Demand on the state grid reached a record 85,508 megawatts in August 2023, and the Electric Reliability Council of Texas has estimated it will grow to about 150,000 megawatts by 2030.
“Businesses in the state are now seeking to bring facilities to Texas that consume unparalleled, tremendous amounts of power,” Sen. Phil King, R-Weatherford, said during a Feb. 27 hearing of the Texas Senate Business and Commerce Committee. “This includes data centers, AI computing, manufacturing facilities and several other types of industries that can consume more electricity in a single building than an entire municipality.”
During the hearing, King discussed his plans to strengthen the power grid, protect residential customers, and better forecast supply and demand. His proposal, Senate Bill 6, was left pending in the committee Feb. 27 to give lawmakers time to work with industry stakeholders to clean up the legislation, King said.
The overview
A recent ERCOT report indicates that in the worst-case scenario, Texas’ peak electric demand could outpace supply as soon as 2027. In extreme conditions, projections show a 8.3% power shortfall during peak demand in summer 2027, which would grow to 32.4% in 2029.
King said lawmakers should treat these estimates as challenges, not catastrophes, and work together to find solutions.
“While this load growth is a strain on the ERCOT grid, it is also an excellent opportunity for the state of Texas, so long as we manage it properly, as to not create reliability risks or pricing issues for everyday Texans,” King said. “Above all, we never want to risk another [Winter Storm] Uri, where over 200 Texans died because they lost their electricity.”
King said one issue identified during Winter Storm Uri is the way power emergencies are handled. To prevent a systemwide blackout in an emergency, ERCOT uses a process called “load-shedding,” which involves directing transmission companies to temporarily disconnect some customers, according to agency documents.
“In practice today, only distribution-level, mainly residential and small business... load can be effectively shed in a power emergency,” King said. “This means that you could have, and frankly, will have, without change, a data center powered up, while the neighborhood literally across the street is without power.”
Zooming in
Utility providers need more flexibility to manage “non-critical” large loads during extreme conditions, King said.
“Remember, during Uri, no one died at the office building and no one died at the manufacturing plant,” he said. “They all froze to death in their homes in 2021 and that will never happen again. It cannot.”
During emergencies when load-shedding is necessary, SB 6 would require customers that use at least 75 megawatts of power to switch to backup generators to reduce strain on the grid. Large customers would also need to install equipment allowing the state to remotely disconnect power from their facilities, according to the bill.
Dan Diorio, a senior policy director for the Data Center Coalition, told senators he was concerned about the unintended effects of these proposed rules. According to the coalition, data centers are buildings that organizations use to “house their critical applications and data”—and Diorio said shutting off their power could impact public safety.
“[Data center clients] include a range of essential services such as federal, state and local governments, law enforcement, cybersecurity [and] hospitals,” Diorio said during the hearing. “They require and depend on the data center to maintain constant uptime, to provide uninterrupted services. Even a momentary interruption of that service can have significant consequences.”
Diorio also noted that the use of backup generation by data centers is “governed by strict environmental regulations” limiting when and how such power can be used. The group hopes to work with lawmakers to ensure the bill would meet state and federal guidelines, he said.
King also proposed creating a “voluntary program” that would encourage large consumers to reduce their energy use when grid conditions start getting tight. Those customers would be paid to switch to backup power and help avoid a load-shed emergency, he said.
More details
Texas also needs to tackle “behind-the-meter” generation, King said, referring to power that is used on-site and does not pass through the electric grid. He said some large customers, including data centers, contract with generation facilities to “take megawatts behind the meter and potentially out of the ERCOT energy market.”
SB 6 would require generators to get approval from the Public Utility Commission of Texas—which oversees ERCOT and utility companies—before they could serve customers behind the meter.
The PUC could require generators to return power to the state grid during tight or emergency conditions, King said. He added that this would help make the grid more reliable.
“Poor [grid] reliability not only leads to risk, but it also creates scarcity, and that creates higher prices for everyone,” King said.
SB 6 would also adjust how ERCOT measures future demand. King said current formulas rely too much on hypotheticals.
“No one knows if this 150 gigawatts is real. ... ERCOT and the PUC just simply aren't sure if the large loads in their interconnection queue are real or just speculative,” he said. “Without credible data on these potential loads, we run the risk of over-building with high costs being passed on unnecessarily to customers—or we could underbuild, further exacerbating scarcity.”
ERCOT CEO Pablo Vegas testified that SB 6 would help make “the grid today and the grid of tomorrow” more reliable.
“Being able to better understand the load forecast that's coming in [is] a really critical element to this, because so much of what we do depends on having a good load forecast,” Vegas said. “If we can use flexibility in modeling and in doing our reporting, then we'll be able to reflect more accurately... what the grid's risks are in the future.”
Barksdale English, the PUC’s deputy executive director, assured senators the agency would move quickly on the proposed changes if SB 6 becomes law.
“[SB 6] balances the opportunities of economic development that these new large loads would present to the state... with the challenges that those new large loads could present to the reliable operations of the grid,” English said. “I feel confident in our staff's ability to take whatever is passed out of this body, and is hopefully signed by the governor, and get it executed expeditiously and effectively.”
Next steps
During the hearing, committee chair Sen. Charles Schwertner, R-Georgetown, asked stakeholders to submit proposed edits to SB 6 by March 3. If senators approve the bill during a future committee hearing, it would be sent to the full Senate for a vote.
Making the power grid more reliable is a top concern of Lt. Gov. Dan Patrick, who gives low bill numbers to his priorities. Meanwhile, Gov. Greg Abbott urged lawmakers to pass legislation to add more power to the grid during his State of the State address in early February.
“Last session, Texas provided incentives to entice the addition of 10,000 more megawatts of power,” Abbott told Community Impact in a Feb. 7 interview. “Those were fully bid out, and that's in the process of being added to the grid. We want to repeat that again this session to make sure that we are able to attract another 10,000 megawatts of additional power.”
