Texas governor talks tough on data centers, calls for clampdown
Texas Governor Greg Abbott has released a broad set of proposals to regulate data center growth in the state, citing concerns over electricity costs and water usage. He has directed state electricity officials to provide recommendations by mid-July, indicating a shift from his previous pro-data center stance. This move follows growing local opposition and a recently rescinded moratorium in Hill County.
Texas Governor Greg Abbott has proposed a comprehensive regulatory framework for data centers, marking a significant shift from his previous position as a proponent of AI development in the state. Citing concerns about increased electricity costs for Texans and the substantial energy demands of data centers, Governor Abbott instructed state electricity officials to submit a memo outlining actions and recommendations by July 17.
The governor's proposals, announced ahead of his November reelection bid, include requirements for data centers to cover their own electric infrastructure costs, utilize water-efficient technologies, and the repeal of sales tax exemptions and other incentives. This policy pivot comes amid rising local opposition, exemplified by Hill County's brief moratorium on data center construction, which was rescinded after a lawsuit. Other pro-data center governors, like Utah's Spencer Cox and Pennsylvania's Josh Shapiro, have also recently adjusted their messaging.
While Abbott's letter does not immediately change existing regulations, it sets the agenda for the next legislative session in 2027, where these proposals will be considered. State entities such as the Public Utility Commission of Texas (PUC) and the Electric Reliability Council of Texas (ERCOT) are already working on implementing Senate Bill 6, a 2025 law designed to protect ratepayers from new grid infrastructure costs. Abbott's letter specifically directs the PUC to act by July 31 to reduce residential ratepayers' transmission costs and ensure data centers bear their full infrastructure expenses.
Industry observers suggest that these new rules are unlikely to halt the immediate wave of data center projects already in ERCOT's Batch Zero power allocation process. However, the governor's directives are expected to influence the PUC's final approval of ERCOT's Batch Zero rules and subsequent detailed regulations. The Data Center Coalition affirmed its commitment to responsible growth, while local opponents like Amy Flynt of Hood County called for immediate legislative action on issues such as noise and water use, rather than waiting until the 2027 session.