Texas Senate Bill 6: Significant Changes to Interconnection Requirements Will Impact Large Loads and Other Electric Market Entities

During its recently concluded regular session, the Texas Legislature passed Senate Bill 6 (“SB 6”),¹ which establishes new requirements and costs for the interconnection and operation of Large Load customers in Texas. The bill was signed by Governor Abbott on June 20, 2025, and took effect immediately. The Public Utility Commission of Texas (“PUCT” or “Commission”) has opened new Project No. 58317 and Commission staff is sponsoring workshop on July 21, 2025 to discuss the implementation of SB 6.

Texas has attracted Large Loads such as data centers, cryptocurrency mining operations, and advanced manufacturing facilities for multiple reasons. These include access to relatively inexpensive and historically reliable electricity, a competitive wholesale power market, abundant renewable energy resources, land availability, and a business-friendly regulatory environment. Technology giants (often referred to as “hyperscalers”), semiconductor manufacturers, and bitcoin miners have established or expanded operations in Texas due in part to the state’s flexible market design and streamlined interconnection processes. These trends are accelerating. The Electric Reliability Council of Texas (“ERCOT”) has projected that total system peak demand could increase by over 65% by 2031 (based on its adjusted load forecast)—from 85.5 GW to 148 GW—driven largely by the proliferation of Large Loads.²

In response to this trend and citing ERCOT’s demand projections, Senator Phil King introduced SB 6 to establish a regulatory framework to manage Texas’s rapid growth in large electrical loads—particularly from data centers, AI facilities, and cryptocurrency mining operations—and to address concerns around inaccurate load forecasting, improper cost allocation, and reliability risks posed by uncoordinated Large Load interconnection.³

SB 6 primarily impacts new Large Loads across the full lifecycle—from initial development through interconnection and ongoing operations—but its effects extend well beyond these facilities. The bill imposes new obligations related to cost recovery, curtailment protocols, and notification requirements on the grid operator and electric utilities but also other market entities. These may include power generation companies (“PGCs”), retail electric providers (“REPs”) and even qualified scheduling entities (“QSEs”) engaged in grid-connected, co-located behind-the-meter (“BTM”) or private use network (“PUN”) configurations—i.e., where a pre-existing, grid-facing generation resource intends to co-locate or serve a new Large Load behind a common point of interconnection (“POI”), particularly where the two facilities are not commonly owned. SB 6 also directs the PUCT to reevaluate transmission cost allocation methodologies, which could lead to broader changes affecting smaller load customers. Over time, SB 6 may have downstream impacts on both investment and reliability—by increasing development risk for certain types of projects, altering incentives for co-location and backup generation, and shifting infrastructure cost burdens across customer classes. These effects will depend in part on how the PUCT and ERCOT implement these new statutory directives through rulemaking and operational protocols.

The law now defines a Large Load as a facility with a demand of 75 MW or greater, although the Commission can lower this threshold by rule. SB 6 introduces a series of new requirements applicable to developers, owners, operators, and affiliates of such Large Loads—particularly where those loads are newly interconnecting, co-located with generation or storage, or participating in net metering or self-supply arrangements. These new requirements include:

• Cost sharing and allocation rules for interconnection and transmission upgrades;
• Mandatory financial and operational demonstrations (e.g., site control and curtailment readiness);
• Expanded disclosure obligations relating to parallel interconnection requests and backup generation;
• Mandatory and voluntary curtailment protocols that ERCOT may use during system emergencies; and
• A framework for net metering arrangements between an existing standalone generation resource and a newly interconnecting Large Load.

SB 6 also directs the PUCT to reevaluate existing transmission cost methodologies—such as the four coincident peak (“4CP”) allocation method—and consider new charges to ensure cost responsibility is not unfairly shifted to smaller consumers. The following sections provide a more detailed discussion of the key provisions of SB 6, important exceptions, and the potential implications for Large Load developers, co-location strategies, and grid-connected energy infrastructure.

Cost Sharing

SB 6 requires the PUCT to develop rules ensuring a Large Load customer contributes to the interconnecting utility’s costs to connect the Large Load to the utility’s electric system. Electric cooperatives (“Co-op”) or municipally-owned utilities (“MOU”) that have not adopted customer choice must pass through reasonable interconnection costs to the Large Load customer.

Cost Allocation

The PUCT must evaluate the existing 4CP methodology used to allocate wholesale transmission costs—which are ultimately passed on to customers—to distribution providers, and whether alternative methods to calculate wholesale transmission rates would more appropriately assign the costs of providing transmission access and service. This evaluation must begin no later than 90 days after the effective date of SB 6 (i.e., September 18, 2025), and the PUCT must make any rule changes deemed necessary by December 31, 2026.

Financial and Operational Demonstration

To prove commitment to the proposed project, Large Loads must demonstrate both site control and financial assurance before the interconnecting utility may submit a project to ERCOT for review.⁴ Requisite financial commitment may be satisfied via security contributions ($/MW or provided under an agreement requiring the Large Load to pay for significant equipment or services before establishing electricity delivery service), contribution in aid of construction, or other financial commitment deemed acceptable to the PUCT.⁵ Additionally, applicants must pay a fee of at least $100,000 to the interconnecting utility for an initial transmission screening study (an additional fee is required if a Large Load requests additional capacity in excess of its initial screening study).

Disclosures

Large Loads must disclose whether they are pursuing substantially similar interconnection agreements elsewhere in Texas.⁶ This is intended to protect against the development of unnecessary infrastructure and should also improve the accuracy of ERCOT’s load growth projections.

Backup Generation

Similarly, disclosure of on-site backup power generation to the interconnecting utility is required if the power produced cannot be exported via the ERCOT grid and the supply can, in aggregate, power at least 50% of the Large Load’s demand.⁷ While disclosure requirements apply without regard to whether the interconnecting transmission service provider (“TSP”) is an investor-owned utility (“IOU”), Co-op or MOU, Co-ops and MOUs retain the authority to adopt additional electric service requirements beyond these standards.⁸

Co-locating Existing Generation with New Large Loads

SB 6 creates a pre-approval process for co-locating a new Large Load and existing (as of Sept. 1, 2025) merchant generation resource. This may subject the Large Load to disconnection or reliance upon backup generation upon system emergency. ERCOT is required to study proposed co-location arrangements before making a recommendation to the PUCT. The PUCT has the ultimate authority to approve the proposal, deny it, or impose reasonable conditions necessary to maintain system reliability, such as curtailing load and making generation capacity available during certain events.

Pre-approval Process

1. The generation owner must submit a description of the arrangement to ERCOT.⁹
2. ERCOT must study such arrangements. Not later than 120 days after receiving all information on a covered net metering arrangement, ERCOT must submit the study and its recommendations to the PUCT.¹⁰
3. The PUCT is responsible for approving, denying, or conditioning ERCOT recommendations. The PUCT has 60 days to approve, deny, or impose reasonable conditions “necessary to maintain system reliability.”¹¹ Conditions imposed by the PUCT may include the requirement that a generation resource, when ERCOT anticipates emergency conditions, provide at least the same amount of dispatchable generation capacity as it did before the net metering arrangement.¹² If conditions are not otherwise time limited, the PUCT must determine at least every 5 years whether the conditions should be continued.¹³

Exemptions

1. A generation resource that registers with ERCOT on or after September 1, 2025, does not require pre-approval to implement a net metering arrangement.¹⁴
2. Pre-approval applies only to new Large Load customers. Because the statute does not define “new,” the PUCT retains discretion to establish that definition. Customers with existing interconnection requests may be excluded, while the Commission may alternatively classify any Large Load customer as new if it is not energized by June 20, 2025.
3. A generation resource with an original registration that includes a co-located Large Load is exempt from the pre-approval requirement, irrespective of whether the Large Load was energized when the generation asset commenced operation.¹⁵
4. Pre-approval is not required where the Large Load’s parent company holds, directly or indirectly, a majority ownership interest in the generator as of January 1, 2025.¹⁶

ERCOT Authority

Backup Generation

Under SB 6, ERCOT has authority to direct the use of backup generation—for Large Loads capable of serving at least 50% of their demand—prior to or during a grid emergency, regardless of whether firm load shed has been initiated.¹⁷ Specifically, ERCOT may require a Large Load to reduce its net load by curtailing operations or activating its backup generation.¹⁸

Load Curtailment

SB 6 requires TSPs to develop protocols for curtailing Large Loads during firm load shed events and to install the equipment and technologies necessary to implement such curtailments.¹⁹ In addition, ERCOT must establish a voluntary, competitively procured demand reduction service targeted to Large Loads for use during anticipated emergency conditions.²⁰ Large Loads that curtail demand in response to wholesale market prices or that participate in ERCOT’s reliability or ancillary service markets are ineligible to participate in this program.²¹

Exemptions

Regarding ERCOT’s ability to direct load curtailment or use of backup generation for Large Loads with backup generation capable of serving at least 50% of their demand, ERCOT’s authority does not apply to load operated by a “critical load industrial customer” (for whom an interruption or suspension of electric service will create a dangerous or life-threatening condition on the customer’s premises) or “critical natural gas facility” (designated by the Railroad Commission of Texas).²²

Implementation of SB 6

While the full impact of SB 6 remains uncertain pending rule development by the Commission and ERCOT, data centers and other Large Loads should anticipate new upfront and ongoing disclosure, operational, and interconnection obligations. The PUCT has initiated Project No. 58317 (SB 6 Implementation). Commission staff is scheduled to hold a stakeholder workshop under this project on July 21. Our team stands ready to provide guidance as implementation progresses. If electricity demand from Large Loads continues to rise as projected, the Texas Legislature may refine existing provisions or impose additional requirements in future sessions.

This article was prepared with the assistance of Kyle Zagon, summer associate at Baker Botts.

¹89th Leg. R.S. (2025) (amending or establishing, inter alia, Public Utility Regulatory Act (“PURA”) §§ 35.004, 37.0561, 39.002, 39.169 and 39.170).
²ERCOT, Long-Term Load Forecast Update (2025–2031) and Methodology Changes, Agenda Item 8.1, Presentation to the ERCOT Board of Directors (Apr. 7, 2025) at: https://www.ercot.com/files/docs/2025/04/07/8.1-Long-Term-Load-Forecast-Update-2025-2031-and-Methodology-Changes.pdf.
³See Texas Senate Business & Commerce Committee Hearing on SB 6, Author's Introduction by Sen. Phil King (Feb. 27, 2025) available at https://senate.texas.gov/videoplayer.php?vid=21183&lang=en.
⁴Id. § 37.0561(g)-(h).
⁵Id. § 37.0561(h)(1)-(4).
⁶Id. § 37.0561(d).
⁷Id. § 37.0561(e).
⁸Id. § 37.0561(l).
⁹Id. § 39.169(a).
¹⁰Id. § 39.169(d).
¹¹Id.
¹²Id. § 39.169(d)(1)-(3).
¹³Id. § 39.169(f).
¹⁴Id. § 39.169(a).
¹⁵Id. § 39.169(b)(1).
¹⁶Id. § 39.169(b)(2).
¹⁷Id. § 37.0561(e).
¹⁸Id.
¹⁹Id. § 39.170(a).
²⁰Id. § 39.170(b).
²¹Id. § 39.170(b)(3).
²²Id. § 39.170(a)(1)-(2).