to $50,000/MW, and broadened site control requirements to include option-to-lease and option-to-purchase at the intermediate stage, and purchase-and-sale agreements at the interconnection agreement stage.
Until Project No. 58481 is finalized, its requirements remain subject to change. Stakeholders should accordingly monitor the rulemaking for additional modifications to proposed 16 TAC § 25.194.
It is clear that S.B. 6 and its implementing regulations have redesigned the process for integrating Large Load customers into ERCOT. Utilities and natural gas generation resources contemplating co-located generation arrangements should assess these transactions carefully to ensure compliance with evolving regulatory and statutory requirements.