ERCOT Delays Texas Data-Center Classifications

On Aug. 3, Gov. Greg Abbott directed an audit of data centers still moving through ERCOT’s interconnection queue. ERCOT issued Market Notice M-A080326-01 saying it would not issue Batch Zero classification notices scheduled for Aug. 7 and will ask the Public Utility Commission of Texas (PUCT) at its Aug. 20 meeting for permission to miss that deadline.

The audit covers power draw, on-site generation, water use, tax incentives, ownership and community impact. The governor’s directive states projects that fail to comply “must be denied connection to the Texas grid.” No PUCT order has been issued and no project has been denied to date.

ERCOT operates Texas’s separate grid but does not own generation or transmission. The organization studies interconnection requests and issues interconnection agreements that grant the right to draw power. On July 29 ERCOT told the Texas Senate its interconnection queue totaled roughly 474 gigawatts, about five times the state’s all-time peak demand of 91,089 megawatts. ERCOT has said roughly 90% of the queue requests are from data centers.

Senate Bill 6, enacted in 2025, requires projects above 75 MW to show site control and post financial security. The PUCT set the security at $50,000 per megawatt, about $25 million for a 500 MW campus. The PUCT approved ERCOT’s Batch Zero framework on June 18. Under that coordinated-study process, projects that posted the required security were grouped for joint study; roughly 205 GW had posted security and qualified for classification notices that were due Aug. 7.

The audit applies only to projects still advancing through ERCOT’s interconnection process. Capacity that has completed studies, signed interconnection agreements, or energized substations is not part of the review. That creates three practical categories for companies with Texas projects: capacity already approved and cleared; projects still waiting for Batch Zero classification; and developments that plan to generate power on-site without a grid interconnection request.

Public filings and company disclosures will show where specific projects fall. Projects that plan fully independent generation typically have no interconnection request on file and are not in the audit’s scope. Projects that combine on-site generation with a grid connection still require interconnection studies and remain subject to the review. Co-located developments next to existing plants face additional technical and contractual constraints; the PUCT recently required co-located loads to be able to fully shut off within 30 minutes of an ERCOT emergency order in a case involving a wind farm and co-located data-center loads.

Sell-side analysts have adjusted target prices on a name-by-name basis, trimming projections linked to pending capacity rather than issuing broad downgrades. No sell ratings or announced cancellations were reported immediately after the directive. NRG’s regulatory team wrote that the $50,000/MW security “did not have the culling effect that we thought it was going to.”

ERCOT cannot unilaterally block interconnections without PUCT action. If the PUCT permits ERCOT to miss the Aug. 7 deadline and sets a new classification date, applicants could receive allocations under the revised timetable. If the PUCT grants an exception with no deadline, some developers may seek to withdraw from Batch Zero and request return of their security deposits.

The PUCT’s Aug. 20 open meeting will determine the next administrative steps and the timing for resuming Batch Zero classifications.