Texas Senate Bill 6 (SB 6) took immediate effect upon Gov. Greg Abbott’s signature on June 21, 2025, following its passing by a super-majority in the Texas House and Senate in May. SB 6 has considerable implications for large load consumers such as data centers, located in the Electric Reliability Council of Texas (ERCOT) region. The bill is meant to balance the state’s desire to support business development while minimizing stranded infrastructure costs and potential reliability issues arising from (1) the removal of power generation from the grid by co-locating large loads with existing generators and (2) the inability of ERCOT to curtail large loads during grid emergencies.
In furtherance of those goals, SB 6 issues a series of directives for the Public Utility Commission of Texas (PUCT) and ERCOT, including adoption of rules to reform interconnection processes and large load financial contributions to interconnection costs, implementation of curtailment requirements for certain large loads through a demand response procurement program, and develop demand management and reliability services. Relatedly, SB 6 also requires the PUCT to evaluate current transmission allocation processes to ensure that all loads appropriately contribute to recovery of transmission costs.
Overall, the bill constitutes an important reform to how large loads interconnect to, and interact with, the grid at the interconnection stage — through additional process and financial commitments — and on an ongoing basis, as related to net metering arrangements and demand-side management measures.
Key Directives for PUCT and ERCOT Relating to Large Loads
New Large Load Interconnections
The PUCT must issue a rule to ensure that new large loads in ERCOT “contribute[] to the recovery of the interconnecting electric utility’s costs to interconnect the large load to the utility’s system.” In addition, the PUCT must establish uniform large load interconnection standards “in a manner designed to support business development in [Texas] while maintaining system reliability.” The standards must:
- Apply to large loads 75 MW and above, unless the PUCT establishes a lower threshold.
- Require large loads to disclose whether the loads are requesting substantially similar interconnection elsewhere in Texas, subject to confidentiality protections.
- Require large loads with on-site backup generation capable of serving at least 50% of their on-site demand that do not export back to the grid to provide information about the facilities and generation to the interconnecting utility and to ERCOT. During grid emergencies ERCOT may direct such large loads, with reasonable notice, to deploy their backup generation or curtail load.
- Establish a flat study fee of at least $100,000 for initial transmission screening studies, with provisions for additional fees if more capacity is requested.
- Establish a methodology for large loads to demonstrate site control for proposed locations through an ownership interest, lease or other acceptable legal interest.
- Include uniform financial commitment requirements for necessary transmission infrastructure that must be built to interconnect a new large load.
Large Load Demand Management and Reliability Services
The PUCT must direct ERCOT to develop a competitive reliability service to procure demand reductions from large loads in anticipation of emergency events. SB 6 also mandates curtailment capabilities for noncritical large loads during firm load shed events and allows ERCOT to issue emergency notices requiring large loads with backup generation to reduce load or deploy their own generation. ERCOT may do so only after all market-based services have been exhausted, treating such actions as firm load shed for price calculation purposes.
New Review Process for Net-Metering Arrangements Using Co-located Generation
The PUCT must establish a formal review process for new large loads seeking net metering with co-located existing generators. In the formal process, a power generation company, municipally owned utility or electric cooperative must submit notice to ERCOT prior to implementing a net metering arrangement between an existing generation resource and a new large load. An independent organization certified for ERCOT will study the system impacts of such proposed net metering arrangement. Based on the study results, the PUCT will approve, deny or impose reasonable conditions on the proposed arrangement necessary to maintain system reliability.
Such conditions may include reductions in load, making the resource available to ERCOT during certain events, or imposing hold-harmless commitments for stranded or underutilized transmission assets. If conditions imposed are not limited to a certain time period, the PUCT will review imposed conditions every five years. The PUCT’s decision shall be posted on its website but will not contain competitively sensitive or confidential information.
Study of Transmission and Allocation Methodology
In a separate but related mandate under the new legislation, the PUCT must evaluate whether the existing “four coincident peak” methodology used to calculate wholesale transmission costs to distribution providers continues to ensure that all loads appropriately contribute to the recovery of costs for transmission investment. This includes evaluating whether alternative methods would be more appropriate and the portion of costs related to access to and wholesale service from the transmission system that should be non-bypassable. The PUCT must begin this evaluation by Sept. 18, 2025.
Impact and Implementation
SB 6 represents a marked policy shift in Texas by imposing increased financial and operational requirements on large loads in ERCOT and taking steps to address their possible impact on grid reliability. Ultimately, the increased oversight of interconnection processes, including increased costs for large loads, may cause delays in large load interconnection timelines. In addition, certain large loads will face increased risk of curtailment, which will need to be considered when developing back-up generation configurations.
Since SB 6 provides significant authority and discretion to the PUCT in implementing and enforcing its mandates, additional details regarding the bill’s implementation are unclear. On June 30, 2025, the PUCT opened Project No. 58317 for “S.B. 6 Implementation,” and presumably any rulemaking proceeding initiated will occur under that project number. McGuireWoods will continue to track the PUCT’s implementation of the bill.
