Texas lawmakers are trying to figure out how the state's already-strained power grid can possibly keep up, when Stargate and some of the other data centers that want to come to the state consume enough electricity to power hundreds of thousands of homes.
Their primary solution is Senate Bill 6, a wide-ranging bill enacting new regulations on data centers and other large electricity users. Designated by Lt. Gov. Dan Patrick as a priority, SB6 unanimously passed in the Texas Senate last week and is now pending in the House.
"We'll be the first ones in the country to take a step such as this," Sen. Phil King, the bill's primary author, said last week on the Senate floor.
The bill's goal, first and foremost, is to prevent a repeat of the deadly outages of 2021, when power plants on the isolated Texas power grid couldn't generate enough electricity amid freezing temperatures to meet demand.
It also directs state regulators to study how to protect everyday residents and small businesses from massive electricity rate hikes, as utilities build new infrastructure so the power grid can accommodate more data centers and other power-hungry facilities.
Sen. Charles Schwertner, chairman of the Senate committee overseeing power grid issues, said the underlying need for SB6 is good news: the state's economy is booming.
"It's not an oil boom. It's an economic boom led by big technology and their corresponding need for big electricity," Schwertner said on the Senate floor.
But some conservatives have slammed the bill, arguing that it's Texas' minimal regulations that have attracted so much business to the state in the first place.
Recent headlines in the Daily Wire and Fox News have warned that SB6 could "stifle" and "derail" President Donald Trump's goal to "enhance America's AI dominance" — pushing Patrick to tell Fox News that he's "completely aligned" with Trump on energy and AI issues.
In fact, "Texas is open for business like never before," Patrick said in a statement on SB6.
"SB6 will ensure the (Electric Reliability Council of Texas) grid is prepared to grow and place Texas at the epicenter of helping President Trump achieve AI dominance over China," Patrick said in the statement.
Evaluating Growth
ERCOT stunned lawmakers last year when it revealed that peak power demand could shoot up to more than 150 gigawatts by 2030, compared to the current peak demand record of 85.5 gigawatts. At the time, a few legislators even floated banning new data centers and crypto currency mines from coming to the state.
"We want data centers, but it can't be the Wild Wild West of data centers and crypto miners crashing our grid and turning the lights off," Patrick posted on X last June.
Since then, lawmakers have softened their stance in hopes of attracting huge investments such as the $500 billion Stargate initiative. They've also realized a big problem: Not even ERCOT is confident in the shocking 150-gigawatt figure, which likely includes many speculative projects that won't be built.
To strengthen ERCOT's forecasts, SB6 would require companies seeking to develop power-hungry facilities to pay a fee of at least $100,000 to apply to connect to the power grid, so those not serious about building are weeded out.
In addition, the aging power grid will need substantial infrastructure overhauls to meet electricity demand growth, such as thousands of miles of new power lines crisscrossing the state. Without reform, lawmakers are concerned that Texas residents and small businesses, instead of large electricity users, could be saddled with much of the cost of these upgrades.
To address this, SB6 directs state regulators to evaluate existing rate-making mechanisms to ensure they "approximately assign costs." A previous iteration of the bill went even further by directly implementing new rates on certain large electricity users.
Power Scarcity Worries
The most controversial sections of SB6 were written with the February 2021 freeze in mind. If rotating outages did happen again, the bill ensures large electricity users also share in that burden, King, the bill's lead author, said during a February committee hearing.
"You could have, and frankly will have without change, a data center powered up while the neighborhood literally across the street is without power," King said.
"Everybody, please remember that during Uri, no one died at the office building, and no one died at the manufacturing plant," King added, using the Weather Channel's name for the February 2021 winter storm. "They all froze to death in their homes in 2021, and that will never happen again. It cannot."
Several provisions in SB6 address potential power scarcity issues. For example, the bill would create a new voluntary program that pays large electricity users to reduce power consumption, with at least 24-hour notice, when the grid might be strained.
Large facilities with significant back-up generators would have to register those units with their local utility. The bill gives ERCOT the authority to require, "after reasonable notice," that facilities switch to their back-up generators or curtail power usage when there is a grid emergency.
If the situation escalates and ERCOT needs to order rotating outages, utilities would confer with large electricity users to shut down "to the extent feasible." This "kill switch" provision has exceptions for critical industrial and natural gas facilities.
'Remaining Concerns'
"We should be looking at energy abundance and how do we unleash energy across the great state of Texas, instead of trying to stifle new businesses," Ginn said in an interview.
In public testimony to Texas lawmakers, however, representatives for data center companies and other industries have said they agree with SB6's goals, while offering careful critiques.
For instance, Dan Diorio, senior director of state policy for the Data Center Coalition, said the industry association shares Patrick's priorities but has "remaining concerns" with SB6.
If passed into law today without changes, "it would create some friction and create potential uncertainty with some of the development that's already in the pipeline and poised to happen in Texas," Diorio said in an interview.
Many data centers host digital infrastructure in support of national security, health care, banking and first response operations, Diorio said. The coalition is worried some of SB6's provisions may hinder data centers from providing those customers continuous service, he said.
In addition, most data centers use diesel-powered generators for backup power, and the pollution from these units is highly regulated at the federal, state and local level. Data centers want to ensure they won't be punished for violating air quality standards if they comply with SB6, Diorio said.
Lancium CEO Michael McNamara, head of one of the companies involved in the Stargate project in Abilene, told lawmakers in February that he wants more clarification on how the "kill switch" would work.
"We think Texas is absolutely the best place to build. We will build for decades to come if there is clarity," McNamara said.
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