Abbott orders regulators to protect Texans from data center costs
Texas Gov. Greg Abbott on Tuesday directed state officials to shield residential electricity customers from costs related to data centers.
The charge was part of a broader letter sent to leaders of the Public Utility Commission of Texas and the Electric Reliability Council of Texas about the booming industry. The growth has caused tension in North Texas and across the state, as communities raise concerns about drains on water and power use.
In the June 10 letter, Abbott also teased what data center-related policy debates could be ahead in 2027. Interim discussions about data center policy are already underway at the Capitol as lawmakers prepare for next year.
The governor said he’d work with lawmakers to “repeal sales tax exemptions and other outdated or unnecessary incentives for data centers.” The vow comes as communities grapple with whether to give projects tax breaks. At a state level, legislators are reviewing sales tax exemptions for certain large data centers that could cost the state billions by 2028.
Abbott said he’d also work with legislators to require data centers to establish setbacks and noise-reduction technology.
“Data centers must operate in ways that reduce costs for residential electricity customers, do not drain water needed for our communities, and take into consideration the needs of our neighborhoods,” Abbott said in a statement.
The commission has until July 31 to refuse residential taxpayer transmission costs, according to the letter.
Ahead of January 2027, when the Texas Legislature next meets, Abbott told the Public Utility Commission to take action to ensure data centers’ interconnections to the state’s power grid result in reduced residential electric bills.
He said the commission must also “take action to require data centers to pay for all of their electric infrastructure costs to ensure that no residential ratepayer is burdened by those costs.”
The directed the commission and ERCOT, the state’s power grid manager, to review what they can do to “safeguard Texans, their property, and resources.”
He gave the commission and ERCOT until July 17 to let the governor’s office know what actions they’ve taken, limits they face and offer legislative recommendations.
Abbott’s other plans for the Legislature include requiring “data centers to pay for their own electric infrastructure costs, resulting in lower residential ratepayer costs.”
The governor also said data centers should add to the state’s available electricity and be required to use water-efficient technologies. Large data centers should be required to annually report water and electricity use, Abbott added.
“As Texas continues to welcome innovation and investment, we must ensure that growth strengthens our people and their quality of life without placing undue burdens on Texans and local communities,” the letter concludes.
Spokespersons for the Public Utility Commission did not immediately return requests for comment.
ERCOT said in a statement that it will continue working with the commission, statewide leadership and Texas lawmakers to “balance the needs of unprecedented load growth and a thriving Texas economy while ensuring a reliable Texas grid.”
In a statement responding to Abbott’s letter, Dan Diorio, the vice president of State Policy at the Data Center Coalition, which represents members of the data center industry, said the group shares Abbott’s “commitment to ensuring that Texas continues to lead the nation in responsible digital infrastructure growth.”
The coalitions’ members are already doing many of the things outlined in Abbott’s letter, such as using advanced cooling technologies, working closely with communities and paying for power and energy infrastructure costs, Diorio said.
“It’s important to recognize that data centers are a diverse industry serving a wide range of needs, and there is no one-size-fits-all solution when it comes to facility design, cooling technology, or regulation,” he said. “The right approach in one community may not be the right approach in another, which is why siting and operational decisions are made in close coordination with local utilities, water providers, and management districts.
“The data center industry is committed to being a responsible partner on power and water use and a good neighbor in the communities we serve.”
This story was originally published June 10, 2026 at 11:39 AM.
