Texas Legislature Adopts New Law Regarding Large Load Interconnection and Operation

The 2025 Texas Legislature has adopted Senate Bill No. 6, which establishes new requirements applicable to interconnection and operation of large load projects (those over 75 MW demand). As of June 5^th, the bill has not been signed or vetoed by the Governor and will take effect no later than June 23^rd if the Governor does not veto it. The bill has many details that are worthy of attention and that are likely to be fleshed out in Public Utility Commission of Texas rules and ERCOT Protocols or other document revisions. This article provides a high-level overview for general guidance.

The primary high-level purposes and effects of the bill are to:

1. Reform the Four Coincident Peak (4CP) methodology of assigning transmission costs, to seek to allocate more transmission and distribution (T&D) costs to large customers (i.e., to seek to potentially shift some of those costs away from residential and small commercial customers). This is accomplished primarily by new 35.004(c-1) and (c-2) (enacted via SECTION 1 of the bill) directing that utilities are to ensure that new large load (LL) customers (whether front-of-the-meter (FTM) or behind-the-meter (BTM)) contribute to interconnection costs, and by the language in SECTION 6 of the bill telling the PUC to re-evaluate transmission cost allocation among customer classes.
2. Establish some gating requirements for LLs requesting interconnection (whether FTM or BTM), to assist ERCOT in determining what load is likely to become “real” for planning purposes.  This is accomplished in SECTION 2 of the bill (which enacts new Section 37.0561 of the Utilities Code) by requiring LLs to put up $100,000 for interconnection study costs, by requiring LLs to disclose if they have site control, by requiring LLs to disclose if they have 50% or greater on-site dedicated backup generation, by requiring LLs to disclose whether they are considering substantially similar projects in Texas that might replace the project under study, and by requiring the PUC to develop a standard for financial commitments by LLs.
3. Make it clear that all non-critical loads served at transmission voltage and connected after December 31, 2025 are subject to curtailment as part of any mandatory firm load shed (via new Utilities Code Section 39.170(a) enacted in SECTION 4 of the bill).  This provision directs the utility to “confer with the customer to the extent feasible to shed load in a coordinated manner.”
4. Ensure that there is a new, focused regulatory review and approval, conditioning, or disapproval of LL BTM proposals at any existing generation site, with a requirement that if the site is a dispatchable plant, then the plant must provide full replacement capacity or the load must fully curtail “in advance of an anticipated emergency condition.”  This review is split into two parts–120 days by ERCOT and 60 days by the PUC, for a total 180-day review, and is provided by new Utilities Code Section 39.169 enacted by SECTION 4 of the bill.  The bill allows for the local utility to raise an objection to a project during the pendency of the ERCOT/PUC review.  Texas House State Affairs Committee Chairman Ken King stated on the House floor in response to a question from Chairman Trent Ashby (Chair of the Public Education Committee’s Sub-Committee on Academic and Career-Oriented Education) that this review would not apply to an arrangement for which the parties have executed a contract before September 1, 2025.  Chairman King also clarified in response to a question from Chairman Stan Lambert (Chair of the House Committee on Pensions, Investments, and Financial Services) that this ERCOT/PUC review would not apply to the ongoing Stargate project in Abilene.  
5. Create a new competitively procured demand reduction service into which LLs can opt (requiring 24-hour notice to the LL before curtailment). This is in new Utilities Code Section 39.170(b) enacted via SECTION 4 of the bill.
6. Create authority for ERCOT to require LLs with backup generation (capable of meeting at least 50% of their demand) to curtail or deploy their backup generation (regardless of whether the LL is FTM or BTM) “before or during an energy emergency alert” and after ERCOT has deployed “all available market services” other than “frequency responsive services” and after ERCOT has issued “reasonable notice.”  This is accomplished via new Utilities Code Section 37.0561(e) in SECTION 2 of the bill.
7. Mitigate the potential downward pricing impact on the wholesale power market of LL curtailments by directing ERCOT to treat those curtailments as out-of-market actions or firm load shed when calculating price adjustments for reliability deployments. This is accomplished by new Utilities Code Section 37.0561(e) in SECTION 2 of the bill and new Utilities Code Section 39.170(c) in SECTION 4 of the bill.
8. Preserve confidentiality of competitively sensitive information regarding proposed LL projects by allowing a LL developer to withhold or anonymize competitively sensitive details regarding alternative projects that the bill requires it to inform the interconnecting utility about, by declaring that information about a LL project shared by the utility with ERCOT is protected from disclosure under the Texas Public Information Act, and by directing the PUC to not publicly disclose competitively sensitive or confidential information regarding a decision to approve, condition, or deny a BTM LL at an existing generation site.  This is accomplished via new Utilities Code Sections 37.0561(d) and (k) in SECTION 2 of the bill and new Utilities Code Section 39.169(h) in SECTION 4 of the bill.