The Texas power grid has been a focal point of legislative action over the past two sessions, particularly after the near-collapse during Winter Storm Uri in 2021. While grid stability remains a concern, the urgency has shifted from emergency preparedness to handling the surge in electricity demand from new industries—primarily data centers and cryptocurrency miners. In response, the Texas Senate is pushing forward Senate Bill 6 (SB 6), authored by Sen. Phil King (R-Weatherford), to regulate and allocate costs for these large electricity consumers.
The Electric Reliability Council of Texas (ERCOT) estimates that the state's electricity load will reach 150,000 megawatts (MW) by 2030—a 40,000-MW jump from 2023 forecasts. This sharp increase is largely attributed to the expansion of data centers and cryptomining operations, both of which require massive amounts of power.
How Data Centers and Cryptominers Affect the Grid Differently
While both facilities demand significant energy, their operations differ in ways that impact grid management:
Cryptominers operate flexibly, meaning they can voluntarily reduce their electricity use during peak demand in exchange for financial compensation. This participation in demand response programs helps ease grid strain.
Data centers, on the other hand, require a constant and uninterrupted power supply. Businesses relying on cloud computing, financial transactions, and digital infrastructure cannot afford downtime, making these facilities less adaptable to demand response programs.
Adding to the strain, the electrification of the oil and gas industry in the Permian Basin is further pushing electricity consumption higher.
What SB 6 Aims to Fix
SB 6 seeks to address these challenges by establishing transparency, cost allocation, and grid reliability measures for large-scale electricity users. The bill focuses on four main objectives:
Proper Allocation of Transmission Costs – Ensuring that large energy consumers pay their fair share for the infrastructure required to connect them to the grid.
Grid Reliability Protections – Making sure that massive energy users do not destabilize the grid or cause blackouts for residential customers.
Improved Load Forecasting – Bringing credibility to energy demand projections to help ERCOT plan for future capacity.
Fair Load-Shedding Requirements – Requiring large-scale consumers to participate in power outage mitigation plans during times of energy shortages.
New Regulations for Large-Scale Energy Consumers
Under SB 6, facilities that use at least 75 MW of power must:
Disclose their interconnection plans to the state, including details on whether they are considering similar operations in other states.
Pay a $100,000 study fee to evaluate the impact of their electricity use on the grid.
Revamp transmission charges for “behind-the-meter” operations—facilities that generate and use power onsite without going through ERCOT or a utility provider.
Prove financial commitment to their project to prevent speculative applications from distorting grid forecasts.
A key concern is behind-the-meter generation, where some facilities contract private generators to supply power outside ERCOT’s oversight. King warned that if 5 to 10 gigawatts of electricity shift behind the meter, it could significantly reduce available power in the broader market, increasing blackout risks.
Changing How Texas Charges for Transmission Costs
Currently, transmission costs are socialized across the market, with ratepayers sharing the expense through a mechanism known as Four Coincident Peak (4CP). This method bases charges on peak electricity usage during the hottest four months of the year—June through September. SB 6 would require ERCOT to reassess the 4CP model and determine whether it is still the best way to distribute transmission costs.
One of the key modifications to SB 6 is scrapping the proposed minimum transmission charge in favor of an upfront interconnection fee. This change, set to be adopted by the Business & Commerce Committee, aims to ensure fairness while avoiding excessive cost burdens on new facilities.
Texas Grapples with Explosive Growth in Large-Scale Energy Demands
State planners are particularly concerned with the uncertainty in load forecasting. Many companies begin regulatory processes for massive energy consumption projects but never follow through, making it difficult for ERCOT to plan future capacity. A similar issue exists on the generation side, where thousands of megawatts of proposed solar power projects may never materialize.
The scale of incoming data centers underscores the magnitude of the issue. Recent committee discussions highlighted that several Texas communities are seeing requests for energy consumption exceeding their current capacity:
Waco and Hillsboro: Current load of 803 MW vs. incoming data center request of 828 MW
Lufkin and Nacogdoches: 451 MW vs. 468 MW request
Cleburne and Alvarado: 205 MW vs. 245 MW request
These surges in energy demand can double the electricity load in some areas, stressing local infrastructure and ERCOT’s long-term planning.
Industry Perspectives: Balancing Growth with Responsibility
ERCOT CEO Pablo Vegas supports SB 6, particularly its load forecasting measures. “This bill provides a helpful set of provisions that ERCOT needs to navigate the grid of today and tomorrow,” Vegas said. “The load forecast provision is especially important because that’s pivotal for everything we do.”
The Data Center Coalition, which represents the industry, acknowledged the importance of fair regulations but expressed concerns about load-shedding requirements. Dan Diorio, the coalition’s senior director of state policy, warned that remote disconnection mandates in emergency situations could threaten public safety if critical infrastructure, such as 911 and emergency response systems, loses power.
Data centers typically install backup power systems, mainly diesel generators, to hedge against blackouts and high electricity costs. However, under SB 6, these backup systems would be required to run more frequently during emergencies. If grid emergencies last longer than expected, federally permitted runtimes for these generators could be exhausted.
Other industry representatives, such as Walt Baum of Powering Texans, suggested increasing flexibility in generation placement rather than tying backup power strictly to data center sites. “Having more flexibility to put it where it's needed the most makes sense,” Baum argued. “Right now, we need the generation down in the Permian Basin.”
The Bottom Line: Texas is Bracing for a Power-Hungry Future
Texas lawmakers have overhauled ERCOT’s grid policies in recent years, focusing on market reforms and weatherization requirements. However, the unprecedented growth in large-scale energy consumption is now the legislature’s new challenge.
