Data centers, the grid, and the rules Texas and New York are writing for them.
Before anyone can say whether, when, and how New York should welcome new data centers, they need a working grip on . This guide takes one technical idea at the center of that fight, the , and lets you take it apart.
Data center policy is grid policy.
Data centers touch tax revenue, land use, water, and noise. But the core questions are about the grid: the system that generates electricity, carries it long distances on high-voltage lines, and it to homes and businesses.
The grid can only deliver so much at once.
At any moment there is a maximum amount of power the system can supply. Operators watch the gap between that ceiling and what everyone is drawing. Call it . In this drawing, a region with 10,000 of capacity is using 8,000.
Then a data center asks to plug in.
A 500 MW campus draws about as much power as 625,000 New York homes do on average, and it runs around the clock. Here it eats a quarter of the region’s slack before a single heatwave arrives.
That one hookup raises a stack of questions.
How much power will it draw? Can it integrate safely with the existing grid? Who pays for the upgrades it needs? What happens during extreme swings in demand? What kind of power can it make on its own site, ?
To evaluate whether, when, and how a state can accommodate data centers, you need a functional grip on all of this. Many people trip right at the starting line.
We’ll follow one technical idea all the way down.
Before any of those questions get answered, a state has to decide which customers count as “large loads” and what rules they face. Think of it as a policy appetizer: one central, technical point that should leave you hungry for the rest of the grid.
Next: what counts as large ↓What counts as “large”?
There is no universal standard. Each jurisdiction picks its own line and its own exemptions.
A large load is any customer that draws a lot of electricity at one site: a data center, a factory, maybe even a fully electrified skyscraper.
Because data centers need so much power, they fall under most jurisdictions’ definitions. And because they are the most common kind of large load asking to connect to most grids, people use “data center” and “large load” almost interchangeably. This guide does too.
But the line itself moves. Texas passed a law in 2025, , that regulates large loads above 75 megawatts.3 New York’s Governor Hochul issued an in July 2026 that temporarily bans data centers of 50 megawatts or more, “we’ll see how temporarily.”4 The New York order exempts uses like manufacturing, research, and education. Parts of SB6’s curtailment rules exempt critical industrial customers and critical natural gas facilities.6
Same facility, two rulebooks
Pick a facility, or drag to resize it. Watch how Texas and New York each treat it.
Facility sizes are illustrative. The scale is logarithmic: each labeled tick is 10× the one before. Stargate: the OpenAI, Oracle, and Crusoe campus in Abilene, Texas, planned at 1.2 GW. Peaks: NYISO 33,956 MW (July 19, 2013); ERCOT 91,134 MW (July 22, 2026, unofficial). Homes: EIA 2025 New York average of 586 kWh a month, about 0.8 kW of average draw.
A note on the bannersAs the essay’s second footnote observes, the phrase “large load” lands a little differently on people new to electrical policy, the same way the old “WIDE LOAD” banners on oversize trucks always have. Repeat it enough in a policy paper and the effect is percussive. This site leans in.
Phantom loads
When one data center shows up as three, grid planners plan for demand that never arrives.
Six real projects, 2,000 MW.
Someone building a data center faces a variable landscape: many utilities, each with its own timeline and compliance burden for . If every developer applied once, the planner’s forecast would match reality.
So developers apply everywhere at once.
Faced with that patchwork, a developer will sometimes apply to several utilities for the same data center and see which moves fastest. For one business, that makes sense. Applicants generally haven’t told utilities that a request is duplicated elsewhere.
And long shots get in line too.
Under the old rules, a request was essentially free. Projects with little chance of panning out joined the alongside the real ones, shown here with dashed outlines.
The planner sees 12,000 MW. Reality is 2,000.
Central grid planners see each request as unique and add them up. The result is an artificially high forecast that warps long-term planning and capital investment: the power plants and transmission lines that take years to build.
Make them disclose duplicates.
Require every potential large customer to say whether it is pursuing a substantially similar request elsewhere. Planners can then count each project once. Texas’s SB6 does exactly this.
Make them put skin in the game.
Require proof of , an upfront study fee, a financial commitment, and an early-termination agreement. Most long shots withdraw. One stays and pays, which is fine: the forecast now tracks the projects that are serious.
Run the machine yourself.
Use the controls to change how many utilities each project applies to, and switch each fix on or off. Watch the gap between the planner’s forecast and what actually gets built.
Disclose duplicate requests
So grid planners know how much unique new demand is actually in the pipeline. See the new Section 37.0561(d), added in Section 2 of SB6.
Require skin in the game
Make applicants show , pay for the studies of what upgrades they’d need, put down a deposit to enter the queue, and sign an early-termination agreement in case they quit before their upgrades are worth the cost.
The standards must set a flat study fee of at least $100,000 to be paid to the interconnecting electric utility or municipally owned utility for initial transmission screening studies for large loads subject to Subsection (c). A large load customer that requests additional capacity following the screening study must pay an additional study fee based on the new request.
The standards must include a method for a large load customer subject to Subsection (c) to demonstrate site control for the proposed load location through an ownership interest, lease, or another legal interest acceptable to the commission.
The standards must include uniform financial commitment requirements for the development of transmission infrastructure needed to serve a large load customer subject to Subsection (c). The standards must provide that satisfactory proof of financial commitment may include: (1) security provided on a dollar per megawatt basis as set by the commission; (2) contribution in aid of construction; (3) security provided under an agreement that requires a large load customer to pay for significant equipment or services in advance of signing an agreement to establish electric delivery service; or (4) a form of financial commitment acceptable to the commission other than those provided by Subdivisions (1)-(3).
How big is the line to connect?
Not every request in a queue is speculative or duplicated. But the gap between what’s requested and what’s real is why planners can’t take queues at face value.
The two panels use different scales. Sources: ERCOT Senate testimony, July 29, 2026; ERCOT demand records; ERCOT monthly operational overview, August 2026; NYISO Power Trends 2026. These context figures were added for this edition and are not from the essay.
When the grid is stressed
In a heatwave, someone’s power gets cut. The rules decide whose.
An ordinary summer day.
Industry, businesses, and households all draw from the same grid. Demand climbs through the day and peaks in the late afternoon, comfortably under what the system can deliver.
Everyone turns on the AC.
A heatwave pushes demand toward the ceiling. In this grid it just barely fits, with a thin sliver of slack at 5 p.m.
Now connect three data centers.
They draw 1,200 MW day and night, raising the floor under everything else. Without new generation, they remove the slack the system was counting on, so the same heatwave now overshoots the ceiling.
So the operator cuts someone off.
When demand outruns supply, grid operators order controlled outages, called , to keep the whole system from failing. Which raises the essay’s question: if new large loads pushed the system over, should residents be the ones who go dark?
Curtail the large loads first.
Require new data centers to their grid power during extreme weather and other stress events, and to sign the agreement and install the equipment to do it when they connect. Here, trimming the data centers covers the whole shortfall. The neighborhood keeps its lights on.
Curtailing doesn’t have to mean switching off.
Data centers allowed to install their own behind-the-meter generation can step off the grid and keep running on it. Texas now requires large loads to disclose that backup capacity, and lets ERCOT tell them to use it.
Make your own heatwave.
Change the weather, add or remove data centers, and flip the rules. Hover over the chart, or focus it and use the arrow keys, to read any half-hour.
Texans have reason to take this seriously. During Winter Storm Uri in February 2021, ERCOT ordered up to 20,000 MW of firm load shed at the worst point of the crisis, according to the FERC–NERC review. SB6’s answer for large loads comes in two parts.
Who pays?
Large loads can raise everyone’s bills two ways: through grid upgrades, and through the price of power itself.
The costs of maintaining the grid, upgrading it, and generating electricity are generally borne by , the people who pay an electric bill every month.
In everyday political language, “ratepayers” usually means households. Large loads can raise their costs in two ways: (1) by requiring grid upgrades that everybody pays for, and (2) by increasing demand on supply, which drives up the cost of electricity itself.
Make large loads pay to connect
Require them to cover the cost of their own interconnection, instead of folding it into everyone’s rates.
The hookup bill
Connecting a big data center can take a new transmission line and substation work. Flip the switches to see who ends up holding the bill.
Illustrative model: a $250 million upgrade, a utility with 1 million customer accounts, costs recovered over 20 years and split evenly per account. When costs are shared, the data center pays 20% as one large customer among many.
Charge them a rate that fits their use
Put large loads on a special rate, or , or make sure they are charged in a way commensurate with what they use. Done well, it might even let a utility lower rates for everyone else.
New York has already lived through a version of the second problem. Upstate, a wave of crypto-mining operations moved into towns whose municipal utilities buy cheap hydropower.7
The hydropower bucket
Upstate municipal utilities get a fixed allocation of low-cost hydropower from the New York Power Authority. Once a town uses it up, it buys pricier supplemental power, and the cost is recovered from all customers. Drag in a new crypto mine or data center.
Illustrative prices and allocation. Household use is New York’s 2025 average, 586 kWh a month (EIA). The mechanism follows the PSC’s 2018 high-density load order (Case 18-E-0126), which let municipal utilities that are members of the New York Municipal Power Agency, including Plattsburgh, put on their own tariff.
“This example highlights how tariffs can be designed in specific cases to protect ratepayers by ensuring data centers and similar facilities pay their fair share.”NY PSC, order instituting Case 26-E-0045, Feb. 12, 2026, pp. 6–7
Texas’s SB6 also tells its regulator to re-examine how transmission costs get split up in the first place.
Deeper lore4CP, 12CP, and dodging the peak
ERCOT splits transmission costs using : each utility’s share depends on its demand during the single highest 15-minute system-peak interval in each of June, July, August, and September. Large customers on demand-based rates are charged the same way.8
That creates a game. A flexible large load that can predict those four summer peaks can curtail for a few intervals a year and avoid most of its transmission charges, shifting them onto everyone else. In June 2026, PUCT staff proposed replacing 4CP with 12CP, one peak interval per month, and charging large loads a minimum bill. A revised version advanced in July. Try it:
Illustrative model: a 500 MW data center on a system with $1 billion a year in transmission costs. Bars show each month’s peak interval; gray is everyone else, yellow is the data center. It can call the summer peaks every time and other months’ peaks about half the time. Rule details: PUCT Project 58000, staff memo of June 12, 2026 and revised proposal of July 9, 2026.
The large-load toolkit
Six tools, three problems. Many of New York’s open questions line up with tools Texas already wrote into law.
| Tool | Phantom loads | Grid stress | Who pays | Related NY question |
|---|---|---|---|---|
| Disclose duplicate requestsSB6 §2 · §37.0561(d) | Count each project once | Q1 Q6 | ||
| Skin in the gameSB6 §2 · fees, site control, security | Long shots drop out | No stranded lines | Q1 Q3 | |
| Curtail during load shedSB6 §4 · §39.170 | Homes aren’t first in line | Q3 Q4 | ||
| Disclose and dispatch backup powerSB6 §2 · §37.0561(e) | Curtail without shutting down | Q4 | ||
| Pay to interconnectSB6 §1 | Hookups aren’t socialized | Q5 Q8 | ||
| Large-load tariffs and cost reviewSB6 §6 · NY HDL order | Rates follow cost causation | Q5 Q8 |
SB6 also directs ERCOT to procure demand reductions from large loads and gives the PUCT review over new large loads co-locating with existing power plants. New York’s questions on interconnection technology (Q2), waste heat (Q7), and climate goals have no direct Texas counterpart in the essay.
New York’s plan
Texas legislated. New York’s governor launched an administrative proceeding, then paired it with a moratorium.
New York’s answer to phantom loads, grid management, and cost allocation is Governor Hochul’s Energize NY Development initiative, announced in her January 2026 State of the State address.
The is carrying it out as a , the vehicle it uses for policymaking. In the governor’s office’s words, the proceeding “will review interconnection processes, cost-allocation mechanisms and tariff structures relating to the integration of large loads with the State’s transmission and distribution systems,” with the goal of supporting economic development “without adversely impacting ratepayers.”
Two ways to make the rules
Texas went through its legislature. New York started with the governor and the administrative apparatus, without the legislature.
The eight questions New York is asking
The PSC’s order lists them in an appendix. Filter by the problem each one targets, and read each in plain English.
How can large load demand be accurately forecasted and verified before being included in long-term load forecasts and system planning studies?
Plain EnglishWhich requests are real, and how do we check before we plan around them?
What innovative technology should be considered to improve interconnection cost estimates, reduce development time, and provide sensitivity analysis? How has this technology been utilized and what were the results?
Plain EnglishCan better tools make hookup studies faster and their cost estimates more reliable?
What requirements should be applied to large loads and / or data centers to maintain grid reliability, protect ratepayers, and meet New York’s climate goals?
Plain EnglishWhat should large loads have to do to connect at all?
What grid services such as load flexibility, demand response, on-site generation, energy storage, or alternative service [sic] be considered?
Plain EnglishCan large loads help the grid in a pinch, by flexing, generating, or storing their own power?
How should cost allocation be structured to ensure data centers or similar facilities bear the cost they impose on the electric system?
Plain EnglishHow do we make sure data centers pay for the costs they cause?
How can the state ensure transparency in the large load interconnection process and information sharing?
Plain EnglishWho gets to see what’s in the queue, and how?
What interconnection rules should the Commission consider that would allow for leveraging of waste heat as part of thermal energy networks?
Plain EnglishCould a data center’s excess heat warm nearby buildings through shared ?
What additional measures should the Commission consider as part of this proceeding to ensure large load and data centers are not causing cost increases to all other ratepayers, or adversely impacting reliability or the achievement of Climate Leadership and Community Protection Act objectives?
Plain EnglishWhat else would keep data centers from raising bills, weakening reliability, or setting back the ?
Questions quoted from the appendix to the PSC’s Order Instituting Proceeding and Soliciting Comments, Case 26-E-0045 (issued and effective February 12, 2026).9 Plain-English versions are this edition’s.
Where things stand
Hollow markers are still ahead. Any of New York’s deadlines can be extended unilaterally by the PSC. Scroll the timeline sideways.
Texas and New York, side by side
| Feature | Texas | New York |
|---|---|---|
| Who started it | The legislature | The governor and the PSC |
| Legal vehicle | Statute (SB6), then PUCT rules | PSC proceeding 26-E-0045, plus Executive Order 62 |
| Size line | Over 75 MW at one site, unless the PUCT sets lower | 50 MW or more, for EO 62’s data center moratorium |
| What the line triggers | Standards to connect: disclosure, fees, site control, financial security, curtailment | A pause on new state environmental permits for data centers while standards are written |
| Carve-outs | Critical industrial loads and critical gas facilities, from curtailment | Manufacturing, research, education, Empire AI, medical care |
| Stage, July 2026 | Final determinations after public comment | Comments closed; conference and white paper ahead |
EO 62 details from the text of the order: it directs DEC to hold in abeyance applications for discretionary permits for data center construction or expansion until DPS completes a generic environmental impact statement, and does not apply to local permits.
What’s happened since the essay
As of October 20, 2026- New York · Sep 15, 2026Empire State Development released the voluntary Community Investment Framework that EO 62 called for. It recommends community investments of $1 million per megawatt.esd.ny.gov
- New York · Sep 18, 2026The PSC released a draft scope for the environmental review whose completion ends EO 62’s moratorium. Comments close October 20. Fifty-six legislators asked for more time and public hearings.nysenate.gov
- Texas · Aug 11, 2026Comments closed on the PUCT’s revised cost proposal from July 9: a new large-load tariff rule, a 12CP method, and a 20-year minimum bill for large loads. About 55 were filed. SB6 rule changes are due by December 31, 2026.puc.texas.gov
- Texas · Aug 3, 2026Governor Abbott ordered an audit of large-load requests. ERCOT paused approvals to energize new data centers and crypto facilities of 75 MW or more pending verification, with reports due December 10.ercot.com
There’s a lot to say about how these differences reflect the differences between Texas and New York. But that’s another post.
Check your grip
Eight questions. Each answer explains itself, so wrong answers teach too.
Answer all 8 to see how you did.
Five things to keep
Data center policy is grid policy.
Taxes, land, and water matter, but the deciding questions are about power: how much, how it connects, who pays, and what happens under stress.
“Large” is a legal line, not a physical fact.
Texas draws it at 75 MW; New York’s moratorium at 50 MW. Exemptions mean the same building can be treated three different ways.
Duplicates and long shots inflate forecasts.
Disclosure counts each project once. Fees, site control, and deposits turn free RSVPs into tickets.
Someone gets cut in a crisis.
Curtailment rules, installed before hookup, let large loads step back first, often onto their own generators.
Make the cause pay the cost.
Interconnection charges and large-load tariffs keep upgrades and pricier power from landing on households.