The Data Center and Crypto Boom – Will It Raise Your Electricity Prices?

by Rick Arnett

Data centers and cryptocurrency miners have officially arrived in Texas. According to the Electric Reliability Council of Texas (“ERCOT”), Texas’ electricity demand—or “load”—will almost double from 2025 to 2029. The grid operator’s February 13, 2025 Capacity Demand Reserves Report (“CDR”) predicts that 90,472 megawatts (“MW”) of summer 2025 peak load will balloon to 140,872 MW by summer 2029. Large loads such as data centers and cryptocurrency entities largely drive the spike in energy demand—and will require significant transmission and generation investments for support.

Under ERCOT’s “postage stamp” system, ERCOT transmission costs are “socialized” and applied to all ERCOT ratepayer bills. Everyday Texans, thus, will likely foot some of the transmission costs required to accommodate data centers and cryptocurrency miners. As set forth below, the 89th Texas Legislature (“Legislature”), Public Utility Commission of Texas (“PUC” of “Commission”), and ERCOT stakeholders are now grappling with these large loads—and how to mitigate increases to ratepayers’ electricity costs.

Legislators and ERCOT Stakeholders Call for More Accurate Load Forecasts

It is critical that ERCOT accurately forecast load. Otherwise, exaggerated forecasts may call for unnecessary transmission and saddle ratepayers with related costs. The Steering Committee of Cities and Texas Coalition for Affordable Power (collectively, “Cities”) filed comments in Project No. 55718—a PUC project that, as discussed below, relates to transmission buildout in the Permian Basin—expressing concern regarding these “stranded costs,” and urging ERCOT to validate its load forecasts. ERCOT’s load forecasts incorporate foreseeable data centers and cryptocurrency mining centers, and thus incorporate load that may never materialize. Notably, this is the first instance that a CDR has forecasted large load without finalized interconnection agreements. Cities argued this may expose ERCOT to exaggerated forecasts—and consumers to stranded costs.

The Legislature has similarly expressed concern regarding ERCOT forecasts. Senator Zaffirini filed Senate Bill 1641 to prohibit transmission operators from including large loads in load forecasts unless the load has provided proof of an intent to interconnect, including a lease or security deposit. Senate Bill 6 (“SB 6”) would require the Commission to “establish standards for interconnecting large load customers…in a manner…minimizing the potential for stranded infrastructure costs….” SB 6, moreover, would standardize the large load interconnection process, and thus mitigate large load forecasting errors. This legislation is encouraging for consumers, who benefit from accurate load forecasts and a more efficient transmission buildout—which as set forth below, has already begun.

Commission Pushes Forward with Transmission Buildout, Grapples with High Voltage

Despite the potentially misleading load forecasts, the Commission recently approved the Permian Basin Reliability Plan (“Plan”), a binding document that expedites transmission buildout in the Permian Basin region. Specifically, the Plan preemptively determines that Permian Basin transmission is necessary and cost effective without ERCOT review and approval. The Plan is designed to meet forecasted load—including forecasted data center and cryptocurrency development.

The resulting transmission buildout will be significant. ERCOT is advocating for Texas’ first Extra High Voltage (“EHV”) transmission in the Permian Basin, a policy proposal that has generated stakeholder and Legislator concern. The grid operator concluded that EHV, compared to more standard 345-kV transmission, results in substantially similar cost—$32.99 and $30.75 billion, respectively—and may produce additional cost savings related to decreased congestion and power losses. But consumer stakeholders argued that a standard 345-kV plan, compared to EHV, may provide greater flexibility and thus greater protection against potentially stranded costs. Indeed, Cities filed comments on ERCOT’s EHV recommendation re-urging the Commission to hedge against load uncertainty whenever possible. Certain Legislators may agree. For example, Chairman Schwertner recently filed Senate Bill 1665, which would require the Commission to conduct a second study on EHV before moving forward with ERCOT’s recommendation.

Legislature Considers Additional Policy to Address Data Center and Cryptocurrency Transmission Costs

The Legislature is currently considering policy far more foundational than load verification and EHV studies: (1) targeted transmission interconnection cost recovery and (2) backup generator requirements. First, SB 6 would require the Commission to “ensure” that large loads “contribute[] to the recovery of the interconnecting electric utility’s costs….” Put differently, an interconnecting data center would pay its own way to connect to the ERCOT grid. To what extent, however, is currently unclear. Second, SB 6 would require some large loads to deploy distributed energy resources—such as backup batteries and natural gas units sited at large load facilities—to the ERCOT grid under certain emergency conditions. This would simultaneously support reliability and reduce energy costs associated with emergency grid conditions.

In conclusion, SB 6 and the other legislation detailed above is an encouraging development for everyday Texas ratepayers. If enacted, SB 6 could directly insulate ratepayer utility bills from data center and cryptocurrency related costs. The other legislation detailed above would bolster ERCOT load forecasting and transmission planning, ultimately reducing utility costs albeit in a more indirect manner. Despite the proposed legislation, however, the data center and crypto boom will likely increase Texas ratepayer utility bills. The extent of these costs is subject to pending legislation and Commission policy.

Rick Arnett is an Associate in the Firm’s Energy and Utility Practice Group. If you have questions or would like additional information related to this article or other matters, contact Rick at 512.322.5855 or rarnett@lglawfirm.com.