Texas Raises the Bar for Large Load Interconnections: What 16 TAC §25.194 Means for Your Next Project

On September 18, the Public Utility Commission of Texas (PUCT) adopted the new 16 Texas Administrative Code (TAC) §25.194. The rule puts into effect Public Utility Regulatory Act (PURA) §37.0561, Planning for and Interconnection of Large Loads, which Senate Bill 6 created. The statute tells the Commission to set interconnection standards that support business development, limit stranded infrastructure costs, and protect reliability. For data center developers, hyperscalers, and other large load energy customers, this means that entering the Electric Reliability Council of Texas (ERCOT) interconnection process now requires substantial upfront financial commitments and disclosures signed by an officer.

Key Provisions

Intermediate agreement. A customer must sign an intermediate agreement before ERCOT will include the customer’s large load interconnection request in an interconnection study. At signing, the customer pays a $100,000 study fee and posts $50,000 per megawatt (MW) in refundable security.

This final rule is easier on customers than what was originally proposed in March, which called for $100,000 per MW of security plus a nonrefundable fee of $100,000 per MW. The Commission dropped the nonrefundable fee entirely and adopted refundable security as part of the Standard Large Load Interconnection Agreement (SLLIA).

Disclosures. Customers must now disclose their regulatory milestones, phased energization schedule, backup generation, power purchase plans, and whether they will operate as a controllable load resource. The order allows ERCOT and PUCT staff to audit these disclosures. A failed audit can lead to penalties or loss of the customer’s allocated transmission capacity.

SLLIA. The customer must also sign and fund a SLLIA within 60 days after ERCOT issues a study report that allocates capacity. At signing, the customer posts security equal to the greater of $50,000 per MW or its allocated system upgrade costs. Direct interconnection costs are paid in cash as a contribution in aid of construction (CIAC). There is no allowance to offset these costs. They are trued up to actual costs, and they are not refundable.

Security is returned in steps after any outstanding amounts owed are paid: 20% of the remaining balance at energization, then the rest in 20% increments as the customer meets the SLLIA milestones tied to its obligation to pay the §25.193 large load minimum billing demand.

Strategic Implications

Timelines and queue strategy. ERCOT studies requests in batches, so there is no queue position to hold. Under the rule, the “interconnection study” is the set of studies, including a batch study and a refinement study, that ERCOT protocols require before a large load can interconnect. ERCOT combines pending requests in a group, studies each group together, and then issues a study report allocating transmission capacity, stated in MW for each study year, which may cover all, part, or none of the customer’s requested peak demand. A customer that receives any capacity allocation has 60 days to sign and fund a SLLIA, and the MW allocated becomes its “contracted peak demand” under that agreement. Capacity that is withdrawn, canceled, or left unused can be reallocated only by ERCOT and only in a future study. Projects that already met ERCOT Planning Guide Section 9 requirements for Batch Zero loads when the rule took effect follow their own Batch Zero study but must still sign a SLLIA to reserve the transmission capacity ERCOT allocates to them. Any material change such as a new peak demand, ramp schedule, or point of interconnection requires a new request.

For large load customers, settle your load profile before you file: Lock down the peak demand; determine the phased energization schedule by month and year and in MW, power factor, and mega volt-amperes reactive; and include the point of interconnection, site configuration, and load type you can stand behind, because an officer must attest to these disclosures and later changes can mean starting over in a new batch.

Siting and load structure. If you withdraw after ERCOT has allocated capacity to your project but before the SLLIA deadline, you forfeit 20% of the security tied to that capacity — and only after outstanding amounts owed to the utility are paid. Withdrawing before the study begins or after being allocated zero MW gets you a full refund less amounts owed. If you neither withdraw nor sign a SLLIA by the deadline, you forfeit all the intermediate agreement security. Over-requesting capacity is now expensive.

Financing. The security requirements also limit the ability to use a guaranty. A parent guaranty requires a BBB-/Baa3 or better credit rating, and letters of credit must come from banks rated A-/A3 or better. Lenders will want to know the CIAC true-up exposure and the minimum billing demand commitments. Agreements signed on or before June 1, 2025, keep their existing direct cost terms.

Coordination with transmission service providers (TSPs) and ERCOT. Your TSP or distribution service provider must contact ERCOT within 60 days after the intermediate agreement is signed and funded. It must also pass along ERCOT communications to you within five working days. Build these deadlines into your development schedule.

Looking Ahead

Many open items will be settled in ERCOT protocols, including possible additional study fees and direct submission of requests to ERCOT.

The $100,000 study fee will be adjusted for inflation every five years starting in 2032. The key points to watch are ERCOT’s protocol revisions, how the §25.193 minimum billing demand is applied, the Commission’s forthcoming pro forma SLLIA, and the results of each batch study.

For large load developers, settle your load profile before signing an intermediate agreement, line up site control and creditworthy security early, and treat every disclosure as one to which an officer must attest and ERCOT may audit.

Steptoe & Johnson’s Energy Team can help you structure your interconnection request, prepare and negotiate intermediate agreements and SLLIAs with your utility, build compliant disclosures, and track the ERCOT protocol changes that will shape the next batch study.