Texas pauses new data center grid connections

On August 3, 2026, Governor Abbott issued an even more consequential directive to the PUCT and ERCOT that may result in a substantial disruption of new data center development within the state. The August 3rd Directive orders the PUCT and ERCOT to “conduct a comprehensive verification and audit of all data centers advancing through ERCOT’s interconnection process before any additional data centers are approved to move forward” and provides that any project that does not comply with applicable requirements and state law will be denied connection to the Texas grid. The directive states that this audit and pause on interconnections is necessary because of “[t]he failure of some data centers to comply with the PUCT’s survey measuring water and power usage . . ., [which] hinders [the PUCT’s] ability to make fully informed decisions.”

The audit will require a developer to provide detailed information on:

• Public Financial Assistance: Including all state and local tax incentives, grants, abatements or other public financial assistance received or expected to be received.
• Power Usage: Is the project providing some or all of its own power or using the ERCOT grid for power. What is projected annual and peak consumption? Details on any on-site electric generation or other efforts to reduce demand on the ERCOT grid.
• Water Usage: Is the Project providing water or using local water supply? Projected annual and peak consumption and details on cooling technologies, such as air-cooled, closed-loop or other water-efficient systems.
• Community Impact: Provide details on mitigation plans for impact on neighboring properties and communities including noise, light, setbacks, traffic improvements and other community impacts.
• Ownership: Details on ownership and controlling interests in the project.

Any data center project that fails to comply with the verification and audit process will be denied.

It would appear that data centers with 100% behind the meter power or that are otherwise not interconnecting through ERCOT, such as interconnections in portions of the state not connected to the ERCOT grid (primarily far east and west Texas) would not be affected by the audit. ERCOT will not share initial determinations of Batch Zero status today, as required in Batch Zero Rules. ERCOT has announced that it will instead apply for a good-cause exception from the PUCT, to be considered at the August 20, 2026 Open Meeting.

If a data center is in the queue and has done everything right, it does not appear that anything in the orders would impact its ability to get power; though, there will be a delay, and no one knows how long a delay. It is clear that no new data center interconnections will be approved until the audit is complete. At this point, there is no indication of how strict the audit will be. Whether data centers are forced to reapply for minor errors or if this will be limited to real problems with the content of the application remains to be seen.

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.