Texas ERCOT market and large-load connections for AI data centers

In short

The Electric Reliability Council of Texas, or ERCOT, manages the grid that serves about 90 percent of the state. ERCOT.com. Under PURA § 37.0561, a large load customer is an entity requesting a new or expanded interconnection where the total load at a single site exceeds a demand threshold of 75 megawatts, though the Public Utility Commission may set a lower threshold if necessary. PURA § 37.0561, ERCOT NPRR1234 overview, PURA § 37.0561, ERCOT Large Load Q&A. In 2025, Texas enacted Senate Bill 6, which gave the Public Utility Commission of Texas, known as the PUCT, authority to write new interconnection rules for large loads, including AI data centers. The queue of large loads waiting to connect to the grid has grown from 63 gigawatts in December 2024 to 410 gigawatts by March 2026, with roughly 87 percent of that from AI data centers. ERCOT Dec. 2025 Board Report, ERCOT December 2025 CDR, ERCOT April 2026 Update. In September 2026, the PUCT adopted a rule that requires a developer to post $50,000 per megawatt of requested peak demand as financial security. Texas Register, October 2026 Transmission-voltage customers that interconnect after December 31, 2025 must accept a protocol allowing their load to be curtailed during firm load shed events, unless the load is operated by a critical load industrial customer or designated as a critical natural gas facility. S.B. 6.

What is ERCOT and what counts as a large load?

ERCOT is an independent, nonprofit grid operator. It controls the flow of electricity to about 90 percent of the state’s electric load. ERCOT.com. Texas chose a competitive wholesale electricity market with no capacity market. That means generators earn money only when they sell energy, not simply for being ready. The market uses scarcity pricing with a $5,000 per megawatt hour price cap. When supply gets tight, wholesale prices can spike rapidly to encourage more generation. This market design requires that new large loads, like AI data centers, be integrated carefully to keep the grid reliable.

A large load under Texas law is one or more facilities at a single site whose combined peak demand reaches 75 megawatts or more. The aggregate peak demand is measured behind one or more common points of interconnection or service delivery points. ERCOT Large Load Q&A. The same 75 MW threshold appears in the Texas Public Utility Regulatory Act, section 37.0561. The PUCT can lower the threshold if needed. PURA § 37.0561 / S.B. 6. For example, the Stargate Abilene AI data center campus is built to draw 1.2 gigawatts, sixteen times the threshold. Epoch AI, Tax alert. A separate PUCT rule, 16 TAC § 25.370, uses a lower 10 MW threshold for load forecasting. That forecasting rule took effect on March 1, 2026 and helps ERCOT predict future demand, but the interconnection process itself stays with the 75 MW test. ERCOT April 2026 Update

What new rules did Senate Bill 6 put in place?

The Texas Legislature passed Senate Bill 6 on May 29, 2025. The Governor signed it on June 20, 2025, and it took effect immediately. Texas Legislature Online. The law directed the PUCT to overhaul how large loads connect to the ERCOT grid. It added several new sections to the Public Utility Regulatory Act.

The PUCT opened five rulemaking projects to carry out the law. In the main one, Project 58481, the PUCT adopted the interconnection standards for large loads in September 2026. Texas Register, October 2026 Other projects cover net metering and co location (58479), load forecasting (58480), reliability and demand reductions (58482), and transmission cost allocation (58484). Tax alert

The key mandates from S.B. 6 include

• Mandatory interconnection standards. The PUCT must write rules that set out a clear, enforceable process for connecting large loads to the grid. (PURA § 37.0561)
• Mandatory curtailment. Any large load that connects on or after January 1, 2026 must be ready to reduce its consumption when ordered by ERCOT. (PURA § 39.170)
• Net-metering review. A new large load that wants to share power behind the meter with an existing generator must go through an ERCOT study and get PUCT approval. (PURA § 39.169)
• Cost recovery for utilities. The transmission service provider, or TSP, that builds the interconnection can recover its costs through established rate mechanisms. (PURA § 35.004)

The PUCT must complete its transmission cost allocation rules by December 31, 2026, while other SB 6 rulemakings are on various timelines with final adoptions planned throughout 2026. Tax alert The PUCT published the proposed main interconnection rule, 16 TAC § 25.194, on March 12, 2026. The public comment period closed on April 17, 2026, and the final rule could be adopted as early as April 26, 2026. Texas Register The PUCT adopted the final rule on September 18, 2026, effective October 8, 2026. Texas Register, October 2026

How does an AI data center get connected to the ERCOT grid?

The process is governed by two frameworks. One is the ERCOT Planning Guide Section 9, adopted by the PUCT in May 2025 and effective December 15, 2025. ERCOT Large Load Q&A The other is the PUCT rule 16 TAC § 25.194, adopted in September 2026. Proposed 16 TAC § 25.194, Texas Register, October 2026 These two are designed to work together and replace a temporary process that ERCOT had operated since March 2022. The old process was built for 40 to 50 large loads. Utility Dive The new process must handle hundreds.

Here are the steps.

Step 1. Notice and initial screening

The developer of the AI data center, called the large load customer, sends a notice to the interconnecting transmission service provider and to ERCOT. ERCOT screens the request. The developer also pays a minimum study fee of $100,000 for the initial transmission screening. S.B. 6

Step 2. Intermediate agreement and financial security

Before the detailed study can start, the developer must sign an Intermediate Agreement with the transmission service provider. Under the PUCT rule adopted in September 2026, that agreement requires

• Proof of site control. A deed, a lease of five years or longer, or an option to purchase or lease.
• A disclosure of any substantially similar interconnection request the developer is pursuing, the approval of which would result in materially changing, delaying, or withdrawing this one. Proposed § 25.194, Proposed § 25.194
• A phased energization schedule.
• Financial security equal to $50,000 per megawatt of the requested peak demand. For a 1 GW project, that is $50 million. Proposed § 25.194
• A study fee. The fee is a flat $100,000, and ERCOT’s own rules may add a separate flat study fee. Any unused part of the fee is returned within 60 days after the study ends. Texas Register, October 2026

Step 3. Large Load Interconnection Study

Through July 10, 2026, the transmission service provider ran a Large Load Interconnection Study, or LLIS. The study covered steady-state analysis, short-circuit analysis, and dynamic and transient stability analysis. It mirrored the Full Interconnection Study that generators receive. The developer paid a $14,000 fee for each LLIS request. ERCOT Market Notice, July 2026, ERCOT Large Load Q&A, EPE Consulting

Under the LLIS, the developer had 180 days from the time the study notice was issued to meet a set of requirements in the Planning Guide. If the developer does not meet that deadline, the transmission service provider must issue a 30-day status update. If the developer fails to meet the 180-day deadline, ERCOT may notify the TSP that the project is subject to cancellation. If the TSP does not provide a status update within 30 days, ERCOT may consider the project cancelled. ERCOT Large Load Q&A

Step 4. Interconnection agreement and non refundable fee

Within 60 days after ERCOT issues a study report that allocates transmission capacity, the developer must sign an Interconnection Agreement. Texas Register, October 2026 That agreement requires

• Financial security of $50,000 per MW of contracted peak demand. At least $50 million for a 1 GW project. Texas Register, October 2026
• Payment of 100 percent of the contributions in aid of construction, often called CIAC. This covers the direct costs the transmission service provider incurs to physically connect the AI data center to the grid.
• Additional security to cover the cost of system upgrades, when that cost is higher than the $50,000 per MW amount.

Step 5. Quarterly Stability Assessment and energization

Before the AI data center can receive power, it must complete the requirements of the ERCOT Quarterly Stability Assessment (QSA). ERCOT Large Load Q&A ERCOT also requires a voltage ride through evaluation. ERCOT proposed that large power electronic based loads such as AI data centers use constant-current control, with IEEE 1668 as a standard under consideration for voltage ride through, and it now assesses ride through in the QSA as a condition for energization. ERCOT Market Notice, January 2026, ERCOT VRT proposal, ERCOT Market Notice Since August 1, 2026, ERCOT’s NOGRR282 rule has required new large computing loads, such as large AI data centers, to stay connected through set frequency and voltage disturbances. ERCOT NOGRR282

Step 6. Forfeiture and refund of the security

If the developer withdraws the project after ERCOT allocates the project capacity, or misses a milestone by 24 months, the security is split. 20 percent of the security tied to the withdrawn or unused capacity is kept by the transmission service provider. 80 percent is refunded to the developer, less any amounts the developer still owes. Texas Register, October 2026

If the project reaches energization, 20 percent of the remaining security is refunded at certain milestones. Under the adopted rule, 20% of the remaining balance is refunded when the large load customer energizes, then the rest in 20% steps as the customer meets the milestones in its agreement for paying a minimum demand charge for a set period. Texas Register, October 2026

How do curtailment and grid emergency rules affect AI data centers?

Any AI data center that interconnects after December 31, 2025 must be capable of mandatory curtailment. The transmission service provider, cooperative, or municipal utility must install equipment that lets ERCOT remotely reduce the facility’s load during a firm load shed event. Critical load industrial customers and critical natural gas facilities are exempt. S.B. 6, Tax alert

ERCOT also gained new emergency authority. If a large load facility has non exporting backup generation that can serve 50 percent or more of its on site demand, ERCOT may direct it to reduce its net consumption or run the backup generators. ERCOT can use this power only during or before a grid emergency, and only after it has exhausted all market services except frequency response. PURA § 37.0561 / S.B. 6

Separately, ERCOT must develop a voluntary demand reduction service. Under this service, ERCOT would pay large loads of 75 MW or more to reduce their consumption with at least 24 hours of notice. The program is meant to be used in anticipation of emergency conditions. Large load customers that curtail in response to wholesale electricity prices are prohibited from participating in the reliability service. PURA § 39.170(b) / S.B. 6

In practice, a large AI data center with on-site backup generators must be designed so that it can island itself from the grid and run on backup power when ERCOT orders it to do so. This has a direct impact on engineering, fuel supply contracts, and operating procedures.

What if the AI data center is co located with an existing power plant?

Senate Bill 6 added a review process for any new net-metering arrangement between a new large load (75 MW or more) and an existing stand alone generation resource. The existing generator must have been registered with ERCOT as a stand alone generation resource as of September 1, 2025. PURA § 39.169 / S.B. 6

The process works in two steps. First, ERCOT must complete a study within 120 days. Then the PUCT has 60 days after receiving the study results to approve, deny, or impose reasonable conditions on the arrangement. S.B. 6

There are two exemptions. The generator was majority-owned by the large load customer’s parent company as of January 1, 2025. Or the generator’s original ERCOT registration already listed a co located large load at the time it was first energized. S.B. 6

This provision prevents an AI data center from sidestepping the full interconnection review by simply striking a behind the meter power deal with an existing solar farm or gas plant that was not built for that purpose.

How big is the interconnection queue, and how much of it is real?

The queue has grown far faster than anything ERCOT expected.

ERCOT Dec. 2025 Board Report, ERCOT April 2026 Update

As of November 2025, only about 2 percent of the queue (5,302 MW) had actually been energized. ERCOT Large Load Q&A. Many industry observers are skeptical that most of these projects will ever be built. A former ERCOT Independent Market Monitor and a UT Austin research scientist have both questioned the physical feasibility of the queue. CNBC

To manage the volume, ERCOT is developing a batch study process. Batch Zero revision requests were filed on March 4, 2026, and the PUCT approved them on June 18, 2026, with most of the rules in effect since July 11, 2026. ERCOT PGRR145 The batch process would group qualified large loads into a single study every six months and reserve capacity to avoid constant restudies. ERCOT April 2026 Update On August 3, 2026, ERCOT paused the Batch Zero study to verify that the large loads in it are eligible. ERCOT has also paused approvals to energize AI data centers of 75 megawatts or more, and it plans to file its verification report with the PUCT by December 10, 2026. ERCOT Batch Zero update, September 2026

The real world is already delivering projects. The Stargate Abilene site, for example, reached about 0.3 GW operating as of April 2026, with a full 1.2 GW expected by the end of 2026. Epoch AI But hundreds of other projects remain only in the queue.

Is Texas building enough generation and transmission to support all these loads?

The short answer is no, not yet. But the buildout is massive.

ERCOT’s all-time peak demand is about 91 GW, set in July 2026. ERCOT peak demand records Total available generation capacity is about 105 GW. The queue for new generation interconnections is also enormous, roughly 432,000 MW to 453,000 MW. That breaks down into 178,000 MW of energy storage, 163,000 MW of solar, 61,000 MW of gas, and 48,000 MW of wind. ERCOT April 2026 Update Between 2024 and 2025, about 23 GW of new generation was synchronized to the ERCOT grid, with another 9.9 GW expected in the first half of 2026. ERCOT Dec. 2025 Board Report

The Texas Energy Fund, or TEF, is a $10 billion state loan and grant program that offers low interest loans to build dispatchable generation inside ERCOT. As of April 10, 2026, six projects had finalized loans totaling 3,564 MW and $2.65 billion. PUCT TEF page One of those is a 1,350 MW gas plant by Competitive Power Ventures that received a $1.12 billion loan at 3 percent interest. Latitude Media However, many TEF projects have withdrawn or asked for extensions into 2026 and 2027, citing turbine procurement delays and thin market forwards. Latitude Media

On the transmission side, ERCOT endorsed the TX 765-kV STEP, a $32.99 billion plan for new high voltage lines. The first line, Oncor’s Longshore Switch to Drill Hole Switch line, is approximately 180 miles and is targeted for energization by December 2028. Oncor Newsroom A second line, the Bell County East Switch to Big Hill Substation line, runs 214 to 244 miles and is expected in service by summer 2030. Together these lines will move power from resource rich regions to load centers. ERCOT The 765-kV plan reduces the need to upgrade existing infrastructure by about 1,400 miles and is expected to save consumers $230 million more per year than the 345-kV alternative. ERCOT Trending Topics

Meanwhile, new gas fired generation is being built specifically for AI data centers. About 58 GW of gas projects were added to the Texas pipeline in 2025, nearly half of all upcoming Texas gas projects, totalling 40 GW, are planned to supply AI data centers directly. Texas Tribune Real projects include Pacifico Energy’s 7.65 GW complex in Pecos County, Fermi America’s 6 GW project near Amarillo, and Chevron’s first-ever power plant at 5 GW in West Texas. Texas Tribune

How long does the interconnection process take?

The entire process, from the initial notice to first energization, can take a year and a half or more. ERCOT’s published interconnection process runs 18 to 30 months for large generation and 8 to 12 months for small generation, not counting construction and supply delays, and a large load interconnection runs on a comparable timeline. ERCOT interconnection process The current queue backlog and supply chain constraints for transformers and switchgear are likely to push those timelines out. In the expected batch process, a project that misses a batch window could wait another six months for the next one.

A developer should plan for interconnection timelines to run parallel with site development, and to secure long dated equipment orders early.

Key takeaways

• Budget for significant upfront costs. A 1 GW AI data center faces $50 million in intermediate financial security, a $100,000 study fee, at least $50 million in security at the interconnection agreement step, and 100 percent of the direct construction costs. The total outlay before energization can exceed $200 million.
• Lock in site control early. The intermediate agreement requires a deed, a five year lease, or a purchase option. You cannot start the interconnection study without it.
• Build for curtailment. Any site that interconnects after December 31, 2025 must be able to reduce load or switch to backup generation when ERCOT commands. That means any on-site backup generation and fuel supply contracts must be part of the design from the start.
• The queue is competitive and full of phantom projects. Many requests will never turn into real sites. A developer with firm financing, site control, and a complete application will move ahead of speculative filings.
• Co-location with an existing generator requires separate approval. Do not assume you can simply contract with an existing solar or gas plant without going through the PUCT review.
• Transmission buildout is on a longer track. The first 765-kV line is not expected until late 2028. Connection timing for a project in West Texas may depend on when the new high voltage backbone reaches the area.
• Watch the PUCT rulemaking. The PUCT adopted § 25.194 in September 2026, with changes to the proposal. The final rule will shape the financial terms and milestones for every project that enters the queue after its adoption.

Frequently asked questions

Q:What is the minimum size to trigger the ERCOT large load interconnection process?

A:75 megawatts at a single site, measured at a common point of interconnection. The PUCT can lower that number. PURA § 37.0561, ERCOT Large Load Q&A

Q:How much financial security must an AI data center developer post?

A:Under the adopted rule, $50,000 per MW in the intermediate agreement step, then security of at least $50,000 per MW at the interconnection agreement step. Texas Register, October 2026

Q:Can ERCOT force my AI data center to shut down?

A:If the facility has on-site backup generating facilities (generation that cannot export to the ERCOT grid and in the aggregate can serve at least 50 percent of on-site demand), ERCOT can, after exhausting all available market services except frequency responsive services, direct the electric utility to require the facility to either curtail load or deploy its backup generation before or during an energy emergency alert. S.B. 6

Q:What if I withdraw my application?

A:The security is split. The transmission service provider keeps 20 percent of the security tied to any capacity ERCOT allocated you. You get the rest back, less any amounts you owe. Texas Register, October 2026

Q:Can I avoid the full interconnection process by co-locating with an existing power plant?

A:No. Any new large load over 75 MW that wants a net-metering arrangement with an existing generator must go through an ERCOT study and PUCT approval, unless it meets a narrow exemption. S.B. 6

Q:How many of the queued AI data center projects will actually get built?

A:Only around 7.5 gigawatts of the queue had been connected or approved as of late 2025. Industry observers expect heavy attrition. CNBC

Q:Does Texas have enough generation to serve them all?

A:Not yet. The current generation fleet can serve about 105 GW. The queue holds many times that, but turning those megawatts into real power plants takes years. ERCOT April 2026 Update

Q:How long will it take to get interconnected?

A:The full process can take a year and a half or longer. ERCOT’s published interconnection process runs 18 to 30 months for large generation, and the volume of large load requests will likely extend timelines further. ERCOT interconnection process

Q:What is the Texas Energy Fund, and does it help AI data centers?

A:The TEF is a $10 billion state fund that makes low-interest loans to build dispatchable generation inside ERCOT. Developers building gas plants have used TEF loans to reduce financing costs. PUCT TEF page

Q:Where can I find the latest rules and forms?

A:The PUCT’s interchange page for Project 58481 has the adopted rule text, and ERCOT’s Large Load Working Group releases updates on the batch process. PUCT Project 58481, ERCOT Large Load Working Group