Texas Data Centers: Will the Cloud Storm Your Future Electricity Rates?
Will Texas Data Centers Drive Up Your Electricity Rates?
Aging Infrastructure and Antique Policies Won't 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. Amazon Web Services, Microsoft Azure, and Google Cloud saw annual revenues top the $100 billion mark in 2025. All three are expected to double that figure in two years. To do that, big tech is also poised to pump $1.3 trillion into hyperscaler development, much of it in Texas.
On June 19, 2026, ERCOT announced filings for 474 GW of large load in its interconnection queue. Of this, about 90% is just for data centers. This puts Texas on course to become the world's largest data center market by 2030.
But this highly lucrative "compute" revenue stream only works when it has plenty of power. So, there are many parts of the country where the rush to "power the compute" is starting to run afoul of home electricity costs.
With public debate over data centers in Texas growing more intense, their potential effect on residential customer bills often gets distorted in the heat of the moment. To help energy consumers better understand the changing effects of utilities and data centers in their monthly bills, analysts at TexasElectricityRatings.com compared residential electricity rates with utility sector costs and the data center growth in all 50 states for the past twenty years. They then review how coming changes to state utility policies that improve transparency and financial risk assignment work to shield residential consumers from skyrocketing energy rates from data center growth.
Key Findings:
- Utility expenses and revenue from 2006 to 2026 correlate to increases in residential rates. The average U.S. bundled price (supply + delivery) for residential electricity has risen by nearly 83%.
- Texas rates rose at just 37.35%. Between 2006 and 2016, electricity rates in Texas fell 8.81%.
- From 2006 to 2026, data center energy demand grew from 1% to just 4.7% of total U.S. demand. Because not all states with data centers shared similar rate increases, their role as a sole driver of raising residential electricity rates could not be established.
- Predicted near-term data center energy demand now requires state utility policy and regulatory changes to provide grid planners a more accurate picture of how to best meet them.
What Data Center Boom States Had the Biggest Electric Rate Hikes?
In states where the data center boom has boomed loudest, electricity prices have not reacted the same way. Between 2016 and 2026, four states saw their number of data centers jump to more than 200. But only three of these with rate hikes over 55% suggest a possible correlation with data centers. In particular, California added 99 data centers and saw its price per kWh rise by a whopping 184.27%.
However, 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.
In contrast to California, Virginia saw rates only 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%. Still, even though both these states have the largest numbers of data centers, neither has seen the highest rate increases.
Clearly, this indicates that other factors have been exerting more pressure on residential electric rates in past years than data center demand.
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.
What Drove US Electric Rate Hikes For the Past Ten Years?
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. That event highlighted the need for utilities to repair, expand, and modernize their infrastructure. Not surprisingly, from 2006 and 2016, the average residential price reflects a 20% increase in utility spending.
But starting in 2016, costs for renewable energy sources fell below coal fired generators. Between 2016 and 2024, transmission projects to new generators increased utility expenses by as much as 86%. In addition, following the pandemic in 2020, electric transformer equipment shortages have extended repair wait times and further pushed costs up by 30% to 39%.
Most recently, year over year price increases for 2024 to 2025 show 30 states where electric rates rose 2% due to fuel costs and wholesale supply rates, and included higher costs for distribution, new generation, transmission, and storm recovery. Likewise, utility requests to add revenue increases to customer bills in 2025 hit a new high at $18.23 billion dollars.
All told, from 2016 to 2026, these costs have pushed up the average residential price per kWh by another 45%. For Texans, the price per kWh on an average residential bill rose nearly 51%.
What Entity Tracks Data Centers and Their Power Consumption?
At present, no federal agency has a clear legal mandate to collect data and track power consumption on data centers. The same held true for states until August, 2026 when Texas began its interconnection audit. This means that for years, tech companies could conceal information from their competitors and regulators. Unfortunately, the lack of transparency hampered grid planners who need data on the load and transmission amounts to expect.
Estimating the number of data centers is a tricky business. Some on line sources differ on whether to count each campus building as a separate data center or not. Others make no distinction between existing buildings and those that exist only as blue prints. Often, information on some data centers consists of an announcement of a picturesque grassy knoll waiting to be purchased by a developer.
Texas is haunted by hundreds of speculative "phantom loads". Data center developers file numerous interconnection forms as they 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
What is the Texas Batch Zero Program?
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. A large load is defined as a demand requiring 75 MegaWatts (MW) or more. The goal was to support the emerging data center industry but shield consumers from their huge interconnection costs while empowering ERCOT to control generation sources during emergencies. The new rules include:
- PUCT Project No. 58481: Large loads 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 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, if a Texas electricity company was generating power for residential or business customers prior to September 1, 2025, it must remain available to do so in the future. And that's even if that generator later is used to supply a large load.
- Transmission Cost Recovery: In May 2026, the PUCT formally recommended that large loads must pay for any infrastructure projects required to serve them.
But, the most significant program ERCOT has undertaken 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 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.
Such big commercial electricity 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 cheap Texas electricity off the grid during low demand hours.
But the program screeched to a halt on August 3, 2026 when Governor Abbott paused the Batch Zero process to require verification of all data centers and other large loads in the program. Dubbed the "Batch Zero Audit", the governor's 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 (ie -- 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.
What is the State of Large Load Connections in Texas Now?
Data center development is so competitive in Texas that companies announce clearing the Batch Zero process to pitch their readiness to 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 set to begin in summer, 2027. However, since 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.
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
GridStrategies: Power Demand Forecasts Revised Up for Third Year Running, Led by Data Centers
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
ERCOTQueue.com
https://www.ercotqueue.com/large-loads
Gov. Abbott Directive Letter
https://gov.texas.gov/uploads/files/press/Thomas_Gleeson_Pablo_Vegas_Data_Centers_Directive_Letter_to_PUCT_ERCOT_August_2026_.pdf
Texas Data Center FAQs:
Will data centers make my Texas electricity bill go up?
So far, the link between data centers and electricity rates in Texas is weaker than headlines suggest. Between 2016 and 2026, Texas added over 500 data centers, more than Virginia's growth, yet Texas rates rose 50.62% compared to Virginia's 44.83%. States with far fewer data centers, like California, saw much larger increases. Rate hikes have tracked utility infrastructure spending more closely than data center growth.
Why are Texas electricity rates going up if we produce so much energy?
Aging grid infrastructure, transmission upgrades, and equipment shortages are the bigger drivers behind rising Texas electricity rates. Since 2016, transmission spending has risen as much as 86%, and post-pandemic transformer shortages added another 30% to 39% in costs. Data centers are a newer factor layered on top of these existing pressures.
What can Texas residents do to protect themselves from rising electricity costs?
Since deregulation means rates vary by provider, Texans have the power to choose their electricity provider, and comparing plans regularly is one of the most direct ways to control costs. Reviewing your Electricity Facts Label (EFL) for contract terms, avoiding auto-renewal into higher variable rates, and shopping before your current plan expires can help offset broader rate pressures from grid and infrastructure costs.
How do Texas electricity rates compare to other states with major data center growth?
Texas's 50.62% rate increase from 2016 to 2026 was lower than several states with fewer data centers, including Illinois (60.05%), Ohio (52.74%), and California (184.27%). When you compare Texas electricity rates to these states, it suggests state-level utility policy, not just data center presence, plays a large role in rate outcomes.
Are Texas commercial electricity rates affected by data center growth too?
Yes, but the dynamics differ from residential rates. Large commercial and industrial users, including data centers, typically negotiate custom contracts tied to wholesale market pricing rather than the fixed-rate plans residential customers use. Smaller and mid-size businesses are more exposed to the same transmission and infrastructure cost increases driving up residential bills, which makes it worth regularly reviewing commercial electricity rates in Texas rather than assuming a renewal is still competitive.
Will data centers raise my business electricity bill??
The impact looks different for commercial customers than for households. Large industrial users like data centers typically negotiate custom wholesale contracts, so they aren't drawing from the same rate pool as small and mid-size businesses. That said, businesses are still exposed to the same aging grid infrastructure, transmission upgrades, and equipment shortages pushing up costs across the board. Reviewing your commercial electricity rates in Texas regularly, especially before a contract renews, is a more direct way to manage costs than trying to pin the increase on data centers alone.
