Public Citizen Comments to the Texas Senate Committee on Business & Commerce Regarding Electric Grid Reliability
To: Chairman Charles Schwertner and the Members of the Senate Committee on Business & Commerce.
CC: Vice Chair Phil King, Sen. César Blanco, Sen. Donna Campbell, Sen. Brent Hagenbuch, Sen. Adam Hinojosa, Sen. Nathan Johnson, Sen. Lois Kolkhorst, Sen. José Menéndez, Sen. Kevin Sparks, Sen. Judith Zaffirini.
Via hand delivery and by email.
From: Kaiba White & Kamil Cook, Public Citizen
Re: Assessing the State of the Texas Electric Grid – testimony by Public Citizen
Dear Chairman Schwertner and Members of the Committee:Public Citizen appreciates the opportunity to testify before this committee on the subject of the state of the electric grid. Public Citizen’s mission is to be the voice of the people in the halls of power. We have 1,000,000 members and supporters across the United States and 30,000 in Texas. We support the following changes to the current approach:
- Implement a moratorium on data center construction.
- Enable greater use of clean customer-site energy solutions, such as home batteries, rooftop solar, and energy efficiency.
- Establish customers’ right to use qualified plug-in solar systems.
- Ensure that residential customers do not pay for grid infrastructure upgrades that primarily serve data centers.
- Create statewide storm reserves.
I. Implement a moratorium on data center interconnection to ERCOT.
With nearly 400 gigawatts of data center load in the ERCOT interconnection queue, data centers are a threat to grid reliability. The Batch Zero study process is intended to mitigate planning challenges for ERCOT, it’s not a silver bullet. Even if only half of the data center projects in the queue were implemented, that would represent a tripling of grid capacity. Implementing an expansion of this magnitude over the course of a few years would greatly increase risks – not just to reliability, but to reliable access to the grid for residential and small commercial customers.
ERCOT’s energy-only market depends on energy producers being able to respond to demand increases in the market. However, the energy infrastructure supply chain cannot support the schedule demanded by data center developers. Unprecedented demand from data centers has driven up the costs of equipment, including transformers, needed to maintain and expand the grid. Batch Zero tackles part of the problem while data centers continue to enter the queue.
It is a fundamental feature of the ERCOT market that increased demand results in increased cost of energy. That increased cost applies to all customers within a load zone.
As the per kilowatt-hour cost of energy increases, lower-income residential customers struggling to pay their electric bills will become unable to pay and face disconnection. As consumer advocates, we see this as a fundamental threat to reliability of the electric system. An electric grid that people can’t afford provides them with no reliability.
Even with the $50,000 per megawatt interconnection security deposit, if the AI bubble bursts and a significant number of data centers shut down or never get built, other customers will be left to foot the bill of expanded grid and energy infrastructure. While this required deposit is likely effective at weeding out speculative data center proposals, it wouldn’t cover those stranded costs. Again, increasing costs pose a fundamental risk of losing access to the grid for lower-income households.
Given the magnitude of the existing ERCOT interconnection queue, the level of uncertainty in the data center industry and the risk to Texas households and other commercial customers, a moratorium on data center interconnections is appropriate.
II. Eliminate or limit the use of diesel back-up generators for data centers.
Data center buildout is resulting in a massive increase in diesel generators. More than 2,100 diesel generators are already in use at data centers in Texas. Data centers get minor air permits based on representations of backup generator run time, but these permits contain no enforceable terms related to run time. Often the facility adds more backup generators later, trigger major permit requirements, but by then the facility is built and operating.[1] Many data centers – and their diesel generators – are located in close proximity to residences, schools and other sensitive facilities.
Diesel pollution is especially harmful to human health. It causes respiratory diseases such as asthma, cardiovascular disease and heart attacks and even cancer.[2]
Senate Bill 6 from the 2025 legislative session requires data centers to have backup generation to allow ERCOT curtailment. While this benefits grid reliability, it does so at the expense of everyone living in the regions surrounding data centers. It is a false solution. Data centers shouldn’t be allowed to force the state into a choice between reliable access to electricity and healthy, breathable air. This policy should be revisited and new legislation passed to require data centers to ramp down when directed by ERCOT, without using polluting diesel generators. At a minimum, if backup generators must be used, Tier IV engines with the strictest pollution controls should be required.
III. Ensure that residential customers do not pay for grid infrastructure upgrades that primarily serve data centers.
As stated by Governor Greg Abbott in his June 10 letter to the POUC and ERCOT, residential customers should not pay for grid infrastructure upgrades that primarily serve data centers. A new method of transmission cost allocation is needed. The Texas Legislature should direct the PUCT to implement a 365 Coincident Peak (CP) method, as suggested by the Office of Public Utility Counsel (OPUC), to more fairly allocate transmission costs.[3] This would better protect residential ratepayers, who cannot selectively ramp down their demand as large loads can. When large loads switch to back-up generation to avoid CP events, they avoid paying their fair share of transmission costs. Those costs are then shifted to residential customers and other commercial customers. While 12 CP is an improvement from the current 4 CP, it will still result in residential customers paying for transmission system upgrades that are largely to serve data centers and the Permian Basin oil and gas industry.
The Texas Legislature should also direct the PUCT to require private electric utilities, cooperative utilities, and municipal utilities to develop large load tariff schedules that, at minimum, cover the full costs of serving them. These rates should include all additional costs, including increased energy costs, new and upgraded substations, transformers and other system upgrades.
IV. Enable greater use of clean customer-sited energy solutions, such as home batteries, rooftop solar, and energy efficiency.
As a result of the influx of data centers and the infrastructure that supports them, there is a growing opposition to utility scale buildout of any energy infrastructure, especially in rural Texas. This will threaten the ability for load to meet demand. While the clear solution to this problem is stopping – or at least reducing – the number of data centers that are slated to come online in Texas, clean customer-sited energy solutions, including home batteries, rooftop solar, and energy efficiency, can play an important role in mitigating existing challenges.
In 2024, Public Citizen released a study of rates and fees specific to residential customers with customer-sited distributed energy generation at all non-competitive Texas electric utilities to inform policymakers.[4] This scope included all 141 municipal and cooperative electric utilities in Texas, and monopoly investor-owned electric utilities that serve Texas customers outside of ERCOT. This research complemented an assessment by Solar United Neighbors (SUN) of distributed energy compensation policies offered by retail electric providers that serve customers in ERCOT’s competitive markets. We found that only 28 of the utilities offered net metering or a distributed generation rate that was comparable. The average avoided cost rate paid for energy sent to the grid from distributed energy systems was 43% of the retail rate charged for consumption from the grid. The avoided cost rates ranged down to just 17% of the retail rate. In the two years since we released this study, we have continued to track distributed generation compensation policies and have seen additional degradation of the value provided to customers through rates. Some utilities that offered net metering when we first did this research have now replaced those policies with much lower sol called “avoided cost” rates. Most times, these “avoided cost” rates are established based on minimal analysis and without transparent customer engagement.
The Texas Legislature should pass legislation directing the Public Utility Commission of Texas (PUCT) to conduct one or more value of solar studies and establish formula-based standards for minimum valuation to be used statewide. Studies like this already exist nationwide and the National Standard Practice Manual for Benefit-Cost Analysis of Distributed Energy Resources provides a framework to follow.[5] This framework has already been utilized by the Texas Solar Energy Society to evaluate the value of distributed solar energy in ERCOT. The study found the value of avoided energy, transmission and distribution costs to be 15 cents per kilowatt-hour, with an additional 12 cents per kilowatt-hour in avoided health impacts from air pollution.[6] Specific benefits include:
- Generation benefits: avoided costs of energy generation, capacity, environmental compliance, and ancillary services and reduced market prices
- Transmission benefits: conserving transmission capacity and avoiding transmission system losses.
- Distribution system benefits: conserving distribution system capacity, avoiding distribution system losses, reducing distribution system operations and maintenance costs, and maintaining distribution system voltage.
- Other benefits, including improved reliability and resilience, reduced risks, and reduced bad debt and disconnections.
Texas has long been an outlier as one of the few states with no net metering or other policy to govern how customers are compensated for energy sent to the grid from on-site solar installations. As a result, utilities across Texas – including electric cooperatives, municipal utilities, regulated monopolies and regulated transmission and distribution utilities – have adopted policies that actively discourage the use of customer-sited solar. This is despite bipartisan popularity of rooftop solar.[7] Texans want to utilize this resource. Many want to invest in it for their homes and businesses and for the benefit of the grid. Artificial barriers in the form of discriminatory rate policies at utilities are stymieing this opportunity.
Of the states with energy efficiency goals, Texas ranks near the bottom.[8] Years of weak goals has left Texas with significant opportunity with comparably little investment. Demand reduction strategies are cheaper than the gas investment attempted by the Texas Energy Fund. This is because the cheapest megawatt of electricity is the one that you don’t buy. According to one ACEEE study, with a $1.6 billion investment in high-efficiency heat pumps over 15 years, ERCOT could see a 12-gigawatt winter peak demand reduction and savings of over $15 billion. This is the equivalent of 40 new 300MW gas plants.[9] This would offer massive savings and put more dollars into the pockets of Texans.
Overall, distributed energy is being underutilized and undervalued in Texas. The state isn’t regulating this at all—even though there are many gaps to shore up. And this is a uniquely opportune time to make these improvements to help offset some of the negative impacts of data centers on consumers. These clean customer-sited energy solutions reduce costs to participating customers and the grid overall and reduce healthcare costs resulting from air pollution from diesel and gas burning electricity generating infrastructure that is on the rise in Texas because of the large increase in data centers.
V. Establish customers’ right to use qualified plug-in solar systems.
Plug-in solar is a term that refers to small solar energy systems that can be plugged into a standard home electrical outlet to provide energy for the home. This is a solution to expand accessibility of distributed solar to renters, people living in multifamily homes and those who can’t afford to invest in larger solar energy systems for their homes. These systems are designed to shut off when grid power goes off, so there’s no danger of harming those working on the grid. Plug-in solar can also be paired with a battery to provide resilience during an outage.
Eight states have now passed legislation to enable the use of plug-in solar. Utah was the first, which speaks to the bipartisan appeal of this technology. The Texas Legislature should join this growing list and pass legislation that affirms residents’ right to utilize qualifying plug-in solar systems, without going through an interconnection process. We also support a post-installation reporting requirement because it would allow utilities and ERCOT to factor in plug-in solar installations in grid planning.
VI. Create a statewide storm reserve.
Texas faces increasing occurrences of severe weather. Whether wildfires in the panhandle, flooding in central Texas, or hurricanes along the Gulf Coast, we face extreme weather that amounts to billions of dollars of damage, yearly, and the frequency of such events has increased over the last 30 years.[10]
Public Citizen supports the Texas Consumer Association proposal for the state of Texas to establish a statewide storm reserve that can cover the costs associated with storms and other extreme weather. This could be funded from interest earned from the Texas Energy Fund. This will help reduce occurrences of ‘rate shock’ without weakening grid resilience and can contribute to the hardening of the grid by replacing broken lines and infrastructure (especially on the distribution grid) with newer and more resilient infrastructure.
Public Citizen welcomes the opportunity to work with members of the committee to advance these policy recommendations.
[1] See https://www.texastribune.org/2026/07/09/texas-data-centers-ai-power-plants-pollution-state-permits/
[2] See https://www.cancer.org/cancer/risk-prevention/chemicals/diesel-exhaust-and-cancer.html
[3] See https://interchange.puc.texas.gov/Documents/58484_115_1621948.PDF.
[4] See https://www.citizen.org/article/eclipsing-progress/
[5] See https://naseo.org/nesp/nspm.
[6] See https://txses.org/new-value-of-solar-study-rooftop-solar-cuts-costs-for-the-texas-grid/
[7] See https://www.forbes.com/sites/current-climate/2026/02/23/you-know-who-likes-solar-power-trump-voters/
[8] See https://www.aceee.org/state-policy/scorecard
[9] See https://www.aceee.org/sites/default/files/pdfs/transforming_texas_-_how_heat_pumps_can_replace_electric_resistance_heat_reducing_costs_and_winter_power_peaks.pdf
[10] See https://www.ncei.noaa.gov/access/billions/state-summary/TX.