Gov. Abbott Orders Comprehensive Review of Data Center Projects

On August 3, 2026, Texas Governor Greg Abbott (R) directed the Public Utility Commission of Texas (PUC) and the Electric Reliability Council of Texas (ERCOT) to conduct a “comprehensive verification and audit” of all data centers advancing through ERCOT’s interconnection process before any additional data centers may move forward. In a letter to PUC Chair Thomas Gleeson and ERCOT President and Chief Executive Officer Pablo Vegas, Gov. Abbott stated that ERCOT is considering approximately 474 gigawatts of requests to connect to the Texas grid, more than five times ERCOT’s record peak electricity demand, and that data centers account for approximately 90 percent of those new power requests. Gov. Abbott also stated that, “[t]he failure of some data centers to comply with the PUC’s survey measuring water and power usage under the General Appropriations Act makes this [directive] necessary.”

Scope of the Audit

The directive requires PUC and ERCOT to conduct a comprehensive review of all data center projects advancing through ERCOT’s interconnection process. As part of that review, PUC and ERCOT must collect information regarding:

• State and local financial support, including tax incentives, grants, abatements, and other forms of public assistance received or expected to be received.
• Power supply arrangements, including projected annual and peak electricity demand, reliance on the ERCOT grid, and efforts to develop or procure on-site generation.
• On-site generation resources and other measures intended to reduce demand on the ERCOT grid.
• Water consumption and sourcing, including projected usage, anticipated water supplies, and efforts to reuse water rather than rely on community resources.
• Cooling technologies, including whether a facility will use air-cooled, closed-loop, or other water-efficient systems.
• Community-impact mitigation measures, including noise controls, lighting management, setbacks, traffic improvements, and emergency response coordination.
• Ownership and control information, including the project’s ownership structure and controlling interests.

Gov. Abbott stated that any project that fails to comply with the verification and audit process “must be denied” connection to the Texas grid.

The August 3 directive does not establish a deadline for completing the audit process, creating uncertainty regarding when affected projects may resume advancing through ERCOT’s interconnection queue.

Immediate Effects on the ERCOT Interconnection Queue

The Governor’s directive is already affecting previously approved state efforts to manage increasing large-load interconnection requests. On June 18, 2026, PUC approved ERCOT’s “Batch Zero” interconnection study process as the first phase of the state’s new framework for evaluating large-load interconnection requests. ERCOT had planned to notify transmission and distribution service providers of project classifications by August 7, 2026, and begin the Batch Zero study in September. Following the August 3 directive, however, ERCOT issued Market Notice M-A080326-01 stating that it would not issue those classifications by its scheduled August 7, 2026, deadline, and would instead seek a good-cause exception from the PUC regarding Batch Zero timelines and procedures during ERCOT’s August 20, 2026, open meeting, while consulting with the agency on implementation of the Governor’s audit requirements.

ERCOT spokesperson Trudi Webster told Houston Public Media that “ERCOT is reviewing Governor Abbott’s letter concerning data centers and will work with the Public Utility Commission of Texas to implement the Governor’s directive, including postponement of the Batch Zero transmission planning study.” PUC Chair Gleeson also stated, “We appreciate Gov. Abbott’s directive and will continue to work closely with ERCOT to ensure these requirements, along with those laid out in our July 17, 2026, letter to Gov. Abbott, are fully carried out on behalf of the people of Texas.”

SB 6 and the Path to the August 3 Directive 

The August 3 directive builds on a series of legislative and regulatory actions over the past year focused on managing the rapid growth of data center development in Texas, one of the nation’s fastest-growing data center markets.

The foundation for many of these efforts was laid by Senate Bill 6 (SB 6), which Gov. Abbott signed into law on June 20, 2025. SB 6 directed PUC to establish new standards for large-load interconnections in the ERCOT region, including requirements related to transmission planning, cost allocation, financial commitments, site control, and the disclosure of on-site generation resources. The law also required large-load customers to contribute to interconnection costs, authorized new reliability tools to curtail large loads during grid emergencies, and directed regulators to reevaluate how transmission costs are assigned among customers.

As part of SB 6 implementation, the PUC approved ERCOT’s “Batch Zero” interconnection study process on June 18, 2026, establishing the first phase of a new framework for evaluating and prioritizing large-load interconnection requests. The process was intended to distinguish commercially viable projects from speculative proposals through study fees, financial commitments, and other readiness requirements.

Gov. Abbott subsequently expanded the state’s focus beyond interconnection reform. On June 10, 2026, he directed the PUC and ERCOT to protect residential and small business ratepayers from costs associated with data center development, require data centers to fund the electric infrastructure necessary to serve their operations, identify additional consumer safeguards, and reduce residential transmission costs. He also called for legislation requiring data centers to report electricity and water usage, utilize water-efficient cooling technologies, contribute new generation capacity, reduce impacts on neighboring communities, and phase out certain tax incentives.

On July 24, 2026, Abbott released PUC and ERCOT’s response to his June 10 directive, highlighting ongoing agency efforts to strengthen large-load interconnection screening, revise cost-allocation policies, develop new reliability requirements, and establish additional standards for data centers seeking grid access. The agencies also recommended additional legislative authority related to the regulation of large computational loads and data center registration and reporting requirements.

The August 3 audit directive represents the latest step in Texas’s evolving approach to managing large-load growth. While SB 6 focused primarily on interconnection readiness, cost responsibility, and grid reliability, the audit expands the state’s review to include project ownership, public incentives, water consumption, community impacts, and the extent to which data centers are providing their own generation resources.

Implications for Developers in Texas

The Governor’s directive will have far-reaching impacts across the data center development ecosystem. Projects currently advancing through ERCOT’s Batch Zero process are expected to face delays, as ERCOT has suspended previously scheduled milestones while it consults with the PUC and seeks relief from existing Batch Zero timelines during the August 20, 2026, open meeting. The duration of those delays remains uncertain.

For generation developers, the audit introduces uncertainty regarding project timing, customer demand forecasts, and financing assumptions tied to anticipated data center load growth. The projects that ultimately advance through ERCOT’s interconnection queue will influence transmission planning, power purchase negotiations, reliability assessments, and future generation investment decisions. Projects paired with, or intended to serve, data centers may face additional scrutiny if the associated data center has not satisfied audit requirements related to power consumption, on-site generation, water use, ownership or community impacts.

The directive may also affect hyperscalers, colocation providers and other large-load customers evaluating Texas development opportunities. Until the PUC and ERCOT establish a path forward, developers may face uncertainty regarding interconnection schedules, infrastructure planning and commercial operation timelines. Real estate developers, landowners and investors pursuing data center campuses may also need to reassess project schedules, contractual milestones, land acquisition strategies and development assumptions that depend on interconnection approvals and power availability.

Financing institutions, infrastructure investors and private equity sponsors may likewise reexamine underwriting assumptions, capital deployment schedules and project-level risk allocations while the scope and duration of the audit remain unclear. Parties with exposure to Texas data center projects may also review transaction documents, development agreements and financing arrangements to evaluate how potential interconnection delays affect milestone requirements, termination rights and other project obligations.