Texas is halting the approval of new data center projects until state regulators can audit all data centers seeking to connect to the power grid, Gov. Greg Abbott announced Aug. 3.
What you need to know
The governor directed the Public Utility Commission of Texas and the Electric Reliability Council of Texas—the state utility regulator and grid operator, respectively—to conduct “a comprehensive verification and audit” of all data center applicants “before any additional data centers are approved to move forward.”
The move comes amid growing public criticism of Texas’ booming data center industry and recent political pressure for Abbott to respond to concerns about the impacts data centers can have on communities, local water supplies and the electric grid. Some Texans, including elected officials, have asked Abbott to enact a complete moratorium on data center development until the legislature can address residents’ concerns.
Officials did not say how long the pause would last or when the audits would begin. In an Aug. 3 letter to the heads of the two agencies, Abbott asked that the PUC and ERCOT collect the following information from each proposed data center project:
- Details on the state and local tax incentives or exemptions data center developers are receiving
- Whether data centers plan to generate their own electricity and how much power they will need
- How the projects will use water, how much water they will need and their impacts on local water resources
- Efforts to limit noise, light pollution and other impacts on local communities
- Who owns each proposed facility
Data centers that do not meet pass the audit should not be allowed to connect to the grid, Abbott said.
“Any data center project that fails to comply with the verification and audit process to protect the reliability and resilience of the Texas electric grid must be denied,” Abbott said in the letter. “Simply put, Texans must come first.”
The Data Center Coalition, which advocates for the industry, said in a statement that it hoped Abbott’s directive would “showcase the good actors” among Texas data center developers without “delaying [projects] unnecessarily.”
“The Data Center Coalition and its members strive to be good actors where we operate, which is why we are hopeful this directive from the governor will help separate those who are responsible water and energy stewards from those who are not,” said Dan Diorio, the coalition’s vice president of state policy. “With billions of dollars in investment and hundreds of thousands of jobs on the line, we urge the PUCT and ERCOT to move swiftly in order to distinguish between speculative projects and serious, committed investors and community partners.”
The big picture
ERCOT is currently tracking about 474,000 megawatts of large projects seeking to connect to the grid. More than 420,000 megawatts, or 90% of all large load interconnection requests, are data centers, officials said during a July 29 legislative hearing. Abbott’s letter directs the two agencies to audit all projects in ERCOT’s interconnection queue.
In response, ERCOT said it would postpone its new batch study process, which requires that data centers and other large projects be evaluated in groups before they can start construction and join the grid. The transmission planning process was approved in June, and applicants were set to learn by Aug. 7 if they'd be included in the first phase of the study, deemed “Batch Zero.”
“ERCOT is reviewing Gov. 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,” an ERCOT spokesperson told Community Impact in an Aug. 3 statement.
Neither ERCOT nor the PUC provided details on the rulemaking process for the audit or how long they expected the audit would take.
“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,” PUC Chair Thomas Gleeson said in an Aug. 3 statement to Community Impact.
Previously, Abbott asked the two agencies to shield residential customers from the costs of data center development in a June 10 letter, and Gleeson laid out their ongoing work on the issue July 17. The governor framed his Aug. 3 order as the next step in data center oversight.
Something to note
During a June 23 hearing, PUC officials said just 28 companies representing less than 100 data center facilities responded to a recent survey on the industry’s water and power use, Community Impact reported. The Texas Water Development Board heard back from about 17% of the data center developers it surveyed about water usage, with lawmakers calling the response rates “terrible.”
“When you’re talking about massive water usage, especially groundwater, and the state can’t calculate how much water is being [used], I think we can all understand why Texans are rightfully concerned about making sure that we have enough water ... to meet our future demand,” Rep. Trent Ashby, R-Lufkin, said at the hearing.
The governor wrote that the lack of response from data centers "makes this [audit] necessary." Legislators have also criticized the data center industry for not being transparent or making efforts to connect with local stakeholders, according to previous reporting.
The debate
State Rep. Gina Hinojosa, an Austin Democrat who is running against Abbott in the Nov. 3 election, urged the governor to do more to stop rapid data center growth.
“Let’s be very clear about this: Abbott can take action now to end the data center madness,” Hinojosa said in an Aug. 3 statement. “He could issue a moratorium until the legislature meets to put in place real protections for Texans and give them a seat at the table to decide if and how data centers move into their communities.”
Data center regulation has emerged as a bipartisan issue in recent months, with legislators, state officials and candidates from across the political spectrum asking for a special legislative session to address a multibillion-dollar tax exemption and consider increased oversight of the industry.
Only Abbott has the authority to call a special session. Texas’ next regular legislative session will begin in January.
