Texas Senate Bill 6: Understanding The Impacts To Large Loads And Co-located Generation

Public Utility Commission to host a workshop on Monday, July 21, 2025

During its 2025 regular session, the Texas Legislature passed Senate Bill 6 ("SB 6") to establish a regulatory framework to manage the rapid growth of consumers with high electricity demand (currently ≥ 75 MW)—referred to as "Large Loads"—in the state.¹ The bill was signed by Governor Abbott on June 20, 2025, and took effect immediately. The Public Utility Commission of Texas ("PUCT" or "Commission") has opened new Project No. 58317 and is holding a workshop on Monday, July 21, 2025 to discuss the implementation of SB 6.²

Texas has attracted Large Loads due to relatively inexpensive and historically reliable electricity, a competitive wholesale power market, abundant renewable energy resources, land availability, and a business-friendly regulatory environment. Technology giants ("hyperscalers"), semiconductor and other advanced manufacturers, and cryptocurrency miners have increasingly established or expanded operations in Texas due in part to the state's flexible market design and streamlined interconnection processes. The Electric Reliability Council of Texas, Inc. ("ERCOT") projects total system peak demand could rise more than 65% by 2031, with much of this driven by these energy-intensive customers.³

In response, SB 6 aims to address concerns around grid reliability, cost allocation, and uncoordinated interconnection of new Large Loads. However, contrary to some early interpretations, SB 6 does not grant ERCOT broad authority to curtail or dispatch behind-the-meter ("BTM") private use network ("PUN") generation and Large Loads. Instead, SB 6 establishes limited and conditional powers under three PURA sections. SB 6 limits ERCOT's operational control to narrow conditions, particularly concerning BTM generation associated with new Large Loads. Specifically, SB 6 establishes three distinct statutory provisions that are particularly relevant for Large Load developers and generation owners/operators considering co-location with large loads:

• Under PURA § 37.0561, ERCOT may curtail or dispatch BTM/PUN load and generation only for facilities with: (a) new or expanded interconnecting Large Loads; and (b) generation that can serve at least 50% of the Large Load's demand and is not capable of grid export. And only then, can ERCOT issue such instructions only: (a) before and during grid emergencies (to be defined in PUCT Proj. No. 58317); and (b) after ERCOT has exhausted all available market services (except frequency responsive service).
• PURA § 39.169 requires ERCOT and PUCT approval for BTM/PUN arrangements between existing grid-facing generators (as of Sept. 1, 2025) and new Large Loads, unless an exemption applies—most notably where generation resource was, as of Jan. 1, 2025, under majority ownership of the Large Load's parent company.
• PURA § 39.170 authorizes utility-administered curtailment protocols for new Large Loads (interconnected after Dec. 31, 2025), whereby the utility may curtail such Large Load only during firm load shed events; it does not give ERCOT dispatch authority over BTM/PUN facilities.

PURA § 37.0561: BTM/PUN Arrangements with New/Expanded Large Loads: ERCOT Curtailment

Under PURA § 37.0561, ERCOT is granted limited, conditional authority to issue operational instructions to certain Large Loads that request new or expanded interconnection. Specifically, ERCOT may direct the facility to reduce its net consumption or activate on-site backup generation—but only if all of the following conditions are met:

• The Large Load is newly requesting interconnection or expansion;
• The facility includes on-site backup generation that:
  
  • Cannot export to the ERCOT grid; and
  • Is capable of serving at least 50% of the facility's demand;
• ERCOT has exhausted all available market tools, except frequency response service; and
• A grid emergency is occurring or imminent, as determined by ERCOT under standards to be developed by the Commission.

This provision does not apply retroactively and is separate from firm load shed administered by utilities under PURA § 39.170. ERCOT's authority is narrowly tailored and applies only to Large Loads meeting these specific technical and operational thresholds during emergency grid conditions. The statute explicitly distinguishes this from ERCOT's routine market operations, and no advance registration of the generator as a grid-facing resource is required.

Additionally, Large Loads must disclose the presence and capabilities of any on-site backup generation as part of their interconnection request. However, the presence of backup generation alone does not trigger ERCOT operational authority unless all statutory conditions under § 37.0561 are satisfied. The statute also does not authorize ERCOT to control or curtail backup generation outside of the defined emergency context. Accordingly, Large Loads with qualifying backup generation must be structured with care, as the presence of non-exporting on-site resources serving a majority of load introduces potential operational obligations during system stress events.

PURA § 39.169: Co-locating Existing Merchant Generation and New Large Loads: ERCOT Study; PUCT Approval

When an existing standalone grid-facing generation resource (as of Sept. 1, 2025) proposes to co-locate with a new Large Load in a BTM configuration, ERCOT must study the reliability impacts of the facility's net-metering arrangement, including transmission and capacity concerns, and provide a recommendation to the PUCT.

The Commission must then review ERCOT's study of a proposed net metering arrangement and either approve, deny, or impose "reasonable conditions" necessary to maintain system reliability, including transmission security and resource adequacy. At a minimum, PURA requires the Commission to ensure that any dispatchable generation that previously made capacity available to the ERCOT power region continues to make at least that same amount available, at ERCOT's direction, in advance of an anticipated emergency condition. Additional conditions may include requiring the behind-the-meter or PUN Large Load to reduce load during certain events, mandating continued capacity availability from the generation resource, or protecting customers from stranded or underutilized transmission costs. If any such conditions are imposed without a specified duration, the Commission must review them at least once every five years. If the PUCT fails to act within 60 days of receiving ERCOT's study, the arrangement is automatically approved.

Critically, ERCOT's dispatch authority under § 39.169 only arises if and to the extent the Commission affirmatively imposes such authority as a condition of approval.

Exemptions

Facilities registered after Sept. 1, 2025, are not subject to these pre-approval requirements. Further, the requirements do not apply to a net metering arrangement between an existing generator and new Large Load if:

(a) The registration for the generator included a co-located Large Load at the time of energization, regardless of whether the load was energized at a later date; or

(b) A majority interest of the generator is owned directly or indirectly as of January 1, 2025, by a parent company of the Large Load that participates in the new net metering arrangement.

PURA § 39.169(b)(2) provides a limited exemption from review where the parent company of the Large Load directly or indirectly held a majority interest in the co-located generation resource as of Jan. 1, 2025. For parties contemplating a transfer of generation assets, there may still be viable strategies—such as specific forms of acquisitions, mergers, or contractual arrangements—that either preserve this exemption or avoid triggering § 39.169 altogether.

These strategies require careful legal and regulatory structuring. In some cases, continuity of ownership through acquisition of the generator's legal entity—not merely its assets—may help preserve exemption eligibility. In others, long-term leases or tolling agreements may offer a path to avoid "net metering arrangement" classification altogether. Each structure carries different risks and tradeoffs, which depend heavily on the timing, regulatory posture of the generator, and the extent to which dispatchable capacity remains available to the ERCOT grid.

While certain approaches may offer a path to avoid triggering SB 6 review requirements under § 39.169, they carry inherent interpretive risk. These arrangements may also be subject to curtailment under other provisions, including § 39.170, depending on project configuration and grid conditions. Success will depend on careful, project-specific structuring that preserves the generator's grid-facing posture and avoids ownership-based netting.

PURA § 39.170: Utility-Administered Curtailment of New Large Loads & Voluntary Demand Reduction Service

PURA § 39.170 pertains to Large Load curtailment but does not provide ERCOT curtailment or dispatch authority. Instead:

• Utilities must implement curtailment protocols for periods only during firm load shed affecting new Large Loads (interconnected after Dec. 31, 2025);
• These curtailment protocols do not apply to on-site generation or backup systems; and
• ERCOT must create a voluntary demand reduction product for Large Loads not otherwise participating in market-based or ancillary services.

PURA § 39.170(a): Utility-Administered Curtailment of New Large Loads

PURA § 39.170(a) establishes a narrow curtailment requirement for certain newly interconnected Large Loads in ERCOT but does not grant ERCOT independent curtailment or dispatch authority. Instead, it directs the PUCT to require transmission service providers ("TSPs"), electric cooperatives, and municipally owned utilities (collectively "utilities") to develop curtailment protocols applicable only during firm load shed events. These protocols apply exclusively to new Large Loads that interconnect on or after Dec. 31, 2025, and are not designated as "critical load industrial customers" (as defined under PURA § 17.002(3-b)) or critical natural gas facilities (under PURA § 38.074). Under PURA § 17.002(3-b), a critical load industrial customer is an "industrial customer for whom an interruption or suspension of electric service will create a dangerous or life-threatening condition on the customer's premises."

Importantly, this provision is limited in scope: it applies only to the curtailment of load, not to any associated on-site or backup generation. It does not authorize ERCOT or the utility to dispatch, initiate, or suspend generation operations. The curtailment must be implemented by the serving utility, not ERCOT, and only in response to system-wide firm load shed directives. As such, developers of BTM or PUN configurations should be aware that even without ERCOT-facing generation participation, their Large Loads may still be curtailed under these utility-administered protocols if not exempt.

PURA § 39.170(b): Voluntary Demand Reduction Product for Large Loads

PURA § 39.170(b) directs the PUCT to require ERCOT to establish a voluntary reliability service that allows ERCOT to competitively procure demand reductions from Large Loads. This program is subject to Commission rulemaking and participation is not mandatory. Under this framework, ERCOT may exercise operational discretion but only within the scope of the approved program.

Crucially, PURA § 39.170(b) does not confer any independent curtailment or dispatch authority to ERCOT outside of the competitively procured demand response product. Any operational directives from ERCOT must arise from participation in the Commission-sanctioned reliability service. Accordingly, Large Load customers not enrolled in the program remain outside ERCOT's direct curtailment authority under this subsection.

Practical Impacts of SB 6: Three BTM/PUN Scenarios

To better understand how SB 6 functions, consider the following examples:

Scenario 1: Existing Generator + New Large Load

• A merchant generator, registered with ERCOT before Sept. 1, 2025, plans to co-locate with a new 100 MW data center (Large Load) behind a shared point of interconnection ("POI").
• The new Large Load expects to use the generator for self-supply, reducing its grid draw.
• Implications: Because the generator is pre-existing (before Sept. 1, 2025), the arrangement triggers PURA § 39.169. ERCOT must conduct a system reliability study, and make a recommendation to the PUCT, who must review the study and may approve, deny, or impose conditions (e.g., requiring generator dispatch during emergencies). If no decision is made within 60 days, the arrangement is deemed approved. ERCOT may receive operational authority only if imposed by the PUCT.

Scenario 2: New Generator + New Large Load

• A developer plans to co-locate a new 100 MW data center with a new generator after January 2026.
• The generator will provide on-site backup but will not export to the grid.
• Implications: Because the generator is not registered as of Sept. 1, 2025, PURA § 39.169 pre-approval is not required. Nonetheless, if the backup generation can serve ≥ 50% of demand, and the site requests new interconnection, PURA § 37.0561 applies. In that case, ERCOT may—only during a grid emergency and after exhausting market tools—direct the facility to reduce net load by activating the generator or curtailing operations. No ERCOT authority applies under PURA § 39.170 unless the facility voluntarily enrolls in ERCOT's demand reduction program.

Scenario 3: New Large Load Owned by Parent of Existing Generator

• A generation company owns a merchant generation resource that was registered with ERCOT prior to Sept. 1, 2025.
• That same company, or its parent entity, intends to develop and operate a new data center (≥ 75 MW) that will be co-located with the existing generator in a BTM/PUN configuration.
• The ownership structure is arranged such that the parent company holds a direct or indirect majority interest in both the generation resource and the Large Load as of Jan. 1, 2025.
• Implications: This structure may qualify for the common ownership exemption under PURA § 39.169(b)(2), which excludes such arrangements from the ERCOT system study and PUCT approval process otherwise required for new net metering configurations. To maintain the exemption, the parent company must be able to demonstrate that it held a qualifying majority interest in the generation resource as of January 1, 2025, and that the ownership structure has been preserved. However, if the generator's ownership changes after Jan. 1, 2025, or if the structure is altered such that the parent company did not have majority control as of the statutory cutoff date, the exemption may not apply. In such cases, careful legal and regulatory review will be required to evaluate whether the arrangement triggers ERCOT and PUCT oversight under § 39.169 or qualifies for a different exemption.

Additional SB 6 Requirements and Exemptions

Aside from ERCOT's operational authority, all Large Loads are subject to new standards:

• Cost Sharing: Developers must pay for interconnection studies and infrastructure upgrades.
• Financial Responsibilities and Site Viability: Demonstrations of financial assurance and site control are required before ERCOT review.
• Transparency: Interconnection applicants must disclose similar projects and backup generation capability.
• Exemptions: ERCOT may not curtail critical industrial loads or critical gas facilities; co-owned generator/loads are exempt from § 39.169.

Conclusion

SB 6 marks a shift toward greater regulation and transparency of Large Loads, particularly in BTM/PUN arrangements. However, ERCOT's curtailment and dispatch authority remain highly conditional and are subject to PUCT oversight and statutory thresholds. Developers should assess project design—including export capability, registration timing, and ownership structure—to minimize regulatory exposure and curtailment obligations.

The July 21, 2025 stakeholder workshop under PUCT Project No. 58317 should provide further clarity. As implementation progresses, our team is prepared to assist clients in interpreting these new obligations and adapting their development strategies accordingly.

Footnotes

1. 89th Leg. R.S. (2025) (amending or establishing, inter alia, Public Utility Regulatory Act ("PURA") §§ 35.004, 37.0561, 39.002, 39.169 and 39.170).

2. The PUCT workshop on SB 6 implementation can be viewed live (9:00 am CST, July 21, 2025) at https://texasadmin.com/tx/puct/workshop/20250721/.

3. ERCOT, Long-Term Load Forecast Update (2025–2031) and Methodology Changes, Agenda Item 8.1, Presentation to the ERCOT Board of Directors (Apr. 7, 2025) at: https://www.ercot.com/files/docs/2025/04/07/8.1-Long-Term-Load-Forecast-Update-2025-2031-and-Methodology-Changes.pdf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.