Data centers are popping up around Texas like fire ant hills after a rainstorm. Or maybe like bluebonnets in the spring. Either way, they seem to be everywhere — and more are coming.
Their arrival could strain the power grid, raise energy costs and siphon already scarce water resources. Lawmakers and regulators need to prepare for the disruption. But how? This week, some of the state's biggest data center developers and operators visited Austin to respond to that question.
As representatives of industry, their answers, predictably, downplayed costs and touted the benefits of the data center boom.
But the hearing, conducted by the House Committee on State Affairs, contained some fascinating information and gave an early look into how state leaders may tackle this major issue in the 2027 legislative session.
Here are four key takeaways.
Data Centers have broken Texas' power grid planning
State power grid operators at the Electric Reliability Council of Texas need to know about new businesses opening up in Texas that will pull a lot of energy from the power grid. Planning for that incoming demand is essential to making sure the grid can accommodate growth while reliably serving the rest of us.
The data center boom has broken that process.
At the hearing, ERCOT CEO Pablo Vegas told lawmakers that incoming businesses plan to pull 410,000 more megawatts from the grid over the next few years. That's about seven times more than the new demand that ERCOT had to accommodate just a couple years ago in 2024.
"It's been growing rapidly over the last year and a half. And really in the last month and a half, we saw a big chunk of new projects come into this queue," Vegas said. "Of these, around 87% are data centers."
To handle all the potential new hunger for electricity, ERCOT is creating a new system to prioritize when those companies can hook up to the grid, how much energy they can pull, and make them put some money down to pay for grid upgrades and reserve their space on Texas's sometimes congested transmission lines while they build their businesses.
It is a radical break from Texas' previous, more hand off, approach to grid planning.
"That's a big change from what we do today. Because today we don't hold transmission capacity for projects," said Vegas.
The process of creating these new rules, referred to as a "batch interconnection process," is still underway. But it is supposed to be complete by next year's legislative session.
Not surprisingly, new costs and regulations have some in the data center industry nervous.
The industry has lawmakers' ears
In many places, the public's reaction to the data center boom has ranged from deeply skeptical to downright hostile.
A handful of states are considering putting a moratorium on new centers until their full impacts can be understood. On the very same day of the hearing in Austin, Maine became the first state to actually do so.
But that never came up at the Texas Capitol.
Instead, the first couple of questions lawmakers asked were on behalf of business developers upset about transmission utility charges, which they believed were related to the proposed new regulation.
"Representative McQueeny and I have got a friend who already had about six million dollars in the queue [for energy transmission] and then he got six days notice, six days notice for an additional 24 million dollars!" said State Rep. Charlie Geren.
"I've got two of them [businesses] that have come to me this week" State Rep. McQueeny followed up later, "So, I think we've got a problem there. We need to get that figured out."
Public Utility Commission of Texas Chair Thomas Gleeson told the Representatives that the Commission would look into why their friends in business might be getting these charges from transmission utilities.
For many data center owners, Trump's 'ratepayer protection pledge' makes no sense
There is plenty of concern that data centers will increase everyday people's electric bills by increasing energy demand and infrastructure costs.
The federal government has answered those fears by asking big tech companies to sign a "ratepayer protection pledge" to pay for whatever extra costs their operations bring.
Critics point out that the pledge is nonbinding and largely symbolic.
But many developers and owners of data centers themselves have no interest in signing.
That's because the companies that build, own and manage data centers are often not the same tech giants that rent them.
"As a landlord [...] we're beholden to what our tenants want to do," said Haynes Strader, the Chief Development Officer of Skybox Datacenters, who was asked why his company had not signed the pledge.
"If we do a lease with JPMorgan Chase, for example, directly as a bank, and they haven't signed that pledge, as a landlord, we've committed ourselves to something that our tenant may not be on board with."
According to testimony from Dan Dorio, with the Data Center Coalition, the largest data center "tenants" in Texas right now are Microsoft, Amazon, Google, Oracle.
All of those firms have signed the ratepayer protection pledge.
A lot of the data center projects that have been announced will probably not be built
Part of the challenge of preparing for a boom in Texas datacenter construction is trying to figure out how many projects have the funding to move forward, and how many have been announced simply in the hopes of raising that funding.
Right now, Texas grid operators need to assume that every potential business that says they want to connect to the Texas grid will materialize.
The reality is that many will not.
"I think one of the challenges is there are a lot of people that own land with power lines running through it and have some real estate development background and are putting in requests. And there's no good way to stop that or at least vet it more thoroughly," said Skybox's Strader. "So there's just been a ton of speculation."
Strader and others say the rules under development by the Electric Reliability Council should help identify some of those projects that are less likely to materialize, and save the grid the operator time and money it would take to plan for them.
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