PUCT affirms curtailment authority over co-located data centers in first net metering case under Senate Bill 6

On July 24, 2026, the Public Utility Commission of Texas (PUCT) issued an order in Docket No. 59220 to approve a net metering application between a data center large load and a standalone generation resource. As the first test case under Texas Senate Bill 6 (SB 6), the order establishes that emergency load curtailment imposed on co-located data centers is not capped by the capacity of the paired behind-the-meter (BTM) generator.

Regulatory overview

In 2025, the Texas state legislature enacted SB 6 to establish a regulatory framework for integrating large loads into the Electric Reliability Council of Texas (ERCOT) power grid.¹ The statute formalizes reliability study procedures and PUCT approval requirements for net metering arrangements involving new large loads² co-locating behind the meter with standalone generation resources that were registered in ERCOT's Network Operations Model as of September 1, 2025.³ SB 6 requires a generator to submit formal notice to ERCOT prior to implementing a net metering arrangement, which subsequently conducts a system impact study within 120 days. The study will assess all necessary data such as transmission security, resource adequacy, load curtailment capabilities, and the potential for stranded (or underutilized) transmission assets. Following the submission of ERCOT's report and operational recommendations, the PUCT has 60 days to approve, deny, or impose reasonable conditions on the arrangement as necessary to maintain grid reliability.⁴

Through its implementing rulemaking in Project No. 58479, the PUCT established standardized conditions for approved net metering arrangements:

• Emergency curtailment: Co-located large loads must maintain the technical capability to fully curtail power consumption within 30 minutes of an ERCOT emergency instruction without financial compensation.
• Market-based demand response: Co-located arrangements are expressly barred from participating in paid ERCOT demand response, ancillary services, Emergency Response Service, or retail transmission and distribution service provider (TDSP) load management programs.
• Paired generation capacity: Co-located facilities must rely exclusively on its own output during grid emergencies, precluding “bring your own capacity” arrangements that leverage off-site virtual power plants or external generation offsets.
• Financial liability: Net metering parties face direct financial liability if the co-location arrangement causes a shared transmission asset to transmit at least 25 percent less power than expected in order to ensure that retail ratepayers are held harmless for stranded transmission investments.

Procedural background

On January 9, 2026, FGE Goodnight I, LLC (Goodnight Wind) and Crusoe Energy Systems LLC (Crusoe) submitted a joint application seeking PUCT approval to net meter Goodnight Wind (GOODNIT1), an existing 265.5 MW onshore wind generation facility, with Crusoe Load Two, a proposed 260 MW artificial intelligence data center located in Armstrong County, Texas, to be developed in partnership with Google.⁵ Under the proposal, Crusoe Load Two would co-locate behind GOODNIT1's single point of interconnection, sharing an ERCOT Polled Settlement meter to net power consumption against wind production for wholesale financial settlement.⁶ While the broader site encompasses 933 MW of off-grid fossil gas turbines under construction, a phase of the project would only co-locate with GOODNIT1.

In March 2026, Crusoe transferred the co-located load assets to Ensign Infrastructure LLC (Ensign), which replaced Crusoe as the large load customer before the PUCT. This special purpose vehicle structure aimed to isolate the regulatory and financial liabilities of this proceeding from its corporate balance sheet, while enabling Google to secure (carbon-free) generation without entering into contracts for the gas-fired expansion.

ERCOT conducted its 120-day system impact study and recommended that the PUCT approve the net metering arrangement, subject to requiring Crusoe Load Two to fully curtail within 30 minutes during a grid emergency. A prior PUCT order already mandated a 265.5 MW 30-minute curtailment obligation for the adjacent 265 MW Crusoe Load One facility.⁷ Building on that baseline, ERCOT's recommendation in Docket No. 59220 established a cumulative 525.5 MW curtailment obligation across the two data centers behind the single wind generating facility.

Subsequently, Ensign, Crusoe, and Goodnight Wind challenged ERCOT's two-to-one curtailment recommendation as improper double-counting, contending that ERCOT formed its recommendation without evaluating whether Crusoe Load One had been curtailed or without accounting for real-time BTM operational conditions. Ensign, Crusoe, and Goodnight Wind argued that PURA § 39.169 provides authority intended solely to mitigate the specific net capability reduction caused by removing a generator from net grid service, rather than a tool to control all load co-located at a site. In response, ERCOT argued that power generation companies and large load customers could pair large compute loads with nominal generators to leave the bulk of the firm load uncurtailable, creating a reliability risk in a grid managing over 233 GW of pending large load applications.

PUCT order

In its July 24, 2026 order, the PUCT rejected the proportional mitigation proposed by Ensign, Crusoe, and Goodnight Wind, and agreed with ERCOT and PUCT Staff.⁸ The PUCT held that the primary objective curtailment conditions pursuant to PURA § 39.169 is to ensure that the existing generation facility's capacity is made fully available to the ERCOT grid during actual (or anticipated) transmission emergencies. In the order, the PUCT stated that both Crusoe Load One and Crusoe Load Two net behind the same point of interconnection. If Crusoe Load One curtailed during an emergency but Crusoe Load Two did not, Crusoe Load Two would absorb GOODNIT1's generation behind the meter. Consequently, GOODNIT1's capacity would not be injected onto the grid, defeating the purpose of the emergency condition.

The PUCT also dismissed Crusoe's technical arguments regarding hardware vulnerabilities. Crusoe asserted that 30-minute shutdowns inflict operational damage, inducing hardware failures across server clusters which may lead to computational data loss. In the order, the PUCT maintained that ERCOT's operational grid requirements supersede individual data center hardware concerns, treating operational risks as commercial trade-offs assumed voluntarily in exchange for accelerated interconnection access.

PUCT generally applied the standardized framework established in Project No. 58479, such that the order imposes the following conditions on the approved net metering arrangement:

• Emergency curtailment: Consistent with the 30-minute uncompensated curtailment rule, Crusoe Load Two must fully disconnect from the ERCOT system upon an ERCOT instruction during a transmission emergency, and Goodnight Wind must make all available generating capacity accessible for ERCOT economic dispatch. The PUCT adopted a minor revision requested by Ensign, Crusoe, and Goodnight Wind requiring ERCOT to provide at least 60 minutes of advance notice “when practicable.”
• Demand response: Maintaining the baseline rule against market-based demand response, Crusoe Load Two is strictly prohibited from participating in any ERCOT or TDSP demand response product, ancillary service, Emergency Response Service, or load management program. Ensign contended that barring data centers from commercial demand response programs privileges supply-side resources and deprives ERCOT of controllable loads during periods of grid stress, which the PUCT ultimately rejected.
• Load shed exemption: The conditions are attached to the physical assets in addition to binding current owners and future successors-in-interest, while net metering loads subject to these curtailment conditions are removed from the calculation of Golden Spread Electric Cooperative, Inc.'s and Greenbelt Electric Cooperative, Inc.'s load shed obligations.
• Periodic review: The net metering conditions will be subject to a mandatory review provision, such that between 36 and 60 months from the date of the order, Goodnight Wind and Ensign must jointly apply for a PUCT determination of whether the operating conditions should be extended, modified, or rescinded.

The order also noted that ERCOT identified no stranded or underutilized transmission assets resulting from the arrangement, confirming that no hold-harmless proceeding under PURA § 39.169(d)(3) was required.

Market implications

The order issued in Docket No. 59220 signals that the PUCT and ERCOT are evaluating behind-the-meter load curtailment exposure based on regional grid reliability rather than strictly offsetting the nameplate capacity of the paired generator. Additionally, the mandate for a formal regulatory review within three to five years introduces a medium-term renewal consideration alongside immediate operational constraints. Some developers may explore alternative interconnection pathways under ERCOT's Batch Zero transmission study process launched in June 2026, such as the Withdrawal-Limited Private Use Network model, which offers a firm cap on net grid draw at the point of interconnection. Perhaps indirectly, the operational considerations of mandatory 30-minute shutdowns could incentivize long-duration energy storage and fully islanded microgrids. In the near future, upcoming proceedings with respect to BTM nuclear co-location should clarify whether the PUCT plans to apply these standardized curtailment conditions uniformly across different generation technologies.

^{1 89th Texas Legislature, S.B. 6 by King et al. (Effective as of Jun. 20, 2025).
2 A “large load” is defined as 75 megawatts (MW) or greater.
3 Public Utility Regulatory Act § 39.169.
4 Please refer to the ERCOT section of our prior article for additional context on SB6: Grid operators propose innovative measures to manage electricity demand from data centers | White & Case LLP.
5 Joint Application for Net Metering Approval in PUCT Docket No. 59220 (Filed on Jan. 9, 2026).
6 ERCOT Nodal Protocols § 10.3.2.3(2)(a).
7 Order in PUCT Docket No. 58881 (Issued on Apr. 23, 2026).
8 Order in PUCT Docket No. 59220 (Issued on Jul. 24, 2026).
9 Letter from Governor Greg Abbott to the PUCT and ERCOT (Aug. 3, 2026). Available at: https://gov.texas.gov/uploads/files/press/Thomas_Gleeson_Pablo_Vegas_Data_Centers_Directive_Letter_to_PUCT_ERCOT_August_2026_.pdf.}

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