Gov. Greg Abbott calls for broad data center rules
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Gov. Greg Abbott on Wednesday directed state energy officials to take up data center regulations aimed at protecting Texans from higher electricity bills.
Why it matters: Texas is seen as one of the friendliest states in the nation for data center development, with one of the most generous tax incentives. Abbott's requests are notable in a state known for lax rules governing businesses.
Zoom in: Abbott's letter to the Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) outlined three steps the agencies should take:
- Require data center developers to fund the cost of electric infrastructure they need.
- Submit a memo to Abbott by July 17 with actions they can take to protect residential and small business ratepayers.
- For PUC, "initiate action" to reduce residential customers' infrastructure costs by July 31.
Zoom out: Data center regulation is expected to feature prominently in the Texas Legislature's 2027 session. Abbott said he will work with state lawmakers to codify his directives, in addition to calling for:
- Requiring data centers to use water-efficient cooling systems.
- Having data centers report some water and electricity use to the state.
- Phasing out "outdated tax incentives."
- Adopting regulations like noise protection for neighbors.
What they're saying: "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.
Flashback: Earlier this year, Lt. Gov. Dan Patrick asked state senators to study data centers for the 2027 session.
By the numbers: The cost of Texas' sales tax exemption for data centers has grown from $14.6 million in 2014–15 to an estimated $3.3 billion for 2028–29, per Texas Senate figures.
Between the lines: Growing demand for electricity places strain on local energy utilities to build out more infrastructure. The cost of that infrastructure can sometimes be passed on to customers through rate increases.
- San Antonio's CPS Energy has seen its electricity needs soar past its predictions, in part due to data center growth. The city-owned utility is reworking its power sources as a result.
The big picture: Texas is an AI infrastructure superpower, with 405 existing data centers and 442 planned or under construction, per a December 2025 report from pro-tech groups. There are more than 80 data centers in the San Antonio area.
- A UT Austin report out last month found that Texas data centers used 25 billion gallons of water in 2025, or about 0.4% of the state's total water use. But researchers estimated data centers could make up 3–9% of Texas' total water use by 2040.
- The centers' electric use is also growing, and could consume the electricity equivalent to tens of millions of homes by 2030, per the report.
What's next: The Texas Senate Committee on Finance will meet July 27 at 10:30am to discuss the sales tax exemption for data centers.