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- [00:00]
A
Texas is open for business. We are not going to be closing the state of Texas to data centers if I have anything to do with it.
- [00:07]
B
On a scale of 1 to 10, it's like a 10 issue right now.
- [00:09]
A
It's like a 12. The data center boom, in my opinion, is kind of like the expansion of the railroad. A day without a data center, your alarm probably doesn't go off on your phone. A day without a data center, you can't get your coffee order placed. A day without a data center, you got to pay cash at lunch. A day without a data center, you can't book your next flight.
- [00:23]
B
On American Airlines, everybody's like, it's a big shit show. Who's causing the shit show?
- [00:28]
A
They paid $958 million in taxes last year. 900 in 58. And they didn't send a single kid to school.
- [00:34]
B
Why is the story so, like, off?
- [00:36]
A
Data centers are a national security issue. We are putting our kids and our grandkids lives at risk by not being part of the solution for this. We are in a world where this matters right now. It's the revolution of the time.
- [00:53]
B
When I saw you the other day, I said, we need to do a podcast. You said, we do. I said, what would we talk about? Tongue in cheek, you said, we need to talk about the data center world and power generation going on in Texas. So I've done a lot of research. I know. We've done a lot of talking. So an amazing outcome today is your view of, like, what the landscape looks like, what it's going to look like, where the bottlenecks are, what the private sector needs to know, what you're seeing from the public sector, all the above. To start the conversation, though, talk about your time in our Texas government and kind of the credentials you have and what you're seeing and the committees that you sit on that kind of make you someone that can really talk in depth about this.
- [01:34]
A
So appreciate it. I'm certainly excited to be here with you. The data center topic is at the top of everybody's list. It's a topic that we get hit on from a government perspective, from a private investment perspective. I mean, we are in a world where this matters right now. It's the revolution of the time. So specifically with my time in the Texas legislature. I'm a member of the Texas legislature, represent about 210,000 people in Southwest Tarrant County. I've finished one session. I'm up for reelection again. But in my first session, and as we work through this interim session, you Know, I had the fortunate assignment of serving on the State Affairs Committee.
- [02:12]
B
Okay.
- [02:13]
A
State affairs, you know, among other things, handles the power grid and electric policy within the state. We handle a lot of social issues. Data centers are in the middle of everything right now.
- [02:25]
B
On a scale of 1 to 10, it's like a 10 issue right now. Like, it's.
- [02:28]
A
It's like a 12.
- [02:29]
B
Yeah, it's a 12.
- [02:29]
A
I mean, we've got counties. I mean, I think Hill county last week or two weeks ago, put a moratorium on data center development. And I think it's.
- [02:37]
B
That's South Dallas.
- [02:38]
A
That's. That's like Hillsboro just south, where i35 comes back together just south of us. They. I don't think that the county court has the legal purview to be able to do that, and they'll probably end up in court. But there are messages out there that people think that these data centers are going to go create grid unreliability and take their water and turn it to a spot where people can't turn their water on because the data centers are stealing that. And that's not entirely true. The data center industry, in my opinion, is not doing a good job telling their story. There are bad actors in space. Don't get me wrong. We've got to build data centers responsibly, and I think that's where the legislature is going to come into play, because we've got to probably put a framework together where industry can have a reliable framework of what they should expect as well as the communities and protecting ratepayers and residential ratepayers and the concerns that everybody has. We've got to make sure that we protect those folks and get a framework for responsibly building these things.
- [03:36]
B
If you were a data center developer, and we talked about it on our call, you just said it, you said they're doing not a great job of telling their story and you could coach them right now on this is how I would start to tell your story. What are the things that they're not saying? What are the things they're just not being clear on, and what are the things they just need to say better?
- [03:58]
A
So I think that the data center community, the good builders of data centers, are an asset to local and county governments. They're an asset to the communities. They come into. They come in and create significant jobs. They create significant revenue. They are revenue payers via property taxes to schools, counties, city governments, you know, water districts, hospitals.
- [04:24]
B
And. Can you give like a little. A little detail right there? On like the actual tax, it's large amounts.
- [04:29]
A
So the. There is a. The second largest taxpayer in Tarrant county is Meta via one of an LLC that they own for their data center. They paid $958 million in taxes last year. 958. And they didn't send a single kid to school. So it is a good balance of your tax base as well, because you could go develop a new neighborhood that could create that tax base. But if you go develop that neighborhood, you're going to go put 5,000 homes in it and you're going to have two kids per home. You're going to send a bunch of kids to school, you've got to build new schools. You're going to have everybody flushing their toilets every day. The story that a lot of the data center guys are not telling and they're, like I said, they're bad actors out there. They need to be built responsibly and we'll put the guardrails on that. But the data center in Abilene as an example, when Stargate gets finished, we were with them last or earlier this week. The mayor of Abilene couldn't be more excited for them to come to town. The water story there with a closed loop system, which is what they're building and what these new developers are building, the city of Abilene, residentially and commercially excluding the Data center uses 25 million gallons of water a day. That data center, once energized up and running, is going to use 12 million gallons of water a year. So there is fear out there that they're going to take our water and that they're using so much water. These closed loop systems, as technology's evolved, the water usage done responsibly and done correctly is they're using less water than a McDonald's restaurant.
- [05:57]
B
So a city uses like 10 billion gallons a year and Stargate will use 12 million a year. A year, like 0.001%.
- [06:07]
A
It's crazy, you know, Then why is
- [06:10]
B
the story so like off.
- [06:12]
A
There are bad actors out there. I even in sophisticated local governments like ours in Fort Worth, our city council and mayor, they are on top of their game and they've got a bunch of resources and they're still asking questions, needing help and needing support. I think there are some bad actors out there that went out there and the local governments didn't ask any questions. And you had folks cutting every corner they possibly could as opposed to building them responsibly. That's where we're going to Step in and make sure we do it responsibly. But those bad actors are. I haven't toured a bad acting facility yet. It's on my radar. You know, we went to Stargate. Those guys are the Cadillac of the class. They're first class. So it's Crusoe and Lancium and it's a Oracle run center with the data space leased to OpenAI. So ChatGPT will be running out in avalanche.
- [07:02]
B
We're going to talk about your day at Stargate. I just want to leave any room. Is there anything else on the storytelling that if you were coaching a data center developer, they should be saying there's
- [07:11]
A
an element where everybody expects and wants their data to work. This is not just ChatGPT and Claude running on these things. The necessity for everyday life and being ready for everyday life is run through a data center.
- [07:27]
B
Here's something I think about a lot. Everything in our lives compound. The businesses, the investments, the relationships we all put work into. But time doesn't. You spend it once and it's gone forever. That's a big part of why people fly with Airshare. What I like about Airshare is they meet you where you are, want to own a share of a plane, they have fractional ownership, fly a handful of days a year. There's a jet card for that. Already own a plane, they'll manage everything for you. Need a one off trip, they offer charter worldwide. They've been doing this for over 25 years, operate their own fleet and hold the top safety ratings in the industry. However, you fly with them, you drive up to the fbo, walk on and just go. If time is the asset you're actually trying to protect, go check out airshare@flyarshare.com that's flyarshare.com I mean a day without
- [08:18]
A
a data center, your alarm probably doesn't go off on your phone. A day without a data center, you can't get your coffee order placed. A day without a data center, you got to pay cash at lunch. A day without a data center, you can't book your next flight on American Airlines. So there's an element where these data centers, as technology's evolved and our dependence and usage of smartphones has continued to grow, these data centers drive that. It's comical to me when people come to me and complain and say, I saw this story on Facebook when I was trying to send pictures from my grandkids eight years ago. But this data center story popped up and it's bad and I'M sitting here going, you understand that that Facebook app where you can pull up photographs from eight years ago, that has to have some infrastructure to support it. The fact that you saw that video on Facebook. So it's not just the chatgpt of the world and the open eyes and Claude and Grok and all these, it is a function of. You expect your Chase bank app to work, you expect your American Airlines app to work, you expect to be able, you know, all of these typical functions that are worked as something we take for granted, have got a real infrastructure behind the scenes and that's where this, a lot of this data center demand is coming from as well.
- [09:30]
B
Okay, what was Stargate like? Like what was the day like?
- [09:35]
A
It was, it was, it was a incredible eye opening. Um, so it's a, as we alluded to earlier, it, it's a partnership. So Lancium is the group that goes and puts the land together and gets the power to the site. So they've worked on land assemblage and finding a place where it's easy to bring power. Out there they've got a brand new gigawatt substation and prior to the new one that's coming online, There was a 250 megawatt substation out there adjacent their property. They've built five, there's 10, there's five and five, two different stacks of five. They built 10 gas powered turbines on site for backup generation. The complex is eight buildings but each of those buildings is technically five buildings. There's four, you know, a complex of four and then one in the middle. Each four or five plex building is about half a million square feet. It's been built in two years. They're up and running. We went into one of the data centers like one of the buildings that was about to come online. So they were kind of doing a lot of testing or we're sitting in the back of this loading dock and you can't hear a thing. It is quite, you know, what they have done, what they have built out there is unbelievable. So I went into the partnership. Lancium does the land in the and the power. Then Crusoe is the group that's actually building the structures. And then inside the structures, Oracle runs all of the servers and everything, the wiring and then it's leased to OpenAI. So it was an unbelievable eye opening experience. You know, the day started we came into town, you know, it's, we're downtown at the Doubletree. The mayor of the town welcomes us to town, talks a lot about how they are welcoming this boom with open arms. It is real jobs. There's 6,500 people there yesterday working at a construction site. I think they peaked it, 9,500 employees. Like they're, they're, they're getting close to that thing being completely built out. So the construction jobs have tailored off. But there are permanent long term jobs. They estimate about 1700 permanent long term jobs. Just between running the servers, running the data, you know, running it, maintaining it. You know, there, there was a story. One of the guys driving us around was upset. You know, a local landscape guy got mad at him. He's like, oh, you're one of the data guys. And he's like, you realize how many football fields of grass I'm about to lay out here? It's going to need to be mowed. I mean, one of the construction managers that drove us around had moved from Oregon seven months ago for the construction job. He's already bought a house out there. He closes the summer. He's looking for a place for his wife, actually in Fort Worth because she wants to be in a little bit bigger city. They're making a real economic impact here. The one thing he joked about was everybody's joined the country club. He's like, everybody came from all over the place. And the Abilene Country Club had memberships available. Nowhere else in the country can you get a membership. And since he's been there in the last six months, because of the influx of people wanting to join, the price has already doubled in six months. So, I mean, there's a local economic impact while this construction's going on. You know, the mayor did talk about price of progress. Construction's never any fun. You've built a lot of things. You understand when you're doing construction, the price of progress is not easy. But they truly believe. I believe I saw it with my own eyes. They are investing for generations to come in Abilene. Abilene. I mean, Stargate's one of. I think it's two or three centers. Nobody's as big or as sophisticated as Stargate. But there's another data center operator building out there. West Texas is having a boom with it. They've had a great relationship with their transmission service provider out there. So it was a unbelievable experience of seeing what a good actor looks like.
- [13:19]
B
That facility is mostly behind the fence, behind the meter, isn't it? Mm, mm. It's not.
- [13:24]
A
It is not behind the meter. It is grid power out there. They have got generation on site that is significant to back it up. But it is, it is grid power out there. Okay, the crazy thing. So Oracle is doing some of their testing on the first buildings right now, like to get the power going. They had probably 35 semi trucks of these power generators just on site that were generating power before all the power came on. That 1 gigawatt substation is almost completely online. So they've kind of had a general, a transition, I guess you'd say, from generating their own power to get things going. They have backup generation out there. It's, you know, those 10 gas powered turbines I think can produce. I think it's probably 350 or 3,500. I believe it's 3,500 megawatts of power and that's a backup generation to make sure the system works if there's an interruption in power from the grid. But no, it's, it is grid power out there.
- [14:19]
B
So was there anything like when you left that you're like, I'm blown away after seeing it that I just wasn't expecting getting there.
- [14:26]
A
The quality of people that are working on that project and the quality of investment that's in that community. The embracement, how the community has embraced it. I mean that is rural Texas and it is a boom. Texas has seen booms before and this is a boom, in my opinion, that Texas can't be closed for business. The city and local government of Abilene has embraced it. You know, I think that they're going to be 20 to 30% of their local budget. I think it's like 32% of the city budget and 25% of the county budget. When this thing's up and running with the taxes that Stargate alone is going
- [14:59]
B
to pay, that one facility will generate 30% of the taxes across the whole city.
- [15:04]
A
Yeah, right. For the city. I mean, put that into perspective.
- [15:08]
B
Like what's the next thing it's like producing 2%. Like.
- [15:11]
A
Well, I mean, I think is there
- [15:12]
B
even a close to 30% of the.
- [15:14]
A
So the development of the land to the city was generating $0 or it got there. Yeah, it is going to produce 18 million, $19 million a year in tax revenue for the city. I mean, it's just we're going to have problems that legislatively we're going to need to address. I mean some of these rural communities are going to have excess funds. You know, I think that we need to consider and probably talk, have an honest dialogue about allowing these municipalities to create a rainy day fund. You know, some of this stuff you get into this whole school Policy and school education finance of Robin Hood, where certain districts are paying into others because the, it's not even based on the tax base or the value of your property, you know, your tax roll. These communities, we're going to, we need to have a good dialogue about that and see what makes sense. In order to protect these communities long term. They're going to have excess money. They should be able to keep that money in their communities and invest in infrastructure. I mean, more people move into town, you're going to need more infrastructure, you're going to need more homes built and, you know, done responsibly. These data centers want to be part of that conversation and want to, want to be a key player in making these communities better for decades to come.
- [16:23]
B
So there could be a surplus of capital to give to school systems just really off these data centers.
- [16:28]
A
Absolutely.
- [16:29]
B
I mean, this is the money we've been waiting for.
- [16:31]
A
This is the, this is the property tax relief money we've been waiting for. This is the money that a lot of these communities have been waiting for. This is the money these school districts have been waiting for. I always joked about how, and I don't think it actually happened, but I always joked about how communities that were on, on the cutting edge of things were going to go and see an influx of capital and you know, 10 years down the road, their kids were going to be better educated and you're going to have better educated kids coming out of these communities. The amount of investment that these data centers and these folks are willing to invest, I truly believe you'll see that where some communities are being left behind because they don't have the resources.
- [17:04]
B
Okay, topic number two, the vicious rest. Number two.
- [17:07]
A
Number two. We're only on number two, huh?
- [17:10]
B
Number two, the vicious restudy cycle.
- [17:12]
A
So to understand the restudy cycle, you've got to understand what the process is to get a approval for a large load onto the, onto the grid.
- [17:24]
B
And a large load is 75 megawatts.
- [17:26]
A
It is defined by 75 watts or above. Yeah, 75 megawatts or above. So the large load to get connected to the grid, you've got to go submit to. You submit to your transmission service provider. That's your encores, your AEPs, your lower Colorado River Authority, Texas, New Mexico power. This is your poles and wire group. This is not the guy you're paying your residential bill to. This is not vistra. These are the transmission service providers, the TSPs. So you submit to your TSP that you put an application in. I want to bring on the powers in McQueeny Data Center.
- [18:03]
B
Let's go.
- [18:04]
A
Let's do it. Come on. I'm in. So you put an application in to your tsp, your TSP submits it to ERCOT for a study. So you have a study, that happens. ERCOT's in the business of, they're in the business of risk management. They've got to manage the risk. You know, there's 88 or 80760 hours in a year. ERCOT is in the business of making sure that the power grid works for Those close to 8,800 hours a year. In reality, the biggest problem ERCOT has is probably 10 to 25 hours a year, where your peak demand, where you've got an extremely hot day and some of your renewables may or may not be working online or, you know, or you've got an extremely cold day in the winter, where, where power demand is so high. So ERCOT has to be in the business of risk management for that. So you submit to ercot, they complete a study. If they approve your study, they're going to look at, hey, this large load coming on our grid is, we can handle that. It's not a problem, you know, it's not going to create grid unreliability. You go and get that approved by ERCOT, then you have a Section 9.5 agreement where you've got to go through a bunch of steps after an approved study, where you got to go show that you've got the financial wherewithal to handle it, that your investment is going to be there, that you've got the land secured, et cetera. After that, in a historic perspective, you would get a A2E, which is an approved to energize study. Like, that's your last checkbox and then you're good to go and come on the grid. The problem is that in a historic world, that happened, they did the study, you had a generator willing to provide the power, everybody's good, you do your 9.5 agreement, you get your approved energized and you're good to go. The problem is, while that 9.5 agreement, you're talking a three to five year process in historic terms. So the problem is that in today's world, there have been so many applications for large load that when you're done with your 9.5 agreements on that approved to energize study, they go, wait a second, we've got another 8,000, you know, megawatts in the same geographic region that could have an impact. And so we've Got to go do a restudy. And so this cycle, because of the interest in the state of Texas and the interest in our business and regulatory environment and the interest in how the ERCOT market is set up has had a abundance of applications. The ERCOT folks in their risk management strategies have had to continue to go back and restudy. So enter the batch process. You know, ERCOT said, we can't sit here and continue to do this vicious cycle. It's not the regulatory environment we want, it's not what the state of Texas wants and it's not providing what we need. And it kept people, you know, it kept people leaving the state of Texas looking to build these data centers elsewhere. And so the vicious recycle or the vicious restudy cycle is being fixed through the batch study process, which should be rolling out very quickly.
- [20:59]
B
Real quick, then what's the batch study process? How did that come into being? That SB6.
- [21:04]
A
So SB6 did not spell out the batch study. We did not get into the weeds of how we were going to standardize the, how ERCOT did the study process. The, you know, the legislature didn't. It was not in our, we didn't think it was a problem at the
- [21:20]
B
time, but that water down, we got it. We got to talk about some now. I'm kidding.
- [21:24]
A
So the batch study process came about because ERCOT looked at things and said, how am I going to go and look at this holistically at one point so that we can provide approvals so that people can move forward so that investment can be made and with the knowledge and certainty of actual delivery. You can't, you know, it's not business friendly. Texas is open for business. It's not business friendly. For us to go and tell you, you're approved to do this. Wait a second, we're going to pull it back. You're approved to do this and pull.
- [21:54]
B
There's no first come, first serve.
- [21:56]
A
Batch 0 will have an element of first come, first serve as well as some the people that have been approved already that have been caught in this cycle of restudy. Restudy. They will be part of Batch 0. Batch 0 is going to have some geographic implications and make sure that it's geographically spread out throughout the state. It used to be a, historically it was a first come, first serve. But the first come first serve model doesn't work. If there's a bunch of people speculating. If there's a bunch of people that are submitting to multiple TSPs for one project. If I've got a deal with Google, and they want to come to Texas and they want a 1,000 megawatt facility. And I go shop that to one of the 20 or to, you know, 20 of the 25 TSPs throughout the state. That load. I've got one deal with Google. I don't have 25. And so the batch process in Senate Bill 6 was really one of the main goals of Senate Bill 6 was to identify what the real loads were and try to identify if there were duplication submissions. But the batch study process will put us in a situation where we can go and have a green light for this group. And let's go move on. Let's move on to batch one. That way you're taking the whole, the whole picture into consideration.
- [23:07]
B
Okay, I'm going to repeat back to you.
- [23:10]
A
I'm going to drink this water.
- [23:11]
B
So batch zero was basically Chris's data center company, your data center company, several data center companies submitted for a data center and power generation in a region. Rather than go, Chris submitted first, so we're going to approve his. And then, oh, wait, now we got to take it back because you came in down the street and now you want to do one and then we approve yours. And oh, wait, then you said, no, we're going to batch everybody together. We're going to look at them holistically, correct, and we're going to put a circle around that batch so that no new applicants can come into that batch. We know what we're securing. And batch zero is the precedent, though. That is the first batch that gets approval, then batch one, batch two.
- [23:53]
A
That is the process that they're working through today. Yes. Now, batch zero, the rules for batch, the batch process were approved out of a committee like literally yesterday. And they will go to the ercot board on June 1st and 2nd.
- [24:08]
B
Can you share what those are? No, it's private.
- [24:10]
A
I don't even have them. I mean, I'm sure that we could get our hands on them. Like, it literally got approved. The ERCOT board will review it at their meeting and say, this is how we're going to handle the batch process. And there were, there were not a lot of circumstances where people got approved and approval got taken away. The problem was, in order to get the final approval, they had to go back and restudy and they had to go back and restate. And that was really the big problem, wasn't giving the regulatory environment we wanted. State of Texas needed to give. So. So to understand the poles and wires business, you know, because part of this batch process and part of this Large load process, understanding the pole and wire business, the TSP business, the transmission service providers. If I want to go, we're going to go put our load on them, on the grid we're working with, call it Encore. And part of, in order for our load to come on board, Encore says, hey, there's $25 million of cost that is going to be associated to your project. And we think that there's about $3 million of that. That's going to make the whole grid better. And there's 22 million. That is 100% on you. We would have to come up with that $22 million. And that's part of the cost studies and the cost sharing. Because one of the big concerns in the state of Texas is that if we don't take care of, if we just put that $25 million in the pot at Encore, Encore is going to go back to the PUC for their rate case studies and say, hey, we spent $25 million. You go divide that out by ratepayers and all of a sudden ratepayers are bearing that burden. So there's a cost segregation study that goes into it and says, all right, $22 million for your data center, you guys are going to pay that. There's an increase in the grid reliability. That we agree with that $3 million. We're going to go put that into the rate case for the, you know, for the entire Encore network to pay, because it is creating more reliability for our entire network. So there's legislative needs for us to look at how that, how that happens and make sure that, that, that those cost studies are done properly, that they're protecting ratepayers. So that if, if, as an example, you and I were to convince Encore that our, our cost was only 5 million and 20 of it went to ratepayers, there's a big concern of that impacting electric bills. And that's where the good actors are doing the right thing. They're not fighting those rate case numbers their business model can afford. In a stable regulatory environment, those business models can afford that $22 million. And that will be in our business model on how we're going to go and recover our costs. So that's where. Anyway, that's. I think I'm hoping I'm explaining that properly.
- [26:38]
B
You are. Okay, so we said there the total grid capacity of the entire state at peak, is it like 8, 86 gigawatts or something?
- [26:47]
A
That's the 80, 85 point something over the summer was a peak Demand number, peak demand, peak demand number. The projected number for this upcoming summer. That with the improvement in infrastructure that has been placed onto the grid, the projected capacity or peak need this summer is at 105. So you've seen a 20 gig growth since the peak season last, last summer.
- [27:11]
B
What's driving that? The new data centers?
- [27:13]
A
Well, there's, there's data centers, there's generation cap, there's generators coming on, there's more lines and the lines and pole businesses coming online. Whether that is just for overall economic growth, whether that's generators, market conditions are dictating and market conditions, these are for profit companies. Vistra wants to make a profit. They see the pipeline of growth in the state of Texas, they're going to build more generation. Your TSPs are coming online with additional capacity to transmit the power. So it's not, I wouldn't call it 100% driven on data centers. You know, we've had an influx of people moving to Texas. We're grateful for that. You know, we, you know, my side of the aisle, we make sure we ask people moving from California to leave their politics at the border, you know, but, but we are, you know, doing that. Yeah, the, you know, so you know, the governor jokes about how we continue to build the economic engine overall in the state of Texas, that instead of worrying about a southern border wall, he's going to put a border wall around the north, south and east side, east, west and north. But no, it's, it's overall growth in the state of Texas. You know, a hot summer day with more residents. I mean you see the rooftops being built, you see industry coming, whether it's data center or otherwise. You see the investments that we have made in, you know, technology, medical, education. You know, we've got a very robust economy in the state of Texas. We're seventh or eighth largest economy in the world. If you just take the state of Texas, I think we're about to pass France. So it's all predicated on that. It's not 100% data center driven, but I do think the data centers are sending market signals to these for profit companies that hey, we're here to stay, we want to be in Texas. And so these companies are reacting accordingly.
- [28:55]
B
Okay, so we're 110. Right before we pressed record, we said there's 440 gigawatts of applications in right now. It's like four times, four times peak
- [29:11]
A
capacity that have applied.
- [29:13]
B
Could we break that down into how much of that's actually real, how much of that's what you said where It's Google needs 1 gigawatt but there's 25 applications form around how much of it is land flippers and what is ERCOT doing to basically flush out the system to where we get to a spot where only well funded, good actors are in the system.
- [29:37]
A
So that was kind of the intention of Senate Bill 6 was to try to make sure that people that are applying are real. And so in define real, I mean a real developer is somebody that hasn't just submitted an application that says hey, I want a gig of power in, in, in South Dallas. It's a person that says I've got land secured in South Dallas. They can show you that they own the land or they've got the land secured, they can show you that they've got the financial strength either via. You know, there's a couple of different ways you can qualify the financial side of it. I think the number and the batch number hasn't come out, but I suspect the number is going to be $50,000amegawatt that you're going to have to put up and show that like you've got the financial strength of really doing it. So if you've got multiple applications for the same user, it's highly unlikely that you're going to see those people put up the money that they need to put up times eight, if they put in eight applications, if they were shopping. So what's real of that? Once you start to get into the study process, those studies cost money. Once you start to get into the study, that number gets a lot more real. And that of that 445 gigawatt number, I think the number is like north of 300 that don't have studies submitted yet that are not in the study process.
- [30:51]
B
Oh, no kidding.
- [30:52]
A
So there's, there's a lot of it that may be fluff or there may be a lot of it. Now we had a massive influx in the first quarter of 2026. You had a massive influx in the first quarter because there was a 1 tsp that submitted all the projects that had gone through their internal process. Their internal process I think had them all boxed up in one group. And you know, I think that they were kind of trying to get the signals from ERCOT and the PUC of how to submit. I mean it's not a secret. I mean Encore submitted a massive number of projects and it makes sense that they've got a massive number of projects but they've got to jump through the hoops internally in their internal process before they're going to submit them for studies to ercot. You know, the process goes, I apply to the tsp, TSP applies to ercot and then the ball gets rolling. So a lot of those projects may not have studies going simply because of the timing they just got submitted in the first quarter. They may be real, they may not be real, but we've got to figure out what's real in that Encore group for sure.
- [31:53]
B
My brain is tripping real quick. Describe a TSP again to me.
- [31:58]
A
Like I'm a 5 year old ESP transmission.
- [32:00]
B
What are the types? Name it. Name a few Companies that are TSPs.
- [32:04]
A
Transmission service providers are your lines and your pole guy.
- [32:07]
B
Yeah.
- [32:07]
A
And that is your substation, your transformers. That is Encore. That is aep. That's the Lower Colorado River Authority. That's.
- [32:16]
B
Those are not private entities. Those are private.
- [32:18]
A
Those are, yeah.
- [32:19]
B
All private.
- [32:20]
A
Yeah. Now there are a couple TSPs that are municipality that run them for, you know, CPS run San Antonio, Austin Power runs Austin. So you've got some municipally, you know, municipality owns owned ones as well.
- [32:31]
B
Are they incentivized to get as many of these as proved as possible? Obviously because they're going to make a lot more money.
- [32:36]
A
Yeah, absolutely.
- [32:37]
B
Like what's the relationship between the TSPS and Encore? Like is Encore.
- [32:42]
A
Encore is the tsp.
- [32:43]
B
I mean ERCOT is ERCOT incentive.
- [32:46]
A
Like ERCOT is a. I say it's
- [32:48]
B
like everybody's like it's a big shit show. Who's causing the shit show?
- [32:53]
A
There's a reason they call it a batch study and not a cluster study.
- [32:56]
B
Yeah. Okay.
- [33:01]
A
ERCOT is a government agency that has the responsibility of mitigating risk to make sure that every Texan has their power on.
- [33:07]
B
Okay, okay.
- [33:08]
A
It is. ERCOT is working their tail off. I'm not going to trash ercot. They are working hard with what they have been delivered. They have got a process that created a doom spiral that they are fixing right now with this batch process. The relationship, you know, the ERCOT is underneath the puc. So Encore, if Encore goes and invests a billion dollars, say they balance sheet, they go spend a billion dollars. That in a rate case with the Public Utility Commission they have got to go and say I spent a billion dollars and here's why. I spent a billion dollars. And they have got a statutorily guaranteed rate of return on that billion dollars. The problem for the problem they run into is that in most cases the PUC looking out for, looking out for ratepayers goes and says of that billion dollars, 200 million of it was fluff and you shouldn't have. That was a waste of money. And Encore is on the hook for that. They spent the billion dollars. They're only getting their return on 800 million because they couldn't justify what they, where they spent the money on. So there is a, you know, there's a, it's a very unique financial relationship and it's a risk reward situation that Encore and AEP and all of these TSPs have got to be very SM about. Now on the flip side of it, there is a, You've got some of these data center developers that are willing to go build the substations and just give them to ercot. Like if we're going to pay, you know, or not ercot, give it to the tsp. If I'm going to, if I'm going to go build this myself, I'll just give it to you, you know, whether I'm paying you to do it. Because you've got to, you know, in that cost segregation study, you're going to pay, you know, in our data center example, we're paying the 20, the 22 million of the 25 that we magically came, you know, the magic number we were joking about. If I could go build it for 22 million myself and I know I'm going to manage it versus wait on Encore or wait on AEP or wait on one of these guys who've got a whole bunch to manage as a data center developer, I may just go build it myself and give it to them versus having to put that money up in their system.
- [35:09]
B
Are they allowing you to do that?
- [35:10]
A
In certain circumstances some developers have been able to do that.
- [35:13]
B
What's the circumstance?
- [35:15]
A
It is a very gray area of where those circumstances have been approved and where they haven't been approved. Because if you start thinking about it, your TSPs have got a guaranteed rate of return on the money they spend. It's not in their financial interest to take it for free, you know, because if they didn't spend the money, they can't go put that money in on the, on the rate, on the rate payer side of things. So there's an element where, you know, quicker to market.
- [35:38]
B
Can I ask a dumb question?
- [35:39]
A
We go build our own substation, we're quicker to market, but why couldn't we
- [35:42]
B
just build it and then Encore does get to user money, they just buy it from us built and they get their rate of return.
- [35:50]
A
Okay, yeah, it's a good question. We'll leave that, we'll leave that one
- [35:53]
B
out there at least. I got one good question in today. Why was 75 megawatts the threshold? Do you have any commentary there?
- [36:01]
A
Yeah, you know, is it going to
- [36:03]
B
be gamed where everybody's now submitting for 74.9?
- [36:06]
A
Yeah. So one of the questions that I've asked ERCOT is, is the 75 number something that's going to change? Does that, does that change? And I, with a high level of confidence, don't think that number changes. I think that the reason that that number was established is because if instantaneously 75 megawatts goes off the grid, instantaneously, it matters to the control room. They've got to start making adjustments to make sure that they've got power coming from another source. And so the 75 number is a real number for the grid operator for ERCOT and their control room. 75 is a number that, of where it really makes a difference. And so that's where if you're below that number now, if we had, you know, 10 data centers at 40 and we've got 400 and we instantaneously go off the grid, that would be highly unlikely just with how the, how the grid is set up, but that would create a problem for them. But 75 really is the number where, from a TSP perspective and from a generation perspective, it makes a difference if it instantaneously happens. And that's where ERCOT wants to be. They want to be where we're mitigating risk, where something instantaneous doesn't. You know, we've studied anything that instantaneously. More than that, they can react to that. In the, in the control room, you have something bigger than that, it needs a study. And that's where all this extra hoops you're jumping through come from.
- [37:30]
B
So what is the difference between submitting for sub 75 megawatts versus you don't
- [37:35]
A
have to go through the large load study process. Yeah, I mean, if you've got, if there's generation to match your need, you get on the grid and the grid provides a lot of benefits, you know, because of that control room, because of ercot, because of the risk mitigation, the grid, the reliability of the grid provides businesses with a lot of stability and there's a reason people want to be on the grid. Now, we can jump into the discussion, if you want, about behind the, behind the meter power. I mean, the, a lot of these data center developers are putting, are building their own generation and going behind the meter now if you are in a true island power island circumstance where I'm behind the grid, I'm using 500 megawatts and I've got 500 megawatts of generation and I don't, I don't have any variables, I'm good to go where I don't have an interconnect at all, those guys don't go through these studies and those guys are quicker to market. The problem is that if I'm going to go build that generation, I'm generally ahead on the generation before I'm there on the usage. So I want to create an interconnect with the grid so that my generation, I can go sell to the grid and sell into the marketplace.
- [38:47]
B
And shouldn't ERCOT want that?
- [38:48]
A
ERCOT should want that, yes. But the problem for ERCOT is bringing that on in a reliable manner over time, once the transmission lines and everything's built for the infrastructure to take it. These data center operators, in my opinion, are providing grid reliability because in addition, like the Stargate as an example, they're using grid power. They've also got generation on site. So in a peak demand circumstance where ERCOT says, hey, I'm worried about this summer day in the middle of July or August, or I'm worried about this day in February where it's going to be really cold, these data center developers can curtail their power usage so that it can be used for residential ratepayers and turn their power generation on and handle what they need on site. So data center operators, people are worried about the energy usage and think that that's going to take their power built out properly and built out responsibly. Data center power is actually going to provide more reliability to ratepayers, residential ratepayers.
- [39:46]
B
When we had talked about this, you'd said the bitcoin miners were great because they didn't need to run 24 7.
- [39:52]
A
They were fantastic.
- [39:53]
B
But then you just said the data centers, as I'm thinking about them and specifically, really with AI, they're kind of running all the time 24 7. So you just said, well, they might be able to wind down for a little bit and provide some to the grid. Is that going to be like the government saying you have to wind your data center production down, or can they actually do that part of this model work and still be able to get a plane on American Airlines booked on my app?
- [40:23]
A
So part of The Senate Bill 6 was a requirement to curtail energy if needed by the grid. That is statutorily part of the bill. It is law.
- [40:34]
B
Okay.
- [40:34]
A
Okay. Now, a data center, a data center operator though, is going to build generation on site so that if they're told to curtail, they're going to turn their power, their backup generation on so that our American Airlines app still works. The AI process is still, you know, your inquiries. It still works as it's supposed to. So it's a matter of they are building this generation on site as backup to make sure that if they're asked to curtail that it provides more reliability for residential and other commercial users and they can still provide and keep their data centers running.
- [41:12]
B
Is there anybody that's just wanting to be behind the meter without any access to the grid? Like, is that going to become a thing?
- [41:17]
A
Yeah, that's the island scenario. And those guys are going to come on quick in their business model. If it's built into the way they build their business model, it's great. But the problem or the opportunity problem and as soon as the transmission guys get caught up, they'll probably. Those guys that are on an island will probably request an interconnected so they'll
- [41:34]
B
probably always get there. There's just some that will be willing to be an island for longer than others.
- [41:38]
A
Well, if you're an island right now, the problem for an island guy is like if he goes and brings on 500 guy is completely not connected whatsoever. Not doesn't even, you know, most of the co located power guys want to bring on their power first, then the construction of the data center will follow. So they want to be able to sell that power when the power parts up, when they don't have a user for the power. But some of these folks have got it and where their business model and they can make the financials make sense. Where I'm going to bring the power on and I'm going to build the user, most likely a data center. And we think we can come on in enough time where we're not wasting capital by it sitting on the sidelines having 500 megawatts of power generation up and ready to provide power with nobody to use it. Nobody wants to build a power generating plant and not have anywhere to sell the power.
- [42:27]
B
All right, y' all have heard me talk about better pitch for years on the podcast. I'm super proud of their founder, Nico, who is a great friend of mine. He's one of the best young entrepreneurs I've come across. And in just two years he's built an incredible company that is now rebranding as collateral partners. And honestly, it makes Perfect sense. From single family investment decks to complete brand overhauls, ongoing partnership support to market research, they deliver institutional grade work that actually moves capital. Think of them as the difference between looking like a startup and operating like an institution. They're really your entire institutional marketing department. The team you wish you had in house but can't justify hiring. Ex Goldman directors who understand your business, ex PE associates who craft your narrative, and world class designers who make it all look effortless. Go check out collateral.com and mention the Powers podcast and they'll give you a complimentary one pager. Enjoy the episode. When you hear of Elon getting these massive projects done all over Texas right now and Terafab just, just got done and are there certain projects the state's willing to look at different than other ones? I realize terrafab isn't a data center, but it is a massive power user. It's, it's enormous.
- [43:48]
A
I think that the everybody go through
- [43:49]
B
the same process or can you skip the line if you're just a multi.
- [43:54]
A
There's not, I don't know of circumstances where people are skipping the line. Okay. I mean we wouldn't be hearing about all the complaints about the restudy process. You know, I don't have an example one. If I figured out how to do it, I'd let you know. Probably not in the studio though.
- [44:07]
B
Yeah, okay.
- [44:08]
A
For everybody. No, no, people are not skipping the line. Everybody's. Everybody's doing their part. I mean you've got to work through different, you know, there's the local, you know, municipalities and county governments and state governments that you've got to work through. But I have not heard of circumstances, people skipping the line.
- [44:22]
B
So if I were to submit today, maybe we could say sub 75 and over. 75. What is my timeline looking like right now based on the current situation and is the goal. Well, let me just start there.
- [44:37]
A
Well, sub 75 submission, it doesn't exist. You don't have to submit for that. That doesn't go through this large load process because you're under the number. Okay, So I would tell you that a sub 75 project with, you know, that, that doesn't have a bunch of operational hurdles. That's got land secured, it's got the financing ready to go. I would think that you're a two to three year project becoming, you know, submission to, you know, you're going to have to work with a TSP and work with a power generator to see, you know, where you're going to get your power. But it doesn't have to go through the batch process. I think that you're two to three years out.
- [45:13]
B
Three years from when I have power
- [45:15]
A
started to power to the site and
- [45:18]
B
then I would start building the building
- [45:19]
A
then I think that most people are building the buildings as they're going through
- [45:23]
B
that process with 100% certainty that it'll. And Encore gives you that certainty that it will be there.
- [45:30]
A
Correct. And then the above 75 submission, I think that the process and with the batch process and just how long it takes to build out the infrastructure, you're probably a three to five year time frame. The part of the problem in that timeframe is, is the generation. Okay, so GE and Caterpillar think about these guys are, you know, there's a, there's a backlog and they're getting caught up, but there's a backlog on gas, on gas powered turbines to generate power. We need more, I mean for the reliability of our grid in the state of Texas, we need more thermal gas power generating plants. There is a backlog and there's a backlog in those. I mean the problem is that you've got a new set of customers now. It used to be that Vistra and Constellation and all your power generators, the only people that were buying those products from GE and Caterpillar were your power generators. But now you've got these data center operators who are saying, hey, if we build a big enough project, let's go. We want to be a customer of yours too. So there's a backlog that they're working through and I think that the, the administration in Washington D.C. really has pushed on these guys to start pumping out more gas powered turbines because it is certainly lacking. We've seen a massive influx in the state of Texas in power generation from the renewable side because when solar the parts were available, people were able to get them online quicker. But for grid reliability long term, we need to be in all of the above state which we currently are. But we need these gas powered turbines to come online.
- [47:00]
B
Do you think most of these big data centers will end up being in rural areas or urban areas? Like is it just going to be a dog fight to try and do it anywhere close to a city?
- [47:09]
A
It's a big industrial complex. And where can you build big industrial complexes? I mean that's a question. I mean there's a big push in south Dallas. You know there's great fiber infrastructure and great electrical infrastructure south of Dallas. You know, there's great infrastructure out west where land is cheaper and where you've got You've got power options, you've got solar, you've got wind, you've got natural gas. You know, so is it easier to get it approved? You know, I think that you're seeing city councils and county commission courts getting beat up by, you know, by people that have seen the horror stories out there. And so there is a lack of willingness to do it. If you're not disrupting a bunch of neighbors, you know, then it's probably easier to get built. So maybe that's more rural Texas. But I think there's an element, you know, Texas and the Republican Party has certainly been a big landowner's rights state where we're not going to go and invade people's world. And I think that's part of the responsibility, part of data centers that we've got to manage and maintain in the state of Texas. We've got to make sure that we are providing a framework or guardrails where these things are going to be built and how they're going to be built. Even in rural Texas, you've got plenty of people that live in rural Texas and we've got to make sure those folks are protected as well. It's not a matter of this getting jammed down anybody's neighborhood.
- [48:31]
B
Are there any states that are doing it better than Texas right now? Is there any model? Is everybody just figuring it out right now in real time?
- [48:36]
A
We're all figuring out there's some states that have started passing some regulatory Guardrail Responsibility Act. I'm working on the Data Center Responsibility act for the state of Texas. It's something that it matters to me, it matters to our community, it matters to North Texas, it matters to my district in Fort Worth. It matters to the state abroad. You know, we've got to provide a responsible. This has got to be done responsibly. And so I'm working on that. There's some states that have started doing that kind of work that are already in session. You know, the Texas legislature meets every other year. So we did Senate Bill 6, which was kind of try to identify and standardize the large load side of things next session. You know, I know that we'll be working on and I'm working on the Data Center Responsibility act so that we're protecting everyday Texans and that these centers, you know, we're protecting them from an electricity perspective, we're protecting them from a water perspective. I mean, I don't think you're going to see any new data centers come online that are not. That are not closed loop water systems from A water protection perspective. Water's too much of a precious resource. We'll have some requirements from noise. We'll have, you know, like I said when we went to what are the
- [49:41]
B
details of the act?
- [49:42]
A
I mean, we're working through and putting the details together with a bunch of industry stakeholders. We're working with local communities. I mean, like I said, sophisticated and unsophisticated. Local governments have asked for help on it. They want some, you know, whether it's a setback, whether it's a noise requirement, whether it's screening, whether, you know, I've gotten somebody that's come to me that said we think that these data center guys need to be in the bee business. They think that the data centers are killing the bee population so that we're not going to have pollination happen. So maybe the data center responsibility act will have something to do with. Maybe data centers are going to get in the beekeeping business as well. I don't know. But it's, you know, site selection and how close it is to neighbors. I mean it's electricity, it's water, it's noise. It's an all of the above approach to make sure that non sophisticated governments are asking the right questions. Government entities. I mean, I think that your bad actors happened because nobody asked the right questions or set the requirements. And I think it's a right framework for the state legislature to put guardrails on it so that all of local communities across the entire state have got the assurance is that these things are going to be done responsibly and you can have confidence that they're going to bring the right things to your community and not the wrong things.
- [50:50]
B
Who's in your coalition?
- [50:52]
A
Oh man, there's a whole lot of people that care about data centers right now. And I think that there's a lot of people that are anti data center just because they've seen one example a thousand times over. But it's the same data center that's the same bad actor. There's the data center coalition is out there. There's councils of technology companies. You know, there's a bunch of people that want to do the right thing. The bad actors are going to get flushed out real quick. You've got a lot of legislators that really understand the economic impact that these things can have to their communities. And listen, there are naysayers out there that are anti data center just because they're worried about the rancher in their community that they don't think they can protect. And they think that the answer is no to the whole thing. And that's just Texas is open for business. We are not going to be closing the state of Texas to data centers. If I have anything to do with it, we've got to do it responsibly, but we're not going to close the state. It's too much of an economic boom. I think when you and I talked and I've said this publicly in a lot of forums, the data center boom in my opinion is kind of like the expansion of the railroad. People and towns and communities that didn't get a stop on the railroad died. I think that the data center is the next economic boom. It, you know, states and cities and counties and countries that do not participate in the data center in this boom I think are going to be left behind and it'll have significant economic disadvantages. So we got to put the guardrails on. We got to make sure that it's responsible and, and the good actors want to be a good community partner.
- [52:24]
B
Can you just define what like a bad actor would be then? Would it just.
- [52:28]
A
A bad actor is a, is somebody that is not talking to the local government that is trying to go quietly, secure land and start construction in areas like in a county where they may or may not have, where they may not have to go get a building permit and they're going to go and put a massive well water that's going to go tap water out of all neighbor, all the neighbors property and they're not going to do a closed loop system. They're not going to do anything. They're not going to buy the newer technology, it's going to operate louder, it's going to, you know, they're not going to invest and work with the local municipalities to make sure the infrastructure is being improved. I mean the infrastructure needs just for building the thing are huge. I mean out at Stargate they're putting new county roads in for those folks out there because they understand they don't want to be driving in front of everybody's, you know, they don't need semi trucks driving in front of somebody's house every single day when there's another way to access their property. So your bad actors are operating in a, you know, water chilled system that's using a ton of water that's making a lot of noise. And like I said, I'll go tour those as well. Like I've toured, you know, some of the good actors and we'll go make sure that we're touching all the bases to understand and fully and Better understand what those bad actors look like. But it's a noise, it's a water. It's doing it in secret. It's trying to sneak stuff through and not talk with your local community. The good actors are working with their community governments.
- [53:47]
B
I'm just making a guess. It sounds like the days of bad actors being able to execute are numbered. Like there's so much information happening so quickly, policies being constructed so quickly, it's literally on everybody's radar that those days of like squeezing one through the system seem like they're going to be harder and harder to come by.
- [54:04]
A
I think you've properly identified that everybody in the state of Texas can have the assurance from me that in my role as a member of the state legislature, we will make sure that the bad actors are getting flushed out and that they don't have opportunities to continue to go and pillage our communities.
- [54:20]
B
Are there going to be economic disadvantages based on geographic region of the application?
- [54:25]
A
So that goes back into our poles and wires, guys, your TSP providers, because they are region, they're set up regionally and they've all got different internal processes of how they work through their application process. But I have got a concern as a member of the legislature that represents a community in North Texas. I've got a concern that if we don't take geographic, geographic factors into consideration with Batch Zero, that if it was not, you know, because of what the internal process was at Encore versus what it was at aep, that if you just simply took it based on who applied, based on the date, that we're going to have problems and disadvantages in North Texas. And so why? Because Encore, with their internal process, submitted the bulk of their, the bulk of their applications in the first quarter of 2026, while others put them in a little bit more over time over the last, you know, four to six quarters.
- [55:20]
B
So what you're saying is because they were late, tax revenue is going to be late to our region starting to show up?
- [55:26]
A
I'm not necessarily saying they're late. I'm saying when they submitted, they did their internal process and put 150, 180 applications in, in the first quarter of 2026. There were quarters before that where 20, 30, 43, 70, you know, where a bunch of applications were put in across the state. Encore kind of dumped a bunch in, which would have a negative impact on North Texas. And, you know, we've had committee hearings and we've talked about it and, you know, I've had assurances from ERCOT and the PUC that the geographic consideration will be part of the batch process for batch zero and that North Texas won't be left out. But because of the internal process, whether it was, we didn't know what to do with it at Encore or Encore had more boxes to check or they had, they had a different process where they didn't put them in until the first quarter this year. If we don't have geographic considerations in the Batch 0 process, North Texas could be put in Batch 1, which would have a negative impact on North Texas on the Encore service map. Because the Batch 0 guys are going to see this investment, they are going to see the construction investment, they are going to see the jobs investment, they are going to see the tax revenue come in. So I believe, and you know, I've been assured publicly by the, by the ERCOT and PUC folks that geographic concerns will be considered in the Batch 0 process. So that we don't have economic, you know, economic disadvantages based on geographic region. But it is a certain, it's certainly a concern for me as a member of the legislature that represents North Texas.
- [57:04]
B
So we're talking about batch zero and batch one. Will it kind of get smoothed out by the time we're in batch nine and batch ten? Like, it really won't matter at that point. There'll be so much going on across the state.
- [57:16]
A
Really.
- [57:16]
B
The disadvantage in the short term.
- [57:18]
A
Correct.
- [57:18]
B
Gotcha.
- [57:19]
A
Now that short term, batch zero to batch one though is three to five years. So, you know, I mean, explain that.
- [57:25]
B
So we're going to hear about when does batch, when do we hear about batch zero?
- [57:28]
A
So the batch zero rules and regulations go to the ERCOT board in 10 days.
- [57:35]
B
Okay.
- [57:36]
A
So hopefully they will approve it. It goes to the PUC to make sure, you know, the PUC overseas, ercot. So, so the rules for that and how you get in it. There's not a single person that is in batch zero today. They're still working through the rules of what Batch 0 looks like. Some of the TSPs, in my opinion, have started taking what they think those rules are going to look like and applying them to their applications. Some of them are putting their hands out, asking for money already, but the rules are not approved by ercot. There's not a single person that is in batch zero today because the rules haven't been approved.
- [58:07]
B
So there's just people that think they might be in batch zero.
- [58:10]
A
There are people that, based on what they believe the rules are going to look like, there's people in industry that are on the advisory board that came up with the rules.
- [58:17]
B
What are the rules? Is it.
- [58:20]
A
I don't have the rules.
- [58:21]
B
There's going to be any idea what's in that.
- [58:23]
A
I've got some framework of what they look like. And the rules are going to be some people that were in that vicious restudy cycle are going to be in batch zero. There's going to be a tranche of people that have been approved but don't know what they've been approved for, that will be in batch zero. There will be some newer applications that are in batch zero and how that is determined is what that ERCOT board's got to get through.
- [58:44]
B
Okay, so rules are going to go in, that's in 10 days, they're going to be confirmed. Then we're going to know. Just so I'm clear, we're going to know who's now in batch zero. Does being in a batch mean you're going to get approved or it just means you're going to be studied?
- [59:00]
A
It means you're going to get studied
- [59:02]
B
and you haven't already been studied or you might have, but you're in the restudy school.
- [59:05]
A
Correct. Some of the applications are further along in batch zero. And I think that there is a. There's an urgency to get into batch zero because people are concerned that batch one, the lag time between batch zero to batch one could potentially be up
- [59:20]
B
to three to five years between batch zero. I mean, and if you don't get approved in Batch 0, you're going to get kicked into Batch 1 or you're
- [59:28]
A
just out, you're going to get. No, you're not just out. You'll have a continued conversation with your TSP and they will start working on the applications for the next batch. But the amount of work and time that has to go into Batch 0, it's not like Batch 0 gets approved and then the next month we're moving to batch one. There's the amount of time and the amount of work and the amount of investment that has to go into those studies to make sure that we're coordinating this thing. I mean, it's not like there's a whole 2nd ERCOT 2.0 that's got another set of staff and these TSP providers and everybody else that. That can go and say, all right, batch zero or these hundred projects, and they just go like, there's work to be done on that. And that's the problem. That's the concern from industry and that's the concern from a lot of these people that have had applications in. They're sitting here going, man, we've been in for three years and we're still waiting and we're going to get in this, we don't get in this batch zero process, we're another three years delayed.
- [60:24]
B
Okay, so if the rules and regulations are approved and call it 10 days, when will we know who's in batch zero on day 11 or another six months after?
- [60:34]
A
It's probably, it's months.
- [60:36]
B
Okay.
- [60:38]
A
As a TSP, you've got to go, you've got hundreds of applications, you've got to go look through and go through this criteria. It's not going to be a one page checklist. I guarantee you there's more to it than that.
- [60:47]
B
Okay, so 11, 10 days, we know the rules, few months, we know who's in the batch. How soon after that do you start getting green lights? Like official green lights?
- [60:57]
A
Yeah. So the people in the batch then are going to go get studied by. That's the initial study. And then you go to that 9.5 agreement, which is the financial and the in the land agreement and then you get your approval to energize that study process I suspect is going to take a year, year and a half.
- [61:15]
B
I know I sound like an idiot and I know we've, and I'm probably just asking the same question over, but this is kind of blowing my brain. It sounds like they're being studied over and over and over. Like just to get to batch zero you were studied. Now you're saying where there's another year,
- [61:31]
A
there are people that are, will be in batch zero that have not had a study done.
- [61:35]
B
Got it.
- [61:36]
A
So I mean, so if you have
- [61:37]
B
had a study done, maybe you're going to be the first out the gate.
- [61:40]
A
There are some that have had studies done that had to get a restudy will also be in that Batch 0 process. That's why Batch 0 is so critical for, and I believe that ERCOT and the PUC are going to do the right thing and those that have been studied, approved and then had to get in that recycle and keep going will be, will have a good consideration to be in batch zero and to just
- [62:03]
B
wrap it up again, that study is saying, Mr. McQueenie Data center company you submitted for a gigawatt of power. You have this land, you've already secured it. We see you've got Google as a tenant. We're going to study whether the deal
- [62:21]
A
is they're going to study the impact of all of those batch zeros in that area.
- [62:26]
B
Got it at the same time. So it's one massive study with a bunch of micro studies.
- [62:30]
A
Correct. That's where that gets us out of the restudy loop. Because we're taking this look, we're going to look at what the impact of all of these are at the same time. That way we can get the ball rolling. Now, based on, you know, this has created a supply chain nightmare as far as finding your parts and pieces and electrical and piping and valves and to create one of these data centers, this is not a small feat of the construction side of it. So this Batch 0 group wall gets studied at once. But just based on the supply chain, you will see these folks trickle onto the system. I think that as an example, I think there's about nine gigs approved right now, approved to energize. And last month I think that ERCOT saw four of those gigs come online. So they're still waiting for the others to energize. And that's a function of supply chain.
- [63:30]
B
So it seems to me like there has to be a big incentive for everybody to figure out the model of like we're just going to do this all behind the meter. If we ever get to the grid, great. Even if it takes 20 years, we're gonna figure out the business model to where we can basically go build our own power plant, build our own little island. And there's no other way that we get to where we need to get to without that becoming a huge piece of it.
- [63:55]
A
We had committee hearings about bring your own power and being on an island. And there will be a significant discussion about that in the next legislative session. You're right.
- [64:05]
B
And I just have this feeling, it's like if more people did that and ERCOT sitting there in these meetings going, well, we did let all these guys build all this excess power, maybe we should speed up and try and get a line to them. Like it would actually force the.
- [64:18]
A
Here's the element of reliability of being on the ERCOT grid. Customers want it, it helps rape it,
- [64:24]
B
but customers want it. But they want something.
- [64:26]
A
They want something. You're going to see, you're going to. We. I've said in a lot of different elements, we need to be a all of the above state, whether it's from a power perspective or other. And I think you're going to see all of the above.
- [64:40]
B
Okay, let me ask this question and maybe you're qualified to answer this, maybe you're not. Why is the grid so much more reliable than just building your own power? Like I'm Assuming if Meta or Google went and built their own power plant, like it'd be the greatest power plant that ever existed. That's still not as reliable as our grid because the grid's pulling from so many.
- [65:02]
A
Our grid has got so many more resources.
- [65:04]
B
Got it.
- [65:04]
A
That's more just. And it's got so many more resources. It's got, you know, so much work goes in at the Public Utility Commission in ERCOT to make sure that we are mitigating risk and that risk mitigation protects everyday Texans, residential ratepayers, commercial users. Not to mention it's expensive to build power generation. And if you're connected to the grid, you are in a spot where you can go buy and sell. I mean, you can be an energy trader. You know, we talked earlier, the crypto guys are really good at being energy traders because their stuff wasn't mission critical if they wanted to. If the grid has a, you know, it's a supply and demand market, it's an open market as far as our wholesale market goes. So if you've got the ability to generate power and you've got an interconnection to the grid, when the grid needs power, you can sell it and make money at it. And so. And it's also a coming online part. When do you come online and what are you going to do with your power when. If you don't have a user for it?
- [66:04]
B
Is that what all these massive manufacturers that back in the day got allocated, 2 to 300 megawatts? They run on about 50 to 75 on a daily basis. And there's all this idle capacity. Are they all selling back to the grid?
- [66:17]
A
I mean, the power sale brokerage business is a business just like every other commodity market. People are selling whether they've got an agreement where it's a manufacturer that's selling back to the grid when there's a demand. And in reality, most of the time there's always excess generation.
- [66:33]
B
Though in a better business model then. And maybe the state wouldn't allow it. I'm just making a hypothetical ABC. Manufacturing has 300 megawatt allocation. They've had it for years. Before power was cool, they had it. They use a hundred, there's 200 right now. They sparingly sell it onto the grid here and there when the grid needs it. But a data center is going to run 24 7, I go to manufacturer and say, hey, will you lease me your power? I'm not going to only ask for it a little bit 24 7, I'm going to pull on that power.
- [67:07]
A
That's the power brokerage business. And yes, now in order to do
- [67:11]
B
that you've got to have some state Ercomico. I know we gave you access to 300 but we never planned for it being used 24 7.
- [67:19]
A
The power brokerage business is a business that exists in the state of Texas. It exists in the United States. It exists. There are people in New York trading power in the state of Texas that have never touched, that don't own any equipment other than a computer to trade it. So there, yes, you could find somebody. But in order to do that, you've got to have sophisticated technology in order to manage and go back and forth to do that. It's not something that, you know, ABC manufacturing, if they're going and you know, making, you know, something in the back of a barn, you've got to have a sophisticated technology, you know, infrastructure in order to sell it because you've got to start pulling it and then moving it elsewhere. So it's it, the brokerage.
- [68:00]
B
There was land right next door. I couldn't just go build a data center right next door and not have to go through the whole ERCOT system or whatever.
- [68:06]
A
Those guys are already approved for a large load. Yeah, I mean it's a power brokerage business, does exist. It exists in, you know, I mean think about oil and gas futures. People that don't know, you know, they're selling those contracts before it comes to fruition because they don't actually have it. You know, I mean there's, there's a futures market and most commodity markets, if
- [68:25]
B
not all of them. All right, topic number three. No, I'm just kidding.
- [68:29]
A
I was worried we weren't going to have enough to talk about today.
- [68:32]
B
There's two things I want to drive home. We'll end on a really high note, but we talked about it a little. You said this was important, so I want to go through it. Who's going to pay for the grid build out? We've kind of talked about it, but I want to really make it in layman's terms, simple. So residential rates in Texas, just generally speaking are up 30% since 2020. Probably not a lot of that's just due to data centers.
- [68:54]
A
But there's a lot of market growth,
- [68:56]
B
a lot of factors. But it's also projected to go up another 30% by 2030. Like if you want to piss off a bunch of people and not get data centers approved, keep raising their electric bill wall.
- [69:07]
A
I think that part of the Data Center Responsibility act is going to address energy and energy build out. And there is a world where this build out could and should lower residential rate payers rate. The large load users are willing to pay their fair share and then some. And it's important that we have a regulatory framework that, that provides that. That is something I'm working on. So that impacts everyday affordability for you know, we've got affordability issues in the United States, we've got them in Texas, we've got property taxes. You know, we will have a large robust discussion and overhaul of property taxes in order to make everyday affordability in the state of Texas better. And if we're not looking at the energy bills, I mean we can, we could talk about affordability. I'll come back next week. But as it relates to all kinds of different things, but as it relates to energy bills, the world that we operate in should have these large load users paying their fair share or their fair share and more in order to help us lower everyday rate payers rate.
- [70:14]
B
Can I poke a little harder?
- [70:16]
A
Sure, you bet.
- [70:17]
B
I love you and I trust that that's the case. But if for somebody doesn't know you and they're like, you know, John's just saying what needs to be said, blah blah, blah, like from a pure business standpoint what you're saying is the money's there, these guys can afford it. Correct. And there's no world where Texas robustly let data centers start getting built where something hasn't been baked in that caps energy can be paid by residents. Like I was listening to the all in podcast and I think it was Friedberg but he basically, I can't remember what episode it was but he basically came up with a case where like you could get to a world where like residential like basically pays nothing in energy costs, the commercial sector can like withstand it.
- [71:00]
A
Yes. The I don't think we're going to get all the way there. I think everybody's got to pay their fair share. But we will make sure and I will make sure and my colleagues will make sure that the, the rate case studies and that the framework for how those are handled are that these new loads pay for what they're bringing onto the grid. They're asking for infrastructure spend and that's part of the poles and wires discussion where your project's going to cost X number of dollars. So you need to pay that because we're not going to go spread that out against we're not going to go spread that out to residential ratepayers. The framework is therefore under today's current set up on how these guys get their money paid back to them, we've just got to make sure that that's tightened up so that this additional load does not impact everyday rate payers.
- [71:46]
B
We have big session coming up in January 27th. Real quick, is there one a year or two a year?
- [71:52]
A
We meet 140 days every other year, an odd number of years. So every January I'm either I've got a primary election or I'm getting sworn in. So I had a beat up or
- [72:04]
B
I'm getting sworn in. Okay.
- [72:07]
A
You could probably say I'm either getting beat up or I'm getting beat up. But you know, no, it's I'm either getting beat up or telling our story of what we accomplished or we're getting sworn in. So January 2027, we will meet for 140 days. So that runs us basically it's the second Tuesday of January and it runs us pretty close to Memorial Day. The governor has the ability to call special sessions and then you come, you get called back for that, but you only work on what the governor puts on the call.
- [72:32]
B
Okay.
- [72:33]
A
So that session will be, it's the 90th session, it'll be very busy.
- [72:36]
B
I think it's clear that the discussion about data centers and power is going to be amongst top deal. I thought I'd ask a fun question. If you could write three policy priorities on a napkin right now heading into that, heading into, heading into January 27th, what would be your top three?
- [72:53]
A
Well, we've got a top three priorities have got to be about affordability for Texans. On energy, you want top three based on data centers or top three? Top three on data centers only. Yeah, I mean we're going to be talking about a energy affordability, we're going to talk about water usage and we're going to talk about making sure that we're doing this overall responsibly and protecting everyday Texans. Okay, that's just on energy.
- [73:23]
B
Yeah, that's just.
- [73:25]
A
We'll stay away from the other stuff.
- [73:26]
B
Yeah, yeah. What would be like a great outcome obviously if you got your three that you just mentioned. But like where would we be as a state as an industry if January went really well?
- [73:38]
A
So session goes well, we will be in a place where industry has got the framework, where they've got consistency and they know what they're dealing with. They understand what the timeframes are gonna be, they understand what their requirements are gonna be and we make sure that everyday Texans are not hating data centers anymore. Because we've done the right thing to protect everyday Texans. That's not an or, it's gotta be an and it's gotta be both.
- [74:01]
B
We have to be. Because they're never gonna get if Texas is pissed off.
- [74:04]
A
Correct. We've gotta protect everyday Texans and we've gotta make sure that the framework for industry is right.
- [74:10]
B
I have to imagine, okay, we're talking about batch zero. Batch one is maybe a three to five year gap in approval. It's a long time.
- [74:17]
A
It's a long time. There's a concern, you know, there's a significant concern that if we don't do the right thing in Texas and if we think that we're just going to go put a moratorium or something on this and we don't handle this responsibly, where this, this investment is going to happen. It's just a matter of is it going to happen in Texas or is it going to happen elsewhere? Is it going to happen in the United States or is it going to happen elsewhere? You know, there's a massive national security issue of data. Data centers are a national security issue. If we don't have these in the United States and leave them up to foreign, especially foreign hostile entities or foreign hostile governments, we are putting our kids and our grandkids lives at risk by not being part of the solution for this.
- [74:59]
B
Yeah, I remember that video when everybody was. I think Aubrey made it when we were doing the Barnett Shale. But it was a great video that showed like everything that's made up of oil and gas. We just, most Americans just think it's their car, but it's basically like, like this entire room is made from an
- [75:15]
A
oil and gas plastic bottle. Yeah.
- [75:16]
B
I mean there needs to be like a video that's like. You think data is just OpenAI and chatgpt or in Claude? No, it's literally everything.
- [75:26]
A
It's your everything. You know, I think that you will see and there are groups that are out there doing this. We talked about it earlier. The data center industry is not doing a good job telling their story about how positively they're impacting the communities they're in and how positively they're impacting your everyday life. And so I think you'll see some similar marketing tactics and people need to understand there's more to it than OpenAI and Claude and Grok. I mean, your everyday life is driven by AI or not by AI, by data centers and the data you use and the data you use on your cell phone and everything else.
- [76:03]
B
We talked about January 27, where we have provided a plan that makes this good for Texans, the Texans can get behind. We've also provided a plan that's good for the development and industry. So they have a clear kind of line of sight of how this works. Will the future, if you were guessing, will the future sessions be about how do we make three to five years, two to three years to one year, or is this just kind of going to be this backlog forever?
- [76:33]
A
It'll be interesting to see how industry reacts with the framework of how it should react. I think that you will see technology continue to advance.
- [76:44]
B
So you might need as many data centers.
- [76:46]
A
I think that you're going to always. The data need in America and in the world is going to continue to grow over time, but your data center technology might get smaller to where you don't need to keep building as many of them. You know, instead of having 12 servers in Iraq, you may end up with 20. So there's an element where this is not going to go away. I mean, unless you think that our smartphones and our addiction to data is going to go away, it's not going away. I mean, it will change and technology will continue. We've already seen when these first data centers first came out, they didn't have a closed loop water system, they didn't have noise reduction. It was. I mean, I mean, technology will continue to evolve, but it's not going away. It's just not.
- [77:27]
B
You've heard about the data centers in space which most people. I listened to this podcast yesterday, Gavin Baker and Patrick, and everybody thinks it's going to be these flying pentagons flying through space. And it's not. It's basically just racking systems. It's basically little units within what you would see in a major data center right now. Just orbiting.
- [77:48]
A
Yeah. Kind of like the satellites orbit, correct?
- [77:50]
B
Yeah.
- [77:51]
A
I think that you will see data centers in space. Yeah. I mean, it's fair to say this
- [77:57]
B
is like the biggest economic engine of our lifetime.
- [78:00]
A
It's a pretty big boom.
- [78:01]
B
Not just from the capex build outside the capex.
- [78:05]
A
It is going to continue to evolve. I think that I've compared where we're at today to the horizontal drilling boom in West Texas. I mean, that changed things. The data centers are changing things. You will see data centers in space. I mean, there are people that are very smart, very, very smart people working on that. And an element of a data center in space that is fantastic is that the cooling element is taken care of naturally. It's cold up there.
- [78:35]
B
And if you don't know the answer to this, that's fine. But if you're somebody that's like, I need to learn more about data centers. All I'm hearing about is this Facebook clip of this data center in Ohio humming all night.
- [78:46]
A
Yeah.
- [78:47]
B
Where should people go to, like, get educated? YouTube, podcasts. Does the Texas state government have a website?
- [78:55]
A
I don't have an answer for that today because I'm not sure that everybody doesn't have the opportunity to go talk and see Starbase or Stargate. Starbase. We're talking about space now. There will be additional resources out there. Very soon. The industry will start doing a better to tell their story. You know, people like me are fighting to make sure that we're taking care of everyday Texans. So make sure that we are not allowing what's humming in Ohio to happen in Texas and to go put the framework that will fix this in the state of Texas. Yeah, we cover everything you wanted to.
- [79:33]
B
There's stuff I pulled up that you might. I didn't. 4cp replacement.
- [79:37]
A
4cp is how they evaluate what you're going to pay, what your rate is. And so you've got some highly sophisticated manufacturers that can predict when the CP when that and it's based on peak usage and that drives your rate. So you have got some sophisticated manufacturers that understand how to ratchet back their specific usage during those four peak times to make it look like they use less energy, which would impact their. The rate they pay. So I believe you will see additional changes on the CP calculation method coming out of the 90th legislative session. I mean, it gets pretty technical if you try to do a 365cp. So there's nobody cheating it, you know, but it's an element of. There is an element where I think with 4cp, some people are gaming the system in which they're not paying their fair share for utility.
- [80:34]
B
All right, John, I'm rooting for you.
- [80:35]
A
I appreciate it.
- [80:36]
B
Anything I can do. Thanks for coming on today.
- [80:38]
A
Really enjoyed it.
- [80:39]
B
It's awesome.