Texas Data Center Freeze Asks About Water, Taxes and Owners

Power

Last updated: 9 August 2026 · First published: 9 August 2026

On 3 August 2026, four days before ERCOT was due to tell Texas utilities which large electricity projects had cleared its new grid connection study, Governor Greg Abbott ordered an audit of every data center in the queue. ERCOT cancelled the notices the same day.

The letter is framed around grid reliability. Four of the five things it demands from each project are not about the grid. It asks what public subsidies the project has taken, how much water it will use and how it will cool itself, what it is doing about noise and traffic, and who owns it.

What does the audit actually require?

The directive is one sentence. The Public Utility Commission of Texas and ERCOT must 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.

Attached to it are five categories of information the two agencies must obtain from every data center project:

1. Public money. All state and local tax incentives, grants, abatements or other public financial assistance received or expected, framed as the extent to which a project is paying its own way.
2. Power. Projected annual and peak electricity consumption, plus any effort and progress toward on-site generation, including generation type.
3. Water. Projected annual and peak water consumption, anticipated sources of supply, whether the project reuses its own water, and the cooling technology it will use, specifically whether it is air-cooled, closed-loop or another water-efficient system.
4. Neighbors. Noise mitigation, light controls, setbacks, traffic improvements, emergency response coordination and other community protection measures.
5. Ownership. Details of the ownership and controlling interests in the project.

Only the second category is a grid question in the sense ERCOT's interconnection process normally uses. Water, subsidies, noise and ownership are not inputs to a transmission study. They are the questions that come up at county commission meetings, and they have now been attached to the connection queue.

Why now?

The letter gives a specific reason, and it is smaller than the action. Some data centers failed to comply with a Public Utility Commission survey measuring water and power usage, required under the General Appropriations Act. The letter says that failure is what makes the audit necessary, on the grounds that incomplete compliance hinders the agencies' ability to make fully informed decisions.

It does not say how many projects failed to respond, which ones, or when the survey was due. It cites two further prompts without detail: recent legislative hearings and public meetings raising questions about the impact of data centers on local communities, and a prior letter of 10 June 2026 in which the governor said he would work with the legislature on the same concerns.

Does this apply to you?

If you are a Texas household, nothing about your service changes today. This is a queue of facilities that have not been built or energized, and pausing it does not affect existing supply. The consumer questions here are the ones the audit itself now asks: who pays for the upgrades, covered in our reporting on who actually pays for AI data centers, and how much water these facilities draw, covered in how much water data centers really use.

If you are developing or financing a large load in ERCOT, the exposure is schedule, and now also disclosure. Projects that met the 10 July submission deadline hold a position with no classification attached and no dated path to one. Separately, the audit reaches information many projects have not previously had to file with a grid operator, including ownership structure and expected tax abatements.

How big is the queue, and which number is right?

Two official figures are in circulation and they do not match.

The governor's letter, dated 3 August, says ERCOT is considering approximately 474 gigawatts of requests, which it characterises as more than five times the state's record peak demand, and that approximately 90 percent of the new requests are data centers. ERCOT's own most recent published figure, from its 18 June release, is more than 438,000 MW with nearly 89 percent from data centers. The gap is about 36 GW across roughly six weeks. DERIVED

This is most likely queue growth rather than a discrepancy. The letter does not state its basis or its as-of date, so whether the two figures count the same population cannot be established from the documents. Both reconcile against the same peak record: at 85,508 MW, the governor's figure is 5.54 times it and ERCOT's is 5.12 times it, both consistent with the letter's own characterisation. The larger number is the one ERCOT has not published.

What exactly did ERCOT stop?

A classification, not a construction project. In a market notice issued at 3:22 PM on 3 August, ERCOT told the market that because of the directive, "ERCOT will not notify each Interconnecting Distribution Service Provider" and Transmission Service Provider of how any large load is classified.

Batch Zero is the first cohort to pass through a process the commission approved on 18 June 2026. Instead of studying each project alone, ERCOT groups every qualifying load of 75 MW or more into a single system-wide study, allocates the transmission capacity that exists, and identifies the upgrades needed for the rest. ERCOT describes itself as the first grid operator in the country to do this.

The 7 August notices were that machine's first output. They would have told each project whether it was a base load, a studied load, or excluded, and triggered the dispute window and financial security reconciliation that follow. None of it happened.

The size of what stopped is therefore unpublished, because publishing it was the cancelled step. ERCOT said in July that "ERCOT will not have sufficient data to provide public reporting" on Batch Zero's aggregate size before 7 August. In June it said it expected to notify applicants in August, "at which point the full scope of Batch Zero will be known".

What exists instead is a preliminary figure presented to ERCOT's Technical Advisory Committee in late July by Jeff Billo, vice president of interconnection and grid analysis. Two trade accounts of that meeting put it at approximately 205 GW, described in one as the load eligible for inclusion as of 28 July on eligibility criteria alone, and in the other as 326 projects under evaluation. CLAIM Both trace to the same presentation, so this is one source reported twice, not two confirmations. That figure is preliminary eligibility, not completed classification, and resolving the difference is precisely what the freeze prevented.

Why can a letter stop this, when federal orders did not?

Because ERCOT answers to Austin. It describes itself as a membership-based nonprofit governed by its own board and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature.

That is a different arrangement from the one covered in FERC's June orders to six grid operators. Those went to PJM, MISO, SPP, CAISO, ISO New England and NYISO. ERCOT was not among them. Where FERC started a clock on rules not yet written, Texas stopped a study already running, and the remedy is not a tariff filing but a request to a state commission for permission to miss a deadline in ERCOT's own planning guide.

What are the dates that matter now?

The 31 August deficiency deadline is the one to watch. It was set by the same planning guide provision ERCOT now asks to be excused from, and curing a deficiency requires first being told there is one.

What the record still does not show

The letter sets an outcome without a process. It states that any project failing to comply must be denied connection, but it does not say what compliance looks like, who judges it, what happens to a project that answers every question, or when the audit concludes. The 20 August meeting is a scheduled hearing on a deadline extension, not a scheduled resolution.

Nor does the record establish the scale of the non-compliance that triggered it. The survey is described but not quantified, and neither agency has published a response rate.

Sources

1. Governor Greg Abbott, letter to Chairman Thomas Gleeson and CEO Pablo Vegas, 3 August 2026. The directive, the five information categories, the General Appropriations Act survey, the 474 GW and 90 percent figures, the denial-of-connection condition, and the reference to the 10 June letter.
2. ERCOT, Market Notice M-A080326-01, 3 August 2026. The cancelled 7 August notification, the good cause exception, Planning Guide Sections 5 and 9, and the commitment to update once filed.
3. ERCOT, Market Notice M-B062326-04, 8 July 2026. The 10 July and 24 July deadlines, the 7 August classification deadline, and the limits on aggregate reporting.
4. ERCOT, PUCT Approves ERCOT's Batch Zero Process, 18 June 2026. The 75 MW threshold, the 438,000 MW queue, the 89 percent share, Jeff Billo's title, and the August classification expectation.
5. ERCOT, New Batch Connection Process for Large Electricity Users, 18 June 2026. The 85,508 MW peak record and the three classification outcomes.
6. ERCOT, Market Notice M-B062326-01, 23 June 2026. PGRR145 and NPRR1325, and the 11 July effective date.
7. RTO Insider, ERCOT Begins Batch Zero Process with 205 GW of Load, 3 August 2026. The 326 projects and 205 GW figures and their origin at the Technical Advisory Committee. Body paywalled; summary and caption only.
8. Zero Emission Grid, ERCOT TAC July 2026 Highlights, August 2026. The 205 GW figure as preliminary eligibility as of 28 July, and the 2 September study start.

Derivations

Three figures here are calculated rather than stated.

• The gap between the two queue figures: 474,000 MW minus 438,000 MW equals 36,000 MW, or 36 GW. Both are stated as approximations, and the letter does not give its basis or as-of date.
• The governor's figure against the peak record: 474,000 MW divided by 85,508 MW equals 5.54, consistent with the multiple the letter itself states. ERCOT's June figure gives 5.12.
• The preliminary Batch Zero figure against the same record: 205,000 MW divided by 85,508 MW equals 2.40.

Open questions

• How many data centers failed to comply with the PUC water and power usage survey, and which ones. The letter says some did, without a count.
• What standard the audit applies, who applies it, and what completing it requires.
• Whether the 474 GW figure and ERCOT's 438,000 MW figure count the same population. The letter states no basis.
• The Technical Advisory Committee presentation behind the 205 GW figure. Not opened here. Both published accounts derive from the same meeting.
• Whether ERCOT has filed its good cause exception request. Its 3 August notice said it would update once filed; as of 9 August no update appears.

Corrections policy

AI Race Facts corrects visibly. Errors are fixed here with a dated note, never as silent edits. Figures labeled CLAIM are stated by the named party and not independently audited by this publication. Figures labeled DERIVED are calculated here, with the arithmetic shown. Figures labeled PROJECTION are scheduled or forecast, not in effect.

Last updated: 9 August 2026