Texas Data Centers: Will the Cloud Storm Your Future Electricity Rates?
Texas Data Centers: Will the Cloud Storm Your Future Electricity Rates?
Aging Infrastructure and Slow-to-Change Policies Could Not Shield Your Rates From Hyperscale Demand
Google opened its first two hyperscaler data centers in Ellis County, Texas in 2009, with each starting out at over 100 MW of capacity. Since then, cloud services and AI have grown into a multi-billion (and soon trillion) dollar business. In 2025, Amazon Web Services, Microsoft Azure, and Google Cloud saw annual revenues top the $100 billion mark. All three are expected to double that figure in two years.
But this highly lucrative "compute" revenue stream only works when it has plenty of power. There are many parts of the country where the rush to "power the compute" is starting to run afoul of home electricity costs.
Since 2006, the average U.S. bundled price (supply + delivery) for residential electricity has risen by nearly 83%. Some states have seen their prices nearly triple during this 20 year period. Texas, however, enjoyed a much lower increase at just 37.35%. In fact, between 2006 and 2016, EIA data shows Texas electricity rates fell by 8.81%.
Cheap industrial electricity rates is one of the reasons that Texas is now second in the nation for data center projects. As of June 19, 2026, of the 474 GW of large load in the ERCOT queue, about 90% is just for data centers. This puts the state on course to become the world's largest data center market by 2030.
With public debate over data centers in Texas growing more intense, their potential effect on future residential customer bills often gets distorted in the heat of the moment. To help Texas energy consumers better understand how rising costs between 2006 and 2026 affected the Texas grid and how the gathering storm of data centers threatened to push them even higher, TexasElectricityRatings.com analysts compared residential electricity rates with utility sector cost information and the data center growth in all 50 states. And by taking into account recent PUCT and ERCOT regulatory actions, they hope to show how the Texas electricity market may be preparing for better management of rising energy demand.
Where the Hyperscaler Storm Clouds Gather
In states where the data center boom has boomed loudest, their influence on electricity prices has shaken those power markets like a thunderclap. Between 2016 and 2026, four states saw the number of data centers jump to more than 200. California not only saw its number of data centers rise from 201 to 296 but the price per kWh rose by a whopping 184.27%. Illinois and New York also saw their crop of data centers rise and witnessed a 60% rise in their price per kWh.
But Virginia and Texas are in a different league. Virginia has an estimated 674 data centers, most located in the northern part of the state near Washington, DC. Texas, meanwhile, has about 520, with most clustering around Austin, Dallas, Houston, and San Antonio.
Yet, neither of these two states made the top ten for percent increases in the price per kWh during that time period. Virginia saw rates rise from 12¢/kWh in 2016 to 17.38¢/kWh in 2026, about 44.83%. Texas saw a somewhat steeper increase, going from 11.28¢/kWh in 2016 to 16.99¢/kWh in 2026; or 50.62%.
So, while some consumers blame rising bills on the climbing power demand by data centers, historical pricing data doesn't fully support this.
How the Biggest Data Center States Stack Up
Top Ten Data Center States & Residential Electricity Prices, 2016-2026
| State | 2016 # of Data Centers | 2026 # of Data Centers | % increase in Data Centers | 2016 residential price per kWh | 2026 residential price per kWh | % increase price per kWh |
|---|---|---|---|---|---|---|
| Virginia | 61 | 674 | 1004.92% | 12.00 | 17.38 | 44.83% |
| Texas | 154 | 520 | 237.66% | 11.28 | 16.99 | 50.62% |
| California | 201 | 296 | 47.26% | 12.40 | 35.25 | 184.27% |
| Georgia | 42 | 276 | 557.14% | 11.16 | 15.37 | 37.72% |
| Illinois | 80 | 241 | 201.25% | 12.79 | 20.47 | 60.05% |
| Ohio | 70 | 240 | 242.86% | 12.76 | 19.49 | 52.74% |
| Pennsylvania | 43 | 174 | 304.65% | 14.27 | 21.47 | 50.46% |
| Arizona | 36 | 160 | 344.44% | 12.36 | 15.48 | 25.24% |
| New York | 99 | 135 | 36.36% | 17.39 | 29.45 | 69.35% |
| Oregon | 28 | 135 | 382.14% | 10.50 | 15.78 | 50.29% |
Top Ten States for Highest % Increase in Residential Electricity Prices, 2016-2026
| State | 2016 Data Centers | 2026 Data Centers | % increase in Data Centers | 2016 residential price per kWh | 2026 residential price per kWh | % change 2016 to 2026 |
|---|---|---|---|---|---|---|
| California | 201 | 296 | 47.26% | 12.40 | 35.25 | 184.27% |
| Maine | 3 | 11 | 266.67% | 14.34 | 28.42 | 98.19% |
| District of Columbia | 8 | 6 | -25.00% | 13.48 | 25.41 | 88.50% |
| Hawaii | 5 | 8 | 60.00% | 26.93 | 46.62 | 73.12% |
| New York | 99 | 135 | 36.36% | 17.39 | 29.45 | 69.35% |
| Illinois | 80 | 242 | 202.50% | 12.79 | 20.47 | 60.05% |
| Louisiana | 11 | 23 | 109.09% | 9.17 | 14.44 | 57.47% |
| Washington | 57 | 117 | 105.26% | 9.33 | 14.36 | 53.91% |
| Maryland | 22 | 58 | 163.64% | 14.37 | 22.07 | 53.58% |
| Ohio | 67 | 240 | 258.21% | 12.76 | 19.49 | 52.74% |
2026 Data Center numbers based on information at www.datacentermap.com. 2016 Data center numbers based on information from www.datacentermap.com at web.archive.org. * Source: EIA average residential price per kWh, April 2016 & April 2026.
Where the Higher Costs Came From
Electric utilities have been struggling to modernize their grids ever since the 2003 Northeast Blackout plunged 55 million people in the U.S. and Canada into darkness. The blackout highlighted how neglected and outdated the regional grids had become. Between 2006 and 2016, average price for residential electricity for 2006 to 2016 reflects a 20% increased spending by utilities to expand, upgrade, and repair their grids.
But as population growth intensified energy demand, U.S. investor-owned utility expenses rose even higher. Between 2016 and 2024, utilities saw big cost increases in transmission (86%), distribution (53%), and maintenance (41%). Of key importance has been ongoing shortages of the electric transformer equipment. Even prices for transformers that step down power to a home rose from 30% to 39%. As utility repairs and expansions have increased, the price for bigger high-voltage and generator transformers has doubled and tripled.
A Lawrence Berkeley National Laboratory study shows year over year increases between 2019 and 2025 due to fuel costs and wholesale supply; distribution costs; cost of new generation; transmission costs; storm recovery; and capacity prices (the PJM Interconnection being the most notable). Likewise, that utility revenue increase requests in 2025 hit a new high at $18.23 billion dollars which also hiked customer bills.
EIA data for residential prices from 2016 to 2026 shows the average national price per kWh shot up by 45%. Likewise, Texas consumers saw similar increases due to volatile natural gas prices and extreme weather. Generation output in ERCOT during this time also increased by 38% and this added more costs for new transmission interconnections (solar, especially) being passed onto consumers.
As a result, costs from upgrading and expanding the Texas grid, the total price per kWh on an average residential bill rose nearly 51% from 11.28 cents per kWh in 2016 to 16.99 cents per kWh in 2026.
But while the past twenty years of rising costs came from utilities' need to upgrade and repair their grids, residential customers have been the biggest load.
Data Centers, however, have barely gotten started. So Texas is rewriting its rulebook.
Data Center Data: Grassy Knolls and Phantom Loads
At present, no U.S. government agency has a clear legal mandate to collect data and track power consumption on data centers. This has also been true in Texas. While this benefits tech companies by concealing information from their competitors and people who oppose these facilities, the lack of transparency hampers grid planners who don't have enough data on the load or transmission amounts to expect.
Even estimating the number of data centers is a tricky business. It can depend on who is gathering the information and how they determine which data centers to include on their list. Some online sources count each campus building as a separate data center. Others make no distinction between existing buildings and those that exist only as blue prints. Often, such listed data centers consist only of an announcement of a picturesque grassy knoll waiting to be purchased by a developer.
Utility estimates reported to FERC estimates that a significant portion of their load growth projections may only ever exist on paper. About 40% of data center projects are actually speculative or "phantom loads".
Texas is haunted by hundreds of these as data center developers race to secure as many building sites as possible in order to sell them to the big tech companies. And given the uncertainty over power availability and permitting costs, tech companies may buy a site for a project only to decide to pull the plug before they break ground. ERCOT's 2023 analysis of its data center interconnection queue puts the case plainly:
- Projects come online about 6 months later than requested
- Only about half of the data center load shows up
- Only about half of the load reported by transmission companies shows up
Storm Proofing with Batch Zero
By passing Senate Bill 6 (SB 6) in 2025, Texas lawmakers required the Public Utilities Commission of Texas (PUCT) and ERCOT to set up new regulatory rules for large loads in the ERCOT region. The goal was to support the emerging data center industry while shielding consumers from large load interconnection costs and empowering ERCOT to control generation sources during emergencies.
- PUCT Project No. 58481: Large loads of 75 MW or more must post a deposit of $50,000 for every MW it wants (e.g. 75 MW = $3.75 million). If the load developer pulls out before the study begins, they can get it all back. But if they pull out after the transmission allocation, the state keeps 20%.
- PUCT Electric Substantive Rules – 16 TAC §25.205: This rule reserves current electric generation so that it will continue to supply homes and small businesses in the future. Basically, electric generation that was available to Texans prior to September 1, 2025 must remain available going forward, even when that generation will primarily serve new large loads in the future.
- Transmission Cost Recovery: In May 2026, the PUCT recommended that large loads must pay for any infrastructure projects required to serve them.
But, the most significant program ERCOT has undertaken as a result of SB 6 is the Batch Zero Connection Process.
Previously, large load customers, like data centers, were evaluated one at a time. The "batch" process speeds this up by looking at large loads (75 MW or more) on a system-wide basis. ERCOT first studies all eligible projects as a group to understand grid and transmission capacity. It then allocates transmission capacity based on what the grid can reliably support and makes plans for needed grid updates.
Large loads also can "bring your own generation" (BYOG). By building their own on-site power, they streamline the approval process so that these data centers are up and running more quickly. But there are exceptions that curtail consumption during grid emergencies.
Loads can also agree to be flexible with their energy demands as a Provisional Controllable Load Resource (PCLR). This lets ERCOT reduce their power consumption when power conditions on the local grid are stressed. In return, the customer can pull more power off the grid during low demand hours.
The program was chugging along quite nicely until August 3, 2026 when Governor Abbott issued a directive pausing the Batch Zero process and requiring verification of all data centers and other large loads in the program.
Dubbed the "Batch Zero Audit", the directive gives ERCOT authority to collect information on grid and water usage, public financial assistance, onsite generation, community impacts, and project ownership.
ERCOT has divided the audit into two classes specifically for computational loads (i.e. anything computer-based):
- Data center projects that expect 75MW or more in demand capacity and have been submitted for Batch Zero are subject to the Batch Zero Audit and a separate Community Impact Audit.
- Data Center or mining projects that expect 25 MW or more of demand capacity are subject only to the Community Impact Audit.
Where Texas Stands Now
Data center development is so competitive in Texas that projects announce when they successfully clear the Batch Zero process as a way to market their readiness for customers and investors. So, developers are pushing to get approval and allocation lined up as quickly as possible.
Originally, the completion date for Batch Zero loads was sometime in Spring, 2027. Batch One was supposed to begin in summer, 2027. However, because the Batch Zero Audit has paused the process, it's now unclear when it will continue.
Currently, the ERCOT interconnection queue for large loads now sits at 466.5 GW to go live by 2030. Of this, 90% or 420.8 GW is for data centers. To date, roughly 13 GW has either been energized or has been approved. So, there's a long way to go. Of the remaining load waiting in the queue, ERCOT expects that about 50% will not go live. That leaves more than 200 GW worth of load that will need some level of servicing.
The current generator interconnection queue, however, holds roughly 438.4 GW of nameplate capacity. Of this, 75% is battery (160,034 MW) or solar (150,365 MW) while 17.5% is natural gas (76,785 MW). To be sure, utility scale solar has been navigating a market clouded with high import tariffs, siting difficulties, and lapsing tax credits. However, natural gas generators now face wait times for turbines as long as 6 years.
It's likely that by 2032, Texas residential customers and data centers will have enough electricity supply to meet their needs. But as demand for AI evolves and the state's population continues to grow and more industries come to Texas, affordable electricity rates could remain everyone's problem.
Methods
Analysts for [SITE] compared EIA residential electricity rates from 2006 and 2026 with EIA data on Revenue and Expense Statistics for Major U.S. Investor-Owned Electric Utilities information. This was then compared with information on the data center demand growth in all 50 states. While revenue and expense data showed similar increases with bundled residential rates, there was little increase in U.S. electricity demand (consumption) during the same period. Because data centers grew from 1% to 4.7% of total U.S. demand during that time, their effect as a sole actor on bundled residential electricity rates could not be established.
Sources
EPA: Power Sector Evolution
https://www.epa.gov/power-sector/power-sector-evolution
NERC: Final Report on the August 14, 2003 Blackout in the United States and Canada: Causes and Recommendations
https://www.nerc.com/globalassets/our-work/reports/event-reports/august_2003_blackout_final_report.pdf
American Society of Civil Engineers: 2005 Report Card for America's Infrastructure
https://ascelibrary.org/doi/epdf/10.1061/9780784478851
The Independent: 'A global superpower with a Third World electricity grid'
https://www.independent.co.uk/news/world/americas/a-global-superpower-with-a-third-world-electricity-grid-100585.html
EIA: Electric Power Annual
https://www.eia.gov/electricity/annual/
EE Power: Transformer Supply Chain Woes Persist as Energy Demand Grows
https://eepower.com/tech-insights/transformer-supply-chain-woes-persist-as-energy-demand-grows/
Lawrence Berkeley National Laboratory: Retail Electricity Price Trends and Drivers: Data Update−2026 Edition
https://emp.lbl.gov/sites/default/files/2026-03/Retail%20Price%20Trends_2026%20edition.pdf
S&P Global: Record amount of utility rate requests in 2025 amid affordability concerns
https://www.spglobal.com/market-intelligence/en/news-insights/research/2026/01/record-amount-of-utility-rate-requests-in-2025-amid-affordability-concerns
Grid Strategies: National Load Growth Report 2025
https://gridstrategiesllc.com/wp-content/uploads/Grid-Strategies-National-Load-Growth-Report-2025.pdf
DataCenterMap.com
https://www.datacentermap.com
Thomson Reuters Institute: Phantom loads & utility forecasting: AI's impact on the US electric grid
https://www.thomsonreuters.com/en/institute/articles/ai-impact-utility-forecasting
Utility Dive: A fraction of proposed data centers will get built. Utilities are wising up.
https://www.utilitydive.com/news/a-fraction-of-proposed-data-centers-will-get-built-utilities-are-wising-up/748214/
K&L Gates: FERC Orders PJM to Reform Tariff For Co-Located Generation And Load
https://www.klgates.com/thought-leadership/FERC-Orders-PJM-to-Reform-Tariff-for-Co-Located-Generation-and-Load-1-15-2026
FERC: FERC Launches Aggressive Targeted Action to Speed Large Load Integration
https://www.ferc.gov/news-events/news/ferc-launches-aggressive-targeted-action-speed-large-load-integration
