Unless Approved by the Commission: The Texas Rule on Large Loads Co-Located With Existing Generation

In the ERCOT region of Texas, an existing power plant registered with ERCOT may not net its output against a large electricity user beside it unless the state's utility commission approves. The Public Utility Commission of Texas adopted the rule, new 16 Texas Administrative Code §25.205, in a notice filed with the Texas Secretary of State on March 26, 2026. The notice prints its effective date as April 15, 2026, and says the rule implements a section of the state's utility law enacted by Senate Bill 6 in the Legislature's 89th regular session. It also carries the commission's replies to the comments it received. Parts of the rule's own text follow, not those replies.

Who it covers

The rule covers net metering arrangements between a large load customer and an existing generation resource in the ERCOT region. A large load customer is one requesting a new or expanded interconnection whose "total expected non-coincident peak demand at a single site is equal to or greater than 75 megawatts (MW)," and which, as of September 1, 2025, was not modeled by ERCOT as part of a generation or storage resource's private use network. An existing generation resource is a plant, or a storage resource, registered with ERCOT as stand-alone on that same date.

The arrangement is defined too. The plant and the large load agree to net the plant's output against the customer's load "for settlement purposes," on a metering scheme ERCOT approves.

Two kinds of plant fall outside the rule. It does not apply to a generation or storage resource that meets either of these:

• "the modeled generation resource or energy storage resource facility included a co-located large load customer at the time of the generation resource or energy storage resource's energization, regardless of whether the large load customer was energized at a later date; or"
• "a majority interest of the generation resource or energy storage resource was owned indirectly or directly as of January 1, 2025, by a parent company of a large load customer that participates in the new net metering arrangement."

Approval, after a study

The approval requirement is written as a prohibition. A power generation company, a municipally owned utility or an electric cooperative "must not implement a net metering arrangement involving a large load customer and an existing generation resource unless the net metering arrangement is approved by the commission."

ERCOT studies each arrangement before the commission decides. It must study the arrangement's effects on transmission security and resource adequacy, and any transmission assets it leaves stranded or underutilized. The study begins once all studies of ERCOT's large load interconnection process are confirmed complete and ERCOT has the information the rule asks of the transmission provider. Among other things, the study must include "a resource adequacy analysis that considers:"

• "the large load customer's curtailment capability;"
• "on-site back up generation capability to offset the large load customer;"
• "expected net generation available to the ERCOT system after implementation of the net metering arrangement; and"
• "the impacts of reduced net capability or lower availability on reserve margins or other reliability criteria;"

Then ERCOT has a deadline. It must file its results and recommendations within 120 days of its own filing that says it has received all the information it deems necessary. The clock starts when ERCOT says it has what it needs.

With or without conditions

Within 60 days of ERCOT filing its results, the commission "will approve, with or without conditions, or deny an application for a net metering arrangement as necessary to maintain system reliability." One condition is set by the rule itself. Where the commission approves with conditions an arrangement with a plant that made dispatchable capacity available to the ERCOT region before it, the conditions must require the plant to make dispatchable capacity available "as directed by ERCOT in advance of an anticipated emergency condition." The amount made available in such an event must be at least what the plant made available to the ERCOT region before the arrangement. The rule defines dispatchable capacity as "Output capacity that can be controlled primarily by forces under human control."

Beyond that, the commission "may impose conditions on a net metering arrangement, including requiring one or more of the following:"

• "the retail customer(s) served behind-the-meter to reduce load during certain events;"
• "the existing generation resource to make capacity available to the ERCOT region during certain events;"
• "initiation of a separate hold harmless proceeding for each net metering arrangement that results in stranded or underutilized transmission assets in order to ensure TSPs and their customers are held harmless;"
• "any ramp rate limitations or maximum duration for load curtailment; or"
• "any other requirement that is necessary to maintain system reliability."

The list says "including." And the rule adds that "nothing in this section limits the commission's authority to impose conditions on a net metering arrangement under the Public Utility Regulatory Act."

The list of conditions ends on "any other requirement that is necessary to maintain system reliability," and the rule keeps the commission's wider authority besides. A developer learns from the rule what kinds of condition may come, and learns the actual ones only in the commission's order.

Who pays for the wires

In the rule, the interconnecting transmission service provider, the TSP, is the one that "owns and operates the facilities necessary to interconnect the large load customer or the existing generation resource to the ERCOT system." A stranded transmission asset is one that, because of the arrangement, "is no longer providing service to the public or may otherwise be retired from service without impairing the ability of the ERCOT system to provide adequate transmission service to customers." An underutilized transmission asset is one that, because of the arrangement, "is expected to transmit on an average, annual basis at least 25% less power commensurate with its maximum capacity to transmit power and is not providing significant reliability benefits to the ERCOT system."

Where the commission orders a hold harmless proceeding, each TSP with stranded or underutilized assets from the arrangement has 60 days to file an application to quantify those costs and take them out of its rates. The costs then move. Once they are out of rates, the TSP must collect them from the plant's owner and the large load customer "in a proportion determined by the commission or by agreement between" the two.

Where the commission orders it, the cost of transmission the arrangement strands or underuses leaves the utility's rates and lands on the plant's owner and the large load, in a share set later. For a project's budget, that is a cost whose size and split are not known at the start.

Conditions with no end date come back for review. If they "are not limited to a specific period," a party must ask the commission, at least 36 months and not more than 60 months after the order approving the arrangement with conditions, whether they "should be extended, with or without modification, or rescinded."