In the space of four days, Texas changed both the cost and the timing of building a data center on the ERCOT grid. On September 18 the Public Utility Commission of Texas adopted its large-load interconnection rule under Senate Bill 6, requiring customers to post $50,000 per megawatt of financial security before ERCOT will include them in an interconnection study. On September 21 Governor Greg Abbott directed the Texas Commission on Environmental Quality to halt all permits sought by data centers until ERCOT completes its audit of projects in the interconnection process.
The rule makes speculative queue positions expensive. The permit halt makes every data center project wait.
The rule
The commission adopted new 16 TAC §25.194, which implements the section of the Public Utility Regulatory Act that SB 6 added in 2025. Its order says that before a large load can be included in an ERCOT interconnection study, the customer must execute an intermediate agreement, provide certain disclosures and post financial security of $50,000 per MW. According to the Texas Register acknowledgment, the rule takes effect on October 8.
The rule covers new interconnections of 75 MW or more at a single site, expansions that take a site to 75 MW or more for the first time, and expansions of sites already at that level that add 75 MW or more, according to a White & Case analysis. The commission declined requests for industry-specific carve-outs, so the rule also captures hydrogen producers, metal manufacturers and petroleum facilities. It also required that security be calculated on gross contracted peak demand, rejecting requests to net out co-located generation.
The biggest change from the March proposal concerns fees. The proposal carried a non-refundable interconnection fee of $50,000 per MW. The final rule removed it. In its order, the commission said the financial security that remains protects against stranded infrastructure costs and is not a fee. In place of the fee, White & Case says, customers pay a flat $100,000 study charge plus size-tiered study charges.
How the money flows
White & Case describes a phased process. At the intermediate agreement stage, the customer pays the $100,000 study fee, submits officer-attested technical disclosures and posts $50,000 per MW of requested peak demand. The utility must contact ERCOT within 60 days to start the study. After ERCOT allocates transmission capacity, the customer signs a standard large load interconnection agreement and posts security equal to the greater of $50,000 per MW of contracted peak demand or its allocated transmission upgrade costs. Utilities invoice direct interconnection costs before incurring them, and the customer commits to pay the large-load minimum billing demand under the transmission cost recovery factor.
Security comes back in stages. The utility returns 20% at initial energization and the rest in 20% increments as the customer meets milestones. A customer that withdraws before its study starts, or receives no capacity in ERCOT's batch study, gets its full security back less amounts owed. A customer that withdraws after capacity is allocated forfeits 20% of the security tied to that capacity. If a project fails to energize within 24 months of its scheduled date, the utility applies the security to amounts owed.
The arithmetic
The sums are designed to bite. A 1 GW campus must post $50 million before ERCOT studies it. ERCOT told the Texas Senate in July that about 474 GW of large loads were seeking interconnection as of June, roughly 90% of them data centers. If every megawatt in that queue had to post at the new rate, the total would be about $23.7 billion. Few developers holding multiple speculative positions will keep all of them at that price, which is the point.
For context, ERCOT's all-time peak demand is 85,508 MW, set in August 2023. The queue of requested load is more than five times that.
The permit halt
Abbott's directive goes further than the rule. His office said that because the PUCT, ERCOT and the Texas Water Development Board need audit information to make informed decisions, no state agency shall move forward with regulatory approvals related to data center development until it is acquired. "Data centers must pay their own way, protect our grid and water, and complete the ERCOT and TWDB audits," Abbott said. "Until they do, TCEQ will issue no permits sought by data center projects."
The governor had earlier directed the PUCT and ERCOT to audit all data centers in ERCOT's interconnection process. On September 14 he told the water board to compel data centers to comply with water-use reporting requirements and to work with ERCOT on the audit. His release sets out conditions: data center projects must cover all electrical infrastructure costs, result in lower residential bills, complete the ERCOT audit, avoid using water needed by local communities, report electricity and water use, and observe setback requirements. TCEQ must report on its compliance by October 19. Abbott also said he will work with the Legislature next session to eliminate financial incentives for data centers.
White & Case notes that ERCOT expects to finish its audit and verification on or around December 10, after which it will finalize classifications for Batch Zero projects and resume the large-load study process.
Why the two moves fit together
The rule and the halt target different routes to the grid. The rule governs projects that connect through ERCOT's queue. TCEQ permits govern, among other things, the on-site generation that some developers have used to start operating before a grid connection is ready. White & Case observes that by suspending permits, the freeze also blocks off-grid or islanded projects that would have bypassed the queue. It also notes that because security is calculated on contracted peak demand, developers cannot avoid the collateral requirement by adding backup generation.
Taken together, Texas has closed both doors for now. Projects must pay to stay in line, and they cannot build their own power plants to skip the line while the audit runs.
What it means for developers
Texas has been the easiest large market in which to build a data center. That is changing. The new rule raises the up-front cost of a queue position and makes withdrawal after capacity allocation expensive. The permit halt adds a delay of at least several months with no fixed end date. And the governor's conditions, particularly the requirement that projects result in lower residential bills, set a standard that developers will have to show they meet.
Developers and lenders will need to revisit financing arrangements that assumed a faster path. Collateral has to stay posted to keep transmission priority, while the permits needed to build remain on hold. The audit's results in December will show how much of the 474 GW queue survives.