The Question Nobody Wrote Into the Form

On 3 August 2026, Texas Governor Greg Abbott directed the Public Utility Commission and the Electric Reliability Council of Texas to conduct a comprehensive verification and audit of data center projects advancing through ERCOT's interconnection process. The audit goes beyond a traditional interconnection review, instructing the regulatory agencies to examine tax incentives, public financial assistance, electricity demand, on-site generation, water sourcing and reuse, cooling technologies, community impacts and project ownership. ERCOT immediately followed the directive with an announcement that it would not meet the 7 August 2026 deadline associated with the Batch Zero interconnection study process.

This is not a story about a governor signing something. It is a story about the person at the Public Utility Commission of Texas who has to write the questions that will decide which $1 billion data center project clears the audit and which does not, and who then has to defend those questions when someone sues. That person is reading the directive, and the directive does not contain a single number. It says "comprehensive", "verify", and "community impacts". Those are instructions a board gives when it wants political cover for the outcome. They are not instructions a regulator can turn into a checklist.

The letter indicated its purpose is to keep the grid stable and reliable, specifically noting an alleged failure of some data centers to comply with the PUCT's recent survey of water and power usage. Read that again. The governor does not say which facilities failed to comply, or what the threshold for compliance was, or whether the survey results were public. He says some did not comply, and that is the stated reason for halting every interconnection in the queue. The letter stated that ERCOT is considering approximately 474 GW of requests, 90% of which are data centers. That is more than twice the state's current total installed generation capacity. The number itself is an accusation.

The regulator now owns the problem the governor named but did not define. Someone at the PUC has to write down what "community impact" means in a way that holds up when a developer with a $500,000 deposit on the line takes it to court. Someone has to decide whether a closed-loop cooling system counts as zero water withdrawal if the facility still draws municipal water for the first fill. Someone has to decide whether "on-site generation" means a synchronous gas turbine behind the meter or a power purchase agreement with a solar farm 20 miles away that was built because the data center signed the contract. None of those are technical questions. They are rule-making by audit, and the person writing them has no legislative text to work from.

The constraint here is not power. Over 55 GW of new generation have already successfully navigated and completed PJM's rigorous interconnection queue process and are available to come online, and more than 800 generating projects totaling 220 GW have entered PJM Interconnection's reformed interconnection process, including 106 GW of gas-fired generation. The generation is queued. The constraint is the approval to draw it, and that approval now depends on passing an audit whose criteria do not yet exist.

The $500,000 placeholder nobody wants to call speculative

FERC issued Order 2023-B in early 2026, implementing financial readiness requirements including non-refundable deposits of $5,000 per MW for queue applications, meaning a 100 MW data center faces a $500,000 upfront deposit. That deposit was supposed to filter speculative applications. It has not. More than 1,800 projects are currently seeking grid connections in Texas alone. The deposit is large enough to hurt but small enough to be worth holding if the site becomes viable later. It is a call option on grid access, priced at $5,000 per MW, and the regulator is now stuck with 1,800 of them.

The PUC has to decide which of those 1,800 are serious. The deposit proves the developer could write a check. It does not prove the facility will be built, or that it will deliver the economic benefit the tax abatement assumed, or that the community that granted the abatement understood what 150 MW of diesel backup generation sounds like at 03:00 when the wind drops. The audit is an attempt to answer those questions after the deposit has already been paid, which means the developer has a sunk cost and the regulator has a queue position that somebody else wants.

FERC Order 2023-B implemented financial readiness requirements including non-refundable deposits, but for a 100 MW data center, the $500,000 upfront deposit remains manageable for serious developers. Manageable is the word that haunts this. The deposit was supposed to separate the serious from the speculative. Instead it separated the modestly funded from the well funded, and the well funded include both the developer building a campus in 18 months and the one holding five sites across three states until the power price settles.

PJM officials have acknowledged that the vast majority of the 3,500 queue applications will never proceed to construction, with many representing speculative filings by developers seeking to preserve optionality across multiple potential sites, and new applicants facing study timelines of 4-5 years. The regulator knows this. The developers know the regulator knows this. The audit is the regulator asking the developers to admit it on a form, and the developers are hiring lawyers to figure out which box to check.

What the auditor can see and what the rule must measure

The Texas directive asks for verification of water sourcing, cooling technology, and community impact. Start with water. New water conditions and disclosures tie local permits and business licenses to water supply assessments, drought scarcity plans and applicant-funded water infrastructure in California, signed on 21 September 2026. In South Carolina, legislation mandating closed loop cooling systems requires that data centers use closed loop systems that result in zero net water withdrawal and net zero wastewater discharge, and prohibits data centers from extracting groundwater or using municipal water for cooling systems. Those are rules. They have thresholds and they define what counts.

The Texas audit does not. It asks the developer to disclose water use and the regulator to verify it. Verify against what? A 200 MW campus using closed-loop liquid cooling with adiabatic dry coolers and rainwater capture for the first fill can credibly claim near-zero ongoing withdrawal. A 200 MW campus using evaporative cooling towers on municipal water will withdraw millions of gallons per day. Both are defensible engineering choices. One uses more water. The regulator has to decide whether using more water means the project fails the audit, and the directive does not say.

The same problem appears on community impact. The audit examines community impacts, but the directive does not define impact. Is it noise? Community concerns cluster around noise, light, water use, and property values. Is it traffic during construction? Is it the property tax abatement the county granted in 2025 that now looks like a bad deal because the facility hired eight people instead of eighty? All of those are impacts. None of them are in the interconnection application, because interconnection studies electrical load and grid stability. The PUC is now being asked to audit for things the application was never designed to measure.

The regulator can send a form. The form can ask the developer to disclose every item the directive named. The developer will fill it out. The regulator will read 1,800 forms, each one written by a lawyer optimising for approval, and at the end of that process the regulator will still have to decide what the threshold is. That decision is rule-making, and rule-making is supposed to happen in public with a comment period and a record that explains why the agency chose one threshold over another. The audit compresses that into a verification checklist, and the first project that fails will sue on the grounds that the PUC applied a rule it never published.

The approval that depends on a document the regulator has not seen

Ireland has lifted its data centre connection moratorium and introduced a demanding new framework requiring developers to provide their own generation capacity, source 80% of electricity from new Irish renewables within six years, and meet strict grid stability requirements. That is a rule. The percentage is published, the time frame is defined, and a developer can read it before filing. Ireland's Commission for Regulation of Utilities has proposed offering discounted gas connections to new data centers on the condition that they accept the risk of planned supply interruptions during periods of high demand, with new data centers receiving a tariff discount in exchange for accepting that their gas supply may be curtailed when national demand is very high. That is a price. It can be modelled.

Texas has an audit whose criteria will be written after the applications are submitted. The regulator is asking the developer to prove something before the regulator has defined what proof looks like. The audit, which ERCOT anticipates will take several months to complete, must occur prior to any additional data center being approved to move forward in the interconnection process. Several months is not a schedule. It is an acknowledgment that the PUC does not yet know what it is looking for.

Approximately $42 billion of European data centre investment has been disrupted by community and regulatory opposition, according to STL Partners research, and in the first four months of 2026, more than 70 European data centre projects were rejected or restricted, a figure that already exceeded the full-year total for 2025. Those were planning refusals. They happened before the interconnection deposit was paid. The Texas projects are already in the queue, deposits paid, and the audit is happening after commitment. The financial exposure is higher, the legal risk is higher, and the regulator is writing the standard in real time.

The person at the PUC tasked with turning the directive into an auditable checklist is not writing policy. They are writing the binding interpretation of policy that was announced but not defined, and the projects that pass will set the precedent for every interconnection dispute in the state for the next five years. That is not the job the regulator signed up for when they joined a utility commission. It is the job they have now, and every box they add to the form is a rule somebody will sue over.

Tarry Singh is the founder and CEO of Real AI (realai.eu), an enterprise AI advisory and deployment firm working with global enterprises on production agent systems, model risk, and AI sovereignty strategy. He also leads Earthscan (earthscan.io) for Energy AI, and is a founding contributor to the EU-funded HCAIM and PANORAIMA programmes for responsible AI education across European universities. He writes at tarrysingh.com.