Legal Alert | October 4, 2026 | Paul B. Turner

Senate Permitting Bill Would Broaden FERC Transmission Siting—and Add New Data-Center Cost Protections

Outside ERCOT, the proposal would simplify the federal siting path; separate provisions could materially affect the economics of large data-center loads in Texas and elsewhere. Sponsored by Sens. Mike Lee (R-Utah), Shelley Moore Capito (R-W.Va.), Martin Heinrich (D-N.M.), and Sheldon Whitehouse (D-R.I.).

Key Dates This Week

PUCT §25.194 final rule becomes effective October 8, 2026.
ERCOT Data Center Impact RFI responses due October 12, 2026.

A bipartisan group of Senate committee leaders—Sens. Lee, Capito, Heinrich, and Whitehouse—introduced the Bipartisan American Affordability and Jobs Act of 2026 on September 30. The bill is not enacted law. Its electric-transmission title nevertheless combines two changes worth separating. First, it would broaden the circumstances in which FERC can permit major interstate transmission projects outside ERCOT. Second, it would create new cost-responsibility and financial-protection rules aimed specifically at large data-center and high-density computing loads.

For Texas readers: the ERCOT line that matters most

The critical distinction is between the bill's transmission-siting provisions and its separate data-center provisions.

What does NOT apply in ERCOT — FERC Section 216 transmission siting. The bill says Section 216 "shall not apply" within ERCOT and excludes ERCOT utilities from the expanded Section 216 jurisdiction. A developer therefore would not gain a FERC Section 216 permit path around Texas siting and interconnection processes for a transmission project inside ERCOT.

What DOES apply to data centers in ERCOT — the covered-load / data-center provisions are NOT ERCOT-exempt. The bill's State-facing ratepayer-protection rules for computational loads — electricity-intensive computing facilities, from AI training to crypto mining — are not carved out of ERCOT. A "covered load" generally means one or more data centers or high-density computing facilities at a single site, or multiple sites under common ownership or control, that reach or are reasonably expected at full buildout to reach 20 MW. That threshold is materially lower than Texas's 75 MW large-load interconnection threshold under §25.194. If enacted, these State-facing provisions could become a federal statutory floor or framework implemented through existing Texas authority; PUCT would remain the central regulator for retail and large-load matters assigned to it by Texas law.

The provisions largely preserve — and in several respects reinforce — State authority over retail service, rate design, resource planning, cost recovery, and the terms on which very large computing loads receive service. A separate savings clause states that the transmission title does not grant FERC authority over retail sales or local distribution.

What "backstop" FERC siting means—and what the bill would change

"Backstop" authority simply means that the State remains the first-line transmission siting authority, but a limited federal permitting path can become available if specified State-related conditions are met. It is not federal preemption of ordinary State siting from the outset.

Today there are effectively two gates. A project generally must be located in a DOE-designated National Interest Electric Transmission Corridor (NIETC), and one of the Section 216 State-related triggers must also exist. Those triggers include a State lacking relevant siting authority, an applicant being unable to qualify for State approval, a State denying the project, failing to act within the statutory period, or imposing conditions that make the project ineffective or uneconomic.
The bill would remove the NIETC gate, but keep the State trigger. That is the core change. A qualifying project would no longer have to wait for DOE corridor designation before Section 216 could apply. FERC still could not simply take over every transmission siting case; the State-related jurisdictional trigger would remain.
For 345-kV-and-above projects, federal work could begin earlier. The applicant could file at FERC at the same time as, or after, the State filing, and FERC could begin processing the case. FERC could not issue the permit until a Section 216 State trigger existed. In practical terms, the bill changes sequencing: the federal process could run in parallel instead of waiting for a full State-only year before federal pre-filing begins.
Once the statutory findings are satisfied, the bill becomes more directive. For qualifying national-interest projects, the operative verb would change from "may" to "shall," and FERC would be directed to issue a permit after the required notice, hearing opportunity, public comment, and findings. The proposal generally uses a 230-kV minimum threshold, with a special rule for advanced conductors.
FERC would also coordinate federal approvals. For projects proceeding under the revised Section 216 framework, FERC would serve as lead agency for covered federal authorizations, which could reduce duplicative federal permitting and centralize judicial review of those federal authorization decisions.

Data-center consequences if the bill is enacted

More of the grid cost would follow the load. The bill sets a cost-responsibility floor for computational loads: no portion of the incremental cost of serving a covered load may be allocated to other customers. Computational loads are also expected to bear the embedded transmission costs of the service they require. "Incremental cost" is defined broadly enough to include generation or storage and transmission and distribution costs that would have been avoided if the covered load were not served. That is a floor against cost-shifting—not a freestanding mandate to redesign every rate.
Financial assurance becomes a core project requirement. Before an electric utility constructs or upgrades generation, transmission, or distribution facilities necessary to serve a covered load, the utility would have to require financial assurance or contributions sufficient to cover the facility or upgrade, with credit for assurance already provided for the same work. For developers, that makes letters of credit, guarantees, parent support, deposits, and other security a central part of project finance—not a late-stage interconnection detail.
Walking away may not end the payment obligation. Rates, charges, or service agreements would have to be designed so that recovery of the full incremental cost continues even if the data center terminates its power arrangement or stops buying electricity before those costs have been recovered. That directly affects termination rights, phased-development risk, stranded-capacity risk, and the economics of a project that does not reach expected load.
States could use competitive allocation and differentiated service. A State could conduct an open season or competitive solicitation for scarce interconnection or service capability rather than simply awarding it in queue order. It could also condition service on the data center procuring, building, or contracting for new generation sufficient to serve its demand, or on the customer accepting a non-firm or otherwise limited service category.
Data centers could be treated less favorably than other industrial loads. The bill recognizes State authority to create a separate class for covered computing loads and to impose rates, terms, conditions, and service priorities that differ from—and may be less favorable than—those applicable to other large industrial or commercial customers. Existing State- or FERC-approved arrangements would remain in effect, while the core covered-load provisions would apply prospectively to covered loads interconnecting after enactment.

ERCOT: the siting carveout is real, but it is not the end of the analysis

Section 216 would still stop at the ERCOT boundary. The siting carveout is explicit; no new FERC Section 216 permit path would arise for in-ERCOT transmission.
The bill also does not federalize Texas retail regulation. Its savings provisions preserve existing FERC and State jurisdiction and expressly recognize State authority over retail electric service, rate design, and resource planning. PUCT therefore remains the central regulator for those Texas matters.
But the carveout is specific to siting. The separate covered-load provisions are not ERCOT-exempt and, if enacted, could operate through existing Texas authority. The precise reach of the FERC transmission-pricing subsection in ERCOT would require implementation analysis given ERCOT's distinctive Federal Power Act status.

Do not confuse "backstop" siting with backup generation

There are two different concepts. FERC "backstop" siting is the limited federal permitting path described above. "Backup generation" is on-site generation that can serve a data center when grid power is unavailable or constrained. Texas §25.194 separately requires disclosure of planned backup generation. The Senate bill does not require every data center to build a backup plant, but it would allow a State to condition service on new generation sufficient to serve the load.

How this interacts with PUCT and ERCOT's current data-center actions

The Senate proposal would not pause or replace the Texas work already underway. Those proceedings arise under Texas law and ERCOT market rules. If enacted, the federal bill would instead add a statutory layer pointing in much the same direction on cost causation, project maturity, financial commitment, and protection of other ratepayers.

PUCT §25.194 remains the immediate Texas interconnection rule. The final rule becomes effective October 8, 2026. It generally applies to new or expanded ERCOT large-load interconnections at or above 75 MW and to certain co-located generation configurations. It requires a $100,000 study fee, substantial financial security, site-control and disclosure showings, and direct treatment of withdrawal and stranded-cost risk. At the SLLIA stage, financial security is generally the greater of $50,000 per MW of contracted peak demand or the system-upgrade costs allocated to the customer. Nothing in the Senate bill relieves a Texas data-center developer from those requirements.
ERCOT Batch Zero remains the operating queue process for the largest loads. PUCT approved ERCOT's Batch Zero process to study qualifying 75-MW-and-above projects together, allocate available grid capability, and identify needed transmission upgrades. The Senate bill would not substitute a federal queue or FERC siting process for Batch Zero inside ERCOT.
The data-center RFIs continue on their own schedule. ERCOT's State and Community Impact RFI applies to data-center projects of 25 MW or more and seeks information on grid dependency, on-site generation, water, cooling, community impacts, ownership, and related matters. Responses are due October 12, 2026. The Senate bill does not change that deadline or the separate Batch Zero verification work.
The federal bill could become especially relevant to Texas cost recovery and service design. PUCT is already considering large-load tariff, minimum-billing, demand-management, and transmission-cost-recovery issues under Texas SB 6. The Senate proposal reinforces the same concern — preventing large computing loads from leaving other customers with infrastructure costs — and recognizes tools including financial assurance, continuing cost recovery, special rate classes, competitive allocation, customer-supported generation, and limited or non-firm service. Those provisions could influence the next phase of PUCT implementation even though FERC Section 216 siting remains outside ERCOT.

TCL takeaway

Outside ERCOT, the proposal is significant because it removes NIETC designation as the first federal gate and permits earlier parallel processing while preserving the State trigger that makes FERC a true backstop. For Texas data centers, the more important provisions concern cost causation, security before infrastructure is built, and allocation of scarce service — at a 20 MW federal threshold well below Texas's 75 MW §25.194 line. The direction is broadly consistent with PUCT/ERCOT work already underway and would not displace Texas interconnection, verification, RFI, curtailment, or cost-recovery processes. The critical ERCOT distinction remains: federal Section 216 siting authority is carved out; the separate covered-load provisions are not.

What happens next

The Bipartisan American Affordability and Jobs Act remains proposed legislation. Until enactment and implementing action, current Section 216, FERC rules, Texas §25.194, ERCOT Batch Zero, and existing Texas proceedings remain controlling.

Compliance note — EIA Form 861 data-center collection (Section 2114)

Section 2114 separately directs EIA to revise Form 861 to capture data-center load, including AI, cloud, and crypto facilities. It contains no ERCOT carveout, so Texas utilities filing Form 861 would report covered ERCOT-area load. This is a distinct compliance item for clients with Form 861 reporting obligations.

Bill text | Senate introduction announcement | FERC current permit process | Texas Register — final §25.194 | ERCOT Batch Zero | ERCOT Data Center Impact RFI | PUCT proposed large-load tariff rules
This alert is for general informational purposes only and does not constitute legal advice. It reflects materials available as of October 4, 2026 and may change as proceedings develop.

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This analysis reflects its original publication date. It is educational material, not advice for a particular transaction.