Texas Political Spotlight

Texas has spent the interim writing the rules for a data center building boom, and this week two rooms, the Public Utility Commission of Texas (PUCT) open meeting held July 30 and the Electric Reliability Council of Texas (ERCOT) Technical Advisory Committee (TAC) meeting held July 29, put hard numbers behind the risk. At the PUCT meeting, commissioners heard that a transmission line fault tripped more than 3,000 megawatts of data center load offline in "Data Center Alley," an event Texas Reliability Entity, ERCOT's independent regional reliability monitor, called more than double the size of any prior event of its kind.

Texas Reliability Entity's director added that the underlying concern extends beyond voltage ride through: artificial intelligence loads can ramp demand quickly enough to create frequency disturbances, and ERCOT has set an operational contingency limit of roughly 3,200 megawatts on load that can be dropped in a single event, meaning the July trip came close to that ceiling.

Later in the meeting, PUCT staff presented, for publication, a new curtailment service required by Senate Bill 6 (the "Large Load Demand Management Service"), which lets ERCOT curtail qualifying large loads during extreme weather emergencies, with a proposed annual budget of $54 million and offer prices capped at $5,000 per megawatt hour. Commissioners voted unanimously to send the proposal out for stakeholder comment. The same meeting produced two other actions: adoption, with modifications, of El Paso Electric's system resiliency plan, and rejection of a transmission line certificate application from Wind Energy Transmission Texas, which commissioners remanded to the State Office of Administrative Hearings (SOAH) for lack of quantitative cost comparison evidence.

One day earlier, ERCOT staff released the first detailed tally from "Batch Zero," the large-load interconnection process that took effect July 11 under Planning Guide Requirement (PGRR) 145, a rule that determines how new high-demand customers, chiefly data centers, get in line for grid connection. ERCOT's Jeff Billow reported: "we currently have 65 gigawatts that are eligible for baseload status... There is another 114 gigawatts that is eligible as studied load... 25 gigawatts... in between... another 20 gigawatts that had met the study requirements but did not submit a dynamic model... and then another 274 gigawatts that did not meet the study requirements." Staff cautioned the numbers are a ceiling only; none yet reflect whether applicants have posted required financial security or site control documentation.

Key dates: classification by August 7, 2026, a dispute and cure window through the end of August, and the formal planning study process beginning September 2, 2026, with final results filed in PUCT Docket No. 59772.

A license revocation case against a foot massage establishment, brought under the agency's new enforcement theory, a sexually oriented business (SOB) notice of alleged basis (NOAB) that the agency has now used to seek roughly 70 license revocations of massage businesses over the past year and a half, according to agency enforcement staff, went before the Texas Department of Licensing and Regulation (TDLR) at its July 28 commission meeting.

An administrative law judge (ALJ) had already reviewed the state's evidence, including a single unopened condom, bedding, locked interior doors, and food storage, and found it insufficient to prove the business's primary purpose was commercial sex rather than massage. Defense counsel argued the commission should adopt the judge's findings as written.

Commissioners pressed on whether the judge had weighed the totality of the evidence, including items such as a bedroom, a bathroom, and food found on the premises, against the business's stated purpose as a massage establishment. Rather than adopt or reject the judge's recommendation outright, the presiding commissioner moved to remand the case to the State Office of Administrative Hearings (SOAH), directing the judge to explain, considering the evidence as a whole, why it was insufficient to prove the business's primary purpose, and to clarify what "primary business" means under this framework. The motion passed on a voice vote with no recorded dissent.

The same meeting included several other enforcement and rulemaking items: license revocations or denials in four unrelated cases; rule amendments implementing SB 2044 and SB 2443 allowing electronic delivery of contested case notices; adoption of the 2026 National Electrical Code with a continued exception for outdoor HVAC GFCI requirements; rules implementing SB 968 for the podiatric medicine program; and updated construction code references for air conditioning and refrigeration contractors.

Jesse Salcillo, deputy commissioner of non-depository supervision at the Texas Department of Banking, told a legislative committee that the state currently licenses about 20 currency exchangers and roughly 175 money services businesses (MSBs), the category that includes money transmitters, with combined annualized transaction volume of about $440 billion. The testimony came before the House Homeland Security, Public Safety and Veterans' Affairs Committee, which convened July 30 for an interim charge (a study assignment given to legislative committees between regular sessions) on countering foreign financial influence in illicit networks.

A committee witness, Michael Lucci, founder of the Austin nonprofit State Armor, testified that an entity affiliated with Alipay holds an active Texas money transmitter license (MTL). Under committee questioning, Lucci testified that a Pentagon designation of Alibaba as a Chinese military company, made roughly two months before the hearing, has not affected that license.

This claim, that a Pentagon Chinese military company listing has had no effect on the entity's Texas license, is witness testimony reported here as testimony, not as independently verified fact; it is queued for verification against the federal register and the Department of Defense's designation list. Lucci separately alleged, without independent corroboration presented at the hearing, that a White House memo described Alibaba using American financial data to assist China's People's Liberation Army; that claim has likewise not been independently verified and is not treated here as established fact. A second witness, Ambassador Kelly Curry, described a pattern of Chinese transnational criminal organizations she said operate crypto kiosks and payment networks used to launder proceeds from scam operations.

Asked what states can do, Lucci pointed to Nebraska, testifying that the state enacted legislation barring "foreign adversary principals" from holding a money transmitter license there, a model Texas lawmakers could consider before the 90th Legislature convenes in January 2027. A sheriff on the committee panel separately told regulators that local police departments typically lack the resources to investigate cross-border or online financial fraud below the dollar threshold that draws federal attention.

The General Land Office's (GLO) Veterans Land Board (VLB), which manages land and home loans, nine state veterans homes, and multiple state veterans cemeteries for Texas veterans, approved the results of its online forfeited land bidding period at its July 28 meeting. Of eight tracts offered, seven sold for a combined $742,003; the eighth, in Walker County, drew no bids and will be re-offered.

VLB staff also disclosed, for the first time, an estimated $1.7 million a year improper payment risk in therapy billing for veterans home residents rated 70% or more service connected disabled, an estimate built by applying a national Centers for Medicare and Medicaid Services (CMS) improper payment benchmark of 17.9% to VLB's therapy claims.

Staff outlined a three part remediation plan: a third party contractor to review documentation and billing compliance, a newly approved full time therapy services compliance specialist, and an ongoing review program modeled on VLB's existing pharmacy audit program. No board vote was required for this informational item.

Separately, the board's attorney requested, and the board approved, emergency authority for the VLB's executive secretary to replace the operator of the William R. Courtney Texas State Veterans Home in Temple on short notice if unspecified "ongoing concerns" about contract compliance escalate. Staff said a standard, multi-year procurement process would follow for any permanent replacement. The exact nature of the concern was not disclosed on the record.

The board also voted to discontinue the Veterans Home Improvement Program (VHIP), a decades old home improvement loan program whose $25,000 cap has not changed since 1992; increased its National Cemetery Administration construction grant request for an East Texas veterans cemetery from $16.3 million to $20.8 million; and renewed cemetery operations contracts with the City of Killeen and Nueces County.

Andy McLaurin, assistant commissioner for funding and financial aid at the Texas Higher Education Coordinating Board (THECB), confirmed under questioning from Sen. Lois Kolkhorst that the agency prorated community college performance based funding payments this interim because college performance outcomes exceeded the amount the Legislature appropriated for that tier, at the July 28 Senate Finance Committee hearing addressing interim charges on higher education financial transparency and fraud, waste, and abuse prevention.

McLaurin placed responsibility for the shortfall with his own agency rather than the Legislative Budget Board (LBB) or the House and Senate budget committees, saying growth in the new performance tier program vastly exceeded even the agency's own significant growth expectations. He said THECB will request a supplemental appropriation next session to cover the difference.

The exchange also clarified that Texas State Technical College (TSTC) operates under a separate "return value" formula tied to graduates' salary differential over a multi-year lookback period rather than a projected appropriation, so it was not subject to this interim's proration, an LBB analyst confirmed on the record.

In the same hearing segment, Sen. Royce West, Sen. Kolkhorst, and Chair Joan Huffman questioned the State Auditor's Office and THECB about why prior financial control failures at Texas Southern University (TSU), including a 2006 embezzlement case and a 2020 incident involving cash found on campus, never triggered a full discretionary state audit despite the Legislature appropriating many millions of dollars to the institution over the interim. Sen. West called the pattern a breach of fiduciary duty by TSU's governor appointed, Senate confirmed board of regents.

McLaurin also confirmed that, under Education Code Chapter 130, community colleges must self-certify annual compliance by August 1, and under Chapter 61 the commissioner must file a list of compliant, funding eligible colleges with the Comptroller and State Auditor by September 1, with non-certifying colleges cut off from state funds entirely. Sen. Paul Bettencourt noted Collin County had, according to committee discussion, not submitted required compliance information, and asked whether general academic and health related institutions face the same funding clawback; McLaurin said they do not, which Bettencourt called a double standard in oversight rigor.