Comment: Texas’ New Large-Load Law is an Opportunity for Data Centers

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Texas’ new SB-6 brings challenges and opportunities for data centers with grid management requirements, writes Claire Swingle, senior regulatory affairs analyst at cPower Energy.

June 30, 2025

As data centers drive an electricity demand boom in Texas – the nation’s second-largest data center market – state legislators have increased oversight of large-load customers, changing how they interact with the power grid.

Senate Bill 6 (SB-6), which was recently signed into law and will take effect on September 1, aims to strengthen the state’s grid while accelerating economic momentum and bringing new data centers online.

Data centers that optimize their energy flexibility and engage with load management services can turn SB-6 compliance into a revenue-generating and cost-saving opportunity.

While proponents of the Texas bill have lauded policymakers for taking proactive measures to shore up the grid and provide greater clarity for customers seeking interconnection, others have raised concerns about how SB-6 will hit large energy users with new costs and mandated curtailment.

Large-load customers in Texas need a plan for monetizing and managing their electric loads because the new law gives the Electric Reliability Council of Texas (ERCOT) the authority to curtail customers with electric loads over 75 MW during grid emergencies, such as summer heatwaves when demand peaks or winter storms when power supply can wane.

Related:Power Availability Now Drives Data Center Site Selection

At such times, large-load customers, including many data centers, cryptocurrency miners, and industrial organizations, will either have to switch to backup generation sources or temporarily power down operations.

Large-load customers will also be required to pay new transmission fees to fund grid upgrades and avoid overburdening residential and small business customers. Texas follows Oregon, which passed the POWER Act in June, in shifting these infrastructure costs away from residential customers and toward data centers. The extent of the Texas fees is not yet determined, but costs will inevitably go up.

Fortunately, data centers can mitigate any potential negative impacts of SB-6 to their bottom lines, and seize the opportunities it presents, through proven strategies and technologies.

ERCOT already pays customers for using less energy when the grid is stressed through its demand response and demand management programs. Depending on the program, customers can earn from $60,000 to over $100,000 per year for every megawatt enrolled. By requiring loads over 75 MW that are interconnected after December 31, 2025, to participate in load management, SB-6 affirms that proactive load management strategies, like demand response programs, are essential for creating a more resilient energy future.

Related:Could Aging Coal Plants Be Transformed into Renewable Data Center Energy Storage?

SB-6 also tasks ERCOT with developing a program to competitively procure demand reductions in advance of periods of anticipated grid stress.

As ERCOT fulfills this legislative directive, it will be crucial to ensure that aggregators with long-standing expertise in cost-effectively managing these types of programs are able to participate. Large-load customers will need to navigate the optimal program stacking opportunities between the new program ERCOT develops, existing programmatic options, and curtailing in response to wholesale prices.

Common energy assets that large energy users can monetize include flexible load, on-site generation (whether it be diesel, solar, natural gas, or nuclear) and energy storage. Earnings and savings potential from load management largely depend on unlocking and stacking incentives for these assets. The more sophisticated the strategy a data center implements, the bigger the return.

Data center owners and developers can also counteract rising transmission costs by maximizing on-bill savings. SB-6 requires the Public Utilities Commission of Texas (PUCT) to evaluate changing the existing “4 Peak” transmission cost allocation to ensure that transmission charges appropriately assign costs amongst different rate classes, or whether an alternative methodology would be more appropriate.

Related:Data Center Outages Decline for Fourth Straight Year, But Issues Persist

The PUCT must begin its evaluation by the end of 2025 and complete it by December 31, 2026. While the commission conducts this evaluation, large load users can still implement existing peak demand management strategies to lower their demand or capacity charges, which typically account for 20% to 30% of a customer’s monthly electric bill. After the evaluation is complete, customers and third-party demand managers will need to assess the most effective peak demand strategies for going forward.

Though the impacts of SB-6 will apply only to ERCOT, we can expect to see other markets across the U.S. follow with similar models – especially in fast-growing data center hot spots, such as Virginia and Georgia. Texas is not alone in seeking grid solutions that support reliability, affordability and resource adequacy while enabling regional economic growth.

In Texas and across the country, there are grid service programs that large-load customers can participate in to make money, strengthen the grid, and support an affordable and reliable energy system that enables the U.S. economy to evolve. If data centers embrace energy flexibility and work alongside grid reliability efforts, they can not only mitigate the impacts of evolving large-load laws but also come out on top by improving their bottom line.

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Comment: Texas’ New Large-Load Law is an Opportunity for Data Centers