Texas Gov. Greg Abbott released a broad set of proposals Wednesday aimed at regulating the growth of data centers — months after declaring his state the “epicenter” of artificial intelligence development.
Abbott (R) said in a letter to state electricity officials that the unprecedented growth of data centers and their major energy needs require “oversight” to shield Texans from higher electricity costs. He directed state electricity officials to send him a memo on actions and recommendations by July 17.
“As Texas continues to welcome innovation and investment, we must ensure that growth strengthens our people and their quality of life without placing undue burdens on Texans and local communities,” Abbott wrote.
Plans for a data center boom in Texas have been cheered by Abbott and other leaders in recent years. But local opposition has been bubbling up, and officials in Hill County southwest of Dallas passed a one-year moratorium on data center construction in May. The county recently rescinded that ban after being sued.
Abbott’s announcement Wednesday came less than five months before he is up for reelection against Democratic state Rep. Gina Hinojosa in November. The letter was met with applause by some state leaders and skepticism from Hinojosa’s campaign.
The governor said he would work with state lawmakers during next year’s legislative session to pass laws that require data centers to pay for their own electric infrastructure and mandate that new data centers be built with water-efficient technologies. He also called for repealing sales tax exemptions “and other outdated or unnecessary incentives for data centers.”
Abbott’s move also follows shifts by other pro-data center governors who have tempered their messaging in recent weeks as opposition to the facilities has grown.
Utah Republican Gov. Spencer Cox, who previously defended a 40,000-acre proposed data center project backed by celebrity investor Kevin O’Leary, signed an executive order less than two weeks ago seeking to assuage fears that data centers could increase utility bills and suck water out of the Great Salt Lake.
In Pennsylvania, Democratic Gov. Josh Shapiro outlined a plan late last month to increase community involvement around data centers and to protect ratepayers. Shapiro had previously pitched data center development as a job creator and worked to woo tech companies to the state.
Abbott has boasted about the amount of AI infrastructure and tech companies coming to the Lone Star State.
In a November 2025 announcement with Google CEO Sundar Pichai, Abbott called Texas “the epicenter of AI development.” Pichai said at a news conference that Google was planning $40 billion of investment in the state as it develops three AI data center campuses.
“We must ensure that America remains at the forefront of the AI revolution, and Texas is the place where that can happen,” Abbott said in a statement last year.
Looking at costs
In recent months, a low public perception of data centers has surfaced in areas across the country. A Gallup poll released in May found that more than 70 percent of Americans oppose the construction of an AI data center in their local area, frequently citing concerns about electricity costs and water consumption.
“What I’m hearing from people is, ‘OK, you want to build this new data center in my community — and it’s going to take all the energy and all the water, and it’s going to create technology that takes all the jobs away,’” said Josh Rhodes, a research scientist focused on energy at the University of Texas, Austin. “It’s not a great pitch. Right or wrong, that’s how people are feeling right now.”
Practically speaking, Abbott’s letter does little to change current rules and regulations for data centers.
The Texas Legislature won’t convene until January 2027 unless Abbott were to call for a special session. But lawmakers are holding hearings this year to study interim charges. Republican Lt. Gov. Dan Patrick in March ordered the Texas Senate to study how to manage data center growth, whether to toss out a state sales tax exemption for data centers and how to assess data centers’ water usage.
And state electricity officials have already been working on a sweeping set of rule changes mandated by Senate Bill 6, the state’s landmark data center law that was enacted in 2025.
That law requires the Public Utility Commission of Texas to study and change how the state allocates grid infrastructure costs by Dec. 31.
Those changes are meant to shield residential and smaller commercial ratepayers from the costs of building new power and transmission lines that will be needed to meet data center demand.
Abbott’s letter directs the PUC to “initiate action” to reduce residential ratepayers’ transmission costs by July 31.
It also directs the PUC and the Electric Reliability Council of Texas (ERCOT), the state’s main grid operator, to submit a joint memorandum by July 17 that lays out the actions they’ve taken to minimize potential adverse impacts of data center development and recommends legislative proposals that could help the two agencies better regulate data centers.
While the letter does not advocate for specific changes to how transmission costs are allocated, it could influence what the PUC ultimately approves, said Bryan Clark, a partner with the Bracewell law firm.
“What I think this letter does is to emphasize to the PUC that they will need to prevent cost-shifting from large loads to other ratepayers,” Clark said in an interview.
Abbott’s letter also directed the PUC to “ensure that data centers’ interconnections will result in reduced residential electrical bills” and to “require data centers to pay for all of their electric infrastructure costs” to protect residential ratepayers.
Project batches
It’s unlikely that rules prompted by Abbott’s letter will derail an incoming wave of data centers that are preparing to come onto the grid, observers said Wednesday.
ERCOT, the state’s main grid manager, has developed a process to divvy up power to data centers and other large power users in groups, rather than giving individual allocations.
Rules for the first of those groups — known as Batch Zero — were approved by ERCOT’s board June 2. Batch Zero projects will be allocated power based on all the transmission that’s currently within ERCOT, and projects not in that first group may need to wait years for power as more transmission gets built.
ERCOT’s new rules include criteria that projects will need to meet to get into Batch Zero, including paying nonrefundable fees to help cover transmission costs and meeting other milestones that show a project is likely to be built.
Jeff Billo, vice president of interconnection and grid analysis at ERCOT, said at a board meeting earlier this month that roughly 100 gigawatts of data center demand could qualify to be part of Batch Zero — more than ERCOT’s all-time electricity demand record set in 2023.
Rhodes at the University of Texas said the Batch Zero train has already left the station, but ERCOT and the PUC will need to drill down on specifics.
“Typically the way it goes is the Legislature and executive branch set these high-level directions to the PUC, and the PUC turns it into rules. Then … ERCOT has to translate that into protocols,” Rhodes said. “There’s still another layer of translation that’s going to have to happen [with Batch Zero].”
Those detailed rules could be affected by Abbott’s letter, Rhodes said. The PUC is slated to vote on ERCOT’s Batch Zero rules later this month.
‘Nice try’
Abbott’s Wednesday letter was quickly endorsed by Texas state House Speaker Dustin Burrows, a Republican; the conservative think tank Texas Public Policy Foundation; and some environmental groups.
Dan Diorio, vice president of state policy at the Data Center Coalition, said in a statement Wednesday that the trade group shares Abbott’s commitment “to ensure that Texas continues to lead the nation in responsible digital infrastructure growth.” He said the industry will work with Abbott’s office, the PUC, ERCOT and the Texas Legislature as data center bills take shape next session.
“It’s important to recognize that data centers are a diverse industry serving a wide range of needs, and there is no one-size-fits-all solution when it comes to facility design, cooling technology, or regulation,” Diorio wrote. “The right approach in one community may not be the right approach in another, which is why siting and operational decisions are made in close coordination with local utilities, water providers, and management districts.”
Abbott’s letter, however, did not include proposals to give local municipalities more decision-making authority on data centers. A 2025 law restricted the ability for municipalities to enact moratoriums on certain types of development, including data centers.
That has frustrated data center opponents and elected officials in some reliably conservative, rural areas. Hood County, located southwest of Fort Worth, has twice failed to pass a moratorium on data center development after a state lawmaker contended the ban was illegal.
The governor’s new letter was encouraging, but the state still needs to take more action, said Amy Flynt, a member of Protect the Paluxy Valley who lives in Hood County. Flynt said she would like to see Abbott call a special legislative session to address other effects of the data center boom — such as noise and water use — rather than wait until the next regular session in 2027.
“Unfortunately, if we don’t address them now, then, you know, we’re just delaying more issues,” she said.
Hinojosa, the Democrat running against Abbott in the governor’s race, said in a statement that Abbott’s letter is an effort to hide his support of data centers and big tech companies.
“Nice try. Data centers are moving to Texas because Abbott helped create the most generous tax dollar giveaway to data centers in the country so Texans would foot the bill,” Hinojosa said. “Greg Abbott has zero credibility here — no one believes that the arsonist is going to put out the fire.”
In response to Hinojosa’s comments, Abbott campaign press secretary Eduardo Leal said in a statement that the governor has been clear that “data centers must operate in ways that reduce costs for residential electricity ratepayers, do not drain water needed for our communities, and take into consideration the needs of local neighborhoods.”
Mike Lee contributed to this report.
