Large Loads, Data Centers, and the Grid

Large loads as the entry point for understanding data center policy and the grid // Texas versus New York on regulating large loads // Work with me on my Foundations of the Grid class this fall!

Data center policy is a subset of the larger policy area of “energy and the grid,” the infrastructure by which electricity is generated, transmitted, and distributed.¹

Although data centers implicate other policy areas, like tax revenue, land use, and resource management (see Andy Masley’s work for data center impacts on water, noise, etc), data center policy is fundamentally about the grid: how much energy they require, whether they can properly integrate into the existing grid, who pays for infrastructure upgrades to accommodate them, what they do during extreme swings in electrical demand, what kind of generation they can use behind the meter, and so forth.

So, to properly evaluate whether, when, and how a state can accommodate new data centers, one must have a functional grip on what “the grid” is. Currently (ha), many people are tripping right at that starting line.

The goal of this post is not to be a primer on the grid, but to give an example of a central, technical policy point relevant to data centers and the grid. Think of it as a policy appetizer that will inspire hunger for more information. I’m also going to ask for collaborators to be involved with my “Foundations of the Grid” class this coming fall. You’ll find information about that at the end of this post, and you can sign up to be notified when applications open in about two weeks here.

The technical policy point I’m going to investigate: large loads.

Table of Contents:

• Large loads

• The technical challenges of large loads

  • #1) Phantom (or speculative, or duplicative) loads hurt grid planning

  • #2) Active use and management of the grid during stress

  • #3) Cost allocation with ratepayers

• New York’s specific plan to address large loads

• Foundations of the Grid class

• Sources and Further Reading

Large loads

A “large load”² is any entity, whether a data center, a factory, or maybe even a fully electrified skyscraper, that consumes a large amount of electricity. There is no universal standard for “large” here. Jurisdictions apply different energy thresholds, and they also exempt certain large loads from regulations.

For example: Last year Texas passed a law, SB6, regulating large loads that put the threshold at 75 megawatts,³ while New York’s Governor Hochul issued an executive order temporarily—we’ll see how temporarily—banning data centers beyond a threshold of 50 megawatts.⁴ The New York executive order exempts certain uses like manufacturing, research, and education from its prohibition,⁵ and certain parts of SB6 relating to load curtailment exempt critical load industrial customers and critical natural gas facilities.⁶

Since data centers require a lot of energy, they often fall under most jurisdictions’ definition of a large load. And since data centers are the most common kind of large load applying to connect to most grids, “data center” and “large load” are often used interchangeably. For the rest of this essay, I will be using “large load” and “data center” to mean “data center with a large energy need.”

The technical challenges of large loads

There are many potential benefits to connecting data centers to the grid, like vastly increased tax revenue (assuming you actually levy net taxes on the data centers). But reaping those rewards requires addressing large load challenges. Generally speaking, they come in a few forms across the country:

#1) Phantom (or speculative, or duplicative) loads hurt grid planning

Someone building a data center faces a variable landscape: many different utilities, offering different timelines and compliance burdens for connecting to the grid. In the face of this, they will sometimes apply to multiple utilities at the same time for the same data center, and see which will move faster. This makes sense from an individual business perspective.

But it doesn’t make sense from a grid-planning perspective. Data center applicants generally haven’t been telling utilities that their requests are duplicated elsewhere, so utilities can’t properly aggregate that information for planning purposes. Central grid planning authorities then see these duplicative large load requests as unique and add them up. This creates an artificially high amount of expected demand, which warps long-term grid planning and capital investment.

✅ The first fix: require all potential data center grid customers to disclose whether their requests are duplicative, so grid planners know how much unique new capacity is actually in the pipeline.

Texas’ SB6 did this (see the new Section 37.0561(d) added in Section 2 of the bill):

The standards must require each large load customer subject to Subsection (c) to disclose to the interconnecting electric utility or municipally owned utility whether the customer is pursuing a substantially similar request for electric service in this state the approval of which would result in the customer materially changing, delaying, or withdrawing the interconnection request. The disclosure may withhold or anonymize competitively sensitive details.

✅ The second fix: require potential data center grid customers to put skin in the game. This means making them demonstrate things like site control (the legal authority to use and develop their land, like through a deed); pay for the upfront costs of studying whether their project will require infrastructure upgrades of the grid; put down a deposit to enter the “interconnection queue” to be added to the grid; and sign an “early termination” payment agreement if their project shuts down prior to making its required infrastructure upgrades worth the cost. This last scenario would result in “stranded assets” like transmission lines that go to no one.

Here are some more examples from Texas’ SB6 (all in section 2 of the bill):

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).

The goal of requiring skin in the game is to reduce more speculative grid connection requests that didn’t have a high likelihood of panning out anyway, but under the prior legal regime were “free” to make. This is just a scaled up version of the RSVP problem with public events: if they’re free, people say they’re coming on a whim, and many don’t show. If you charge for tickets, people tend to only say they’re coming if they mean it.

#2) Active use and management of the grid during stress

The grid is a collectively shared resource, and industry, business, and individual households are all connected to it, drawing electric power. But the grid has a maximum amount of electricity that it can deliver at any one time. So what happens when there is a large increase in electrical demand that pushes the grid near its limit, like when it gets really hot and everyone turns on their AC? In those cases, grid operators do controlled power shutoffs called “load shedding” to help balance electrical supply and demand.

Large loads can potentially exacerbate this problem. For example: what if you allow several large loads to connect to the grid, and then that same area experiences a massive heatwave. Who is going to face load shedding? After all, new large loads might force the system into load shedding even faster without expanded generation capacity on the grid, because they eliminated more slack from the system. And if that happens, should residents face load shedding?

✅ The fix: require new data centers to curtail their grid power consumption during extreme weather or other grid stress events, and to sign an agreement and install necessary infrastructure to accomplish this at the time of grid connection. Curtailing grid power consumption doesn’t have to mean shutting down, especially if data centers are allowed to install their own behind-the-meter generation.

For example, see this new statute added by section 4 of Texas’ SB6 (emphasis added):

Sec. 39.170. LARGE LOAD DEMAND MANAGEMENT SERVICE. (a) The commission shall require the independent organization certified under Section 39.151 for the ERCOT power region to ensure that each electric cooperative, transmission and distribution utility, and municipally owned utility serving a transmission-voltage customer develops a protocol, including the installation of any necessary equipment or technology before the customer is interconnected, to allow the load to be curtailed during firm load shed. The electric cooperative, transmission and distribution utility, or municipally owned utility shall confer with the customer to the extent feasible to shed load in a coordinated manner.

And also see this example from section 2 (emphasis added):

(e) The standards must require each interconnected large load customer subject to Subsection (c) to disclose to the interconnecting electric utility or municipally owned utility information about the customer’s on-site backup generating facilities and require the interconnecting electric utility or municipally owned utility to provide the information to the independent organization certified under Section 39.151 for the ERCOT power region. For the purposes of this subsection, “on-site backup generating facilities” means generation that is not capable of exporting energy to the ERCOT transmission grid and that, in the aggregate, can serve at least 50 percent of on-site demand. The independent organization shall establish a threshold before or during an energy emergency alert at which the organization may issue reasonable notice that large load customers with on-site backup generating facilities may be directed to either deploy the customer’s on-site backup generating facilities or curtail load.

#3) Cost allocation with ratepayers

The costs of maintaining the grid, upgrading the grid, and consuming electricity, are generally borne at by ratepayers—the people who pay bills for their electricity every month. In practical everyday political language, “ratepayers” usually means residential customers.

Large loads can potentially impose large cost increases on ratepayers in two ways: (1) by requiring grid upgrades that are paid for by everybody, and (2) by increasing demand on electrical supply, driving up the cost of electricity itself.⁷

✅ The first fix: require large loads to pay the cost of their interconnection with the grid. Per section 1 of Texas’ SB6:

(c-1) The commission by rule shall ensure that a large load customer who is subject to the standards adopted under Section 37.0561 contributes to the recovery of the interconnecting electric utility’s costs to interconnect the large load to the utility’s system. (c-2) An electric cooperative or municipally owned utility that has not adopted customer choice shall pass through to a large load customer who is subject to the standards adopted under Section 37.0561 the reasonable costs to interconnect the large load in a manner determined by the electric cooperative or municipally owned utility.

✅ The second fix: charge large load customers a special rate (or “tariff”) for electricity, or make sure they are being charged in a way commensurate with their electricity use, which might even allow a utility to lower the rates on regular electrical consumers. From section 6 of Texas’ SB6:

SECTION 6. (a) The Public Utility Commission of Texas shall evaluate whether the existing methodology used to charge wholesale transmission costs to distribution providers under Section 35.004(d), Utilities Code, continues to appropriately assign costs for transmission investment…(b) The Public Utility Commission of Texas shall evaluate whether the commission’s retail ratemaking practices ensure that transmission cost recovery appropriately charges the system costs that are caused by each customer class.⁸

New York’s specific plan to address large loads

New York’s plan to address phantom loads, grid management, and ratepayer cost allocation, among other things, comes in the form of Governor Hochul’s Energize NY Development initiative (“Energize NY”), which she announced in her January 2026 State of the State address. The New York State Public Service Commission (PSC) is carrying out the initiative in the form of a proceeding, which is the name of the vehicle that it uses for policymaking.

[Aside: 📚 Hierarchy of authorities note for current and former Foundations students: While this is a kind of administrative law, proceedings usually live in the PSC’s uncodified “docket,” kind of like a court’s case law. You can make an account to follow its activity here. The PSC does issue rules that wind up in the state’s book of admin law, Title 16 NYCRR, but that is not the whole picture of what it does.]

[Aside: For those of you who want to read the actual content of the proceeding, you can do so here. That page contains the PSC’s initiation of the proceeding (item 76), as well as public comments from interested entities and members of the public.]

Here are the goals of the PSC proceeding, quoted directly from the governor’s press office in February 2026:

Governor Kathy Hochul announced today that the New York State Public Service Commission (PSC) instituted a proceeding to advance the Energize NY Development initiative she unveiled last month as part of her State of the State policy agenda. 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. The goal of this initiative is to support State economic development objectives without adversely impacting ratepayers.

The proceeding formally began in February 2026, and it is structured to conclude with a final set of recommendations that New York can act on by February 2027. It is investigating eight questions through its own work and via comments submitted by external stakeholders, including New York City:

1. How can large load demand be accurately forecasted and verified before being included in long-term load forecasts and system planning studies?

2. What innovative technology should be considered to improve interconnection cost estimates, reduce development time, and provide sensitivity analysis? a. How has this technology been utilized and what were the results?

3. 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?

4. What grid services such as load flexibility, demand response, on-site generation, energy storage, or alternative service [sic] be considered?

5. How should cost allocation be structured to ensure data centers or similar facilities bear the cost they impose on the electric system?

6. How can the state ensure transparency in the large load interconnection process and information sharing?

7. What interconnection rules should the Commission consider that would allow for leveraging of waste heat as part of thermal energy networks?

8. 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?⁹

⏰ Deadlines: The proceeding took comments from interested stakeholders through May 13, 2026, and the Department of Public Service (the PSC staff arm) must convene at least one public technical conference to discuss the contents of the proceeding by the end of 2026. They must then produce a white paper informed by the conference and stakeholder comments by February 2027. Presumably, the state will act on those recommendations, but we shall see. Finally: any of these deadlines can be extended unilaterally by the PSC.

Texas is going through a similar process that was kicked off by requirements in SB6 starting in June of 2025. They are now coming to the end of many of their public comment periods, and their kind-of-equivalent-to-the-PSC is making its final determinations after public comment (see here for example).

The close reader will note the governmental differences between Texas and New York. New York’s large load regulatory change was initiated by the governor and the administrative apparatus, without the legislature. It was also paired with a data center moratorium contained in a gubernatorial executive order (read more about EOs here) that layered on more administrative requirements.

Texas, on the other hand, passed a bill through its legislature that set forth the regulatory requirements of its large load program. They are almost done being fleshed out by its administrative apparatus, pursuant to that bill, SB6.

There’s a lot to say about these differences, and how they reflect differences between Texas and New York. But that’s another post!

“Foundations of the Grid” class

The abundance movement’s strongest soldier is the YIMBY movement. But other pillars of abundance need to be strengthened, and energy abundance has increasing momentum behind it at all levels of government. It also has tons of useful overlap with land use and permitting that also affects housing.

Last week Matt Yglesias wrote in his newsletter:

Abundance, in practice, is mostly the YIMBY movement and the YIMBY movement continues to be an incredible success story on a policy level…Abundance, as a policy concept, continues to have the half-drawn horse problem I wrote about last fall — housing abundance is really robust, energy abundance has ideas and some legislative momentum, and then beyond that it gets really sketchy fast. Which is just to say there’s a lot of work to be done.

Therefore, I will be teaching a “Foundations of the Grid” class this coming fall, and it will sit as the third core class alongside Foundations of New York and Foundations of the Liberal Arts.

Foundations of the Grid will address content on five levels, roughly in order of sequence:

• Physics (volts, amps, watts, and so forth)

• Physical infrastructure (generation, transmission and distribution lines, substations, etc)

• History and lore: New York City and State

• Institutions and markets (NYISO, FERC, ConEd, PSC, etc)

• Policy (New York’s CLCPA, PSC proceedings, etc)

CALL TO ACTION: If you are an energy industry professional who likes Maximum New York, and you have concrete ideas about how to partner with me to provide an excellent Foundations of the Grid class, please email me at daniel@maximumnewyork.com. I am very interested in facilitating field trips to see grid infrastructure.

📨 Get notified when class applications open in early-mid August!

Sources and Further Reading

• Texas Senate Bill 6 (signed by Texas Governor Abbott on June 20, 2025).

• Public Utility Commission of Texas (PUCT), latest memo on proposed rulemaking to implement section 6 of SB6 (June 12, 2026). This is interesting to read because it shows you how SB6, as statute, is carried out in administrative law. If you really want to get into the implementation meat of §6 of SB6, also read this comment on PUCT’s rulemaking process from ERCOT Steel Mills from April 2026.

• Energize NY PSC proceeding press release (February 2026).

• NY PSC proceeding, case 26-E-0045 portal, which includes the order initiating the proceeding (item 76, very worth reading). Some readers might also find New York City’s comments on the proceeding (item 34) interesting too.

• New York Governor Hochul’s Executive Order 62: “Establishing a Temporary Moratorium on Data Centers in New York While the State Develops Higher Standards for Data Center Development and Benefits Blueprint to Support Localities” (July 14, 2026). This EO extends NY PSC proceeding in case 26-E-0045, and adds separate requirements apart from it.

1. You could style this in different ways. Technically “the grid” could be a subset of “energy,” and technically “the grid” might not count behind-the-meter generation, but only the generation, transmission, and distribution of the public grid itself. When I say “the grid” in this essay, I mean “the grid ecosystem,” which includes behind-the-meter generation capabilities designed to operate directly in concert with a grid connection. I’m speaking about “the grid” ecosystemically because it is simpler, and doesn’t require getting into detail that would be distracting for this piece. Maybe I won’t do that in the future, but I’m doing it now. And anyhow, this is what footnotes are for: to divulge detail without derailing prose.

2. While you will find no mention of this in a technical paper or legislation about the grid, the phrase “large load” carries a robust connotation to a large segment of the population, especially if they are new to the world of electrical policy. Repeated use of the phrase in policy papers has a linguistically percussive effect on someone who isn’t used to it as a technical term. One can see a similar, older double entendre play out in the phrase “wide load,” which appears on banners hung on tractor trailers carrying overly large/heavy items across the country via road. I don’t know if there’s anything to do about this, or even if it is a problem.

3. Section 2 of SB6 says (emphasis added):

The standards must apply only to customers requesting a new or expanded interconnection where the total load at a single site would exceed a demand threshold established by the commission based on the size of loads that significantly impact transmission needs in the ERCOT power region. The commission shall establish a demand threshold of 75 megawatts unless the commission determines that a lower threshold is necessary to accomplish the purposes described by Subsection (b).

4. Executive Order No 62: “Establishing a Temporary Moratorium on Data Centers in New York While the State Develops Higher Standards for Data Center Development and Benefits Blueprint to Support Localities” (emphasis added):

For the purposes of this Executive Order, “data center” shall mean a facility or group of facilities located on the same site or contiguous sites used to house computer servers, associated components, or computing or telecommunications equipment for the storage, processing, distribution, and / or management of data. Characteristics of data centers subject to this Executive Order include computer servers, associated components, or computing or telecommunications equipment which: (1) are in facilities containing uninterruptible power supply systems, specialized cooling systems designed for high-density computing loads, and / or contain cybersecurity systems designed for secure digital infrastructure operations, (2) provide data storage, cloud computing, and/or content delivery to customers, internal operations, and/or affiliated business operations, oftentimes on a continuous twenty-four-hour cycle, and (3) consume or can consume 50 megawatts of energy or more.

5. Executive Order No 62: “Establishing a Temporary Moratorium on Data Centers in New York While the State Develops Higher Standards for Data Center Development and Benefits Blueprint to Support Localities”:

Provided, however, that a facility that is primarily used for manufacturing, research (including but not limited to quantum computing research or biomedical research), education (including but not limited to such facilities used by accredited colleges and universities in New York State, to the extent such colleges and universities are engaging in academic research, and the Empire AI consortium, or the institute, as defined in section three hundred sixty-one of the Economic Development Law), or the provision of medical care, is not covered by this definition and thus not subject to this Executive Order.

6. Section 4 of SB6 added §39.170 to Chapter 39 of the Texas Utilities Code, which partially exempts critical load industrial customers and critical natural gas facilities from electrical curtailment requirements.

Per Texas Utilities Code Chapter 17, §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.”

7. On this second point, New York saw a potent case of this with upstate crypto-mining facilities. See this excerpt from the PSC’s order initiating the Energize NY proceeding, which you can find as item 1 here (pp. 6-7):

“Additionally, the Commission authorized upstate municipal power authorities to adopt tariff classifications for high density load (HDL) customers in response to concerns that data centers and crypto mining business demand could drive up local electricity costs for existing ratepayers.8 Customers of these municipal utilities benefit from an allocation of low-cost New York Power Authority hydroelectric power. When the municipality’s allocation has been expended, more costly supplemental power is procured, and the costs are recovered from all customers. Serving HDL customers requires municipalities to increase their supplemental energy purchases. The HDL Order implemented protections against increased power costs associated with such purchases for New York Municipal Power Agency member customers, among other things. 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.”

8. If you want deeper lore here, read about the Public Utility Commission of Texas’ 4CP (4 Coincident Peak) cost allocation model, and their potential move to 12CP pursuant to section 6 of SB6, as outlined in PUCT’s memo issued last month.

9. STATE OF NEW YORK PUBLIC SERVICE COMMISSION, CASE 26-E-0045 - Proceeding on Motion of the Commission to Address Interconnection Reforms for Large Loads. ORDER INSTITUTING PROCEEDING AND SOLICITING COMMENTS (Issued and Effective February 12, 2026), Appendix. See item #76 in this portal for the document, and then look at the last two pages in that PDF for the relevant questions.