House Bill 5200 would have required ERCOT to evaluate grid-enhancing technologies (sensors, software and advanced conductors that raise an existing transmission line’s capacity). It passed the House 128-0 in 2025. The Senate never gave it a hearing.
Its author, State Rep. Rafael Anchía (D-Dallas), says no senator would carry it, and he plans to refile it for the session that opens Jan. 12. Lawmakers return to Austin as the large-load queue tops 400 gigawatts, mostly data centers, and Gov. Greg Abbott froze data center development.
On this week’s Energy Capital Podcast, Joshua Rhodes talks with Anchía, who has represented House District 103 since 2005, about how a bill becomes Texas law and what the 2027 session holds for the grid.
How a Texas bill dies. About 1,200 of the 8,700 bills filed in 2025 reached the governor. Anchía calls the process “a mechanism designed to kill legislation” and tells advocates to build coalitions between sessions.
SB 6’s price of entry. The Texas Public Utility Commission’s rules under SB 6, the 2025 large-load interconnection law, require a $100,000 study fee for large-load connection to the grid and $50,000 per megawatt in security.
Predictable rules. Anchía, once skeptical of Texas’s competitive market, says it works when the rules stay predictable, and he names what undercuts it: shifting tariffs, threats to re-regulate, and favoring one fuel over another.
Upgrades and new lines. He supports the 765-kilovolt lines the PUCT began approving in August. Utilities such as Oncor recover new-line costs more easily than upgrade costs, he says, so he wants grid-enhancing technologies made a condition of new builds.
Winter risk after Uri. Experts tell Anchía a severe winter storm worries them more than summer peaks. He wants proof the Railroad Commission’s 2022 gas weatherization rules will hold through a storm.
The 2027 list. Anchía expects bills will be filed requiring data centers to disclose energy and water use and ending their taxpayer subsidies. He also wants a temporary fund, modeled on the old System Benefit Fund, for the Texans least able to absorb price shocks to pay their electric bills.
Plus: his two decades in the House, from deregulation through transmission line buildout, his predictions for the Nov. 3 Texas House and statewide races, and what a change in control of Congress would mean for Texas energy.
Chapters
00:00 – Meet Rep. Rafael Anchía
00:58 – How a bill becomes law in Texas
06:25 – When public input matters most
08:33 – Why HB 5200 stalled in the Senate
12:43 – 20 years of Texas energy policy
16:46 – What still needs fixing after Winter Storm Uri
19:18 – The data center rush and SB 6
22:27 – Why the governor paused data centers
26:05 – Steady rules vs. picking winners
30:29 – Bigger power lines and getting more from the grid
35:01 – Rewarding utilities for doing more with less
37:51 – Priorities for the 2027 session
40:14 – Election predictions for Texas
44:02 – If Congress flips: what it means for Texas energy
Resources
Host
Joshua Rhodes: LinkedIn
Energy Capital
Guest
Rep. Rafael Anchía: Texas House profile | LinkedIn
Bills, filings and primary sources
In the news
From Texas Energy & Power
Related Energy Capital episodes
Transcript
Joshua Rhodes: Chairman Anchía, welcome to the Energy Capital Podcast.
Rafael Anchía: Josh, thanks for having me.
Joshua Rhodes: Yeah, absolutely. But before we get into any kinda like substantive policy positions and other types of things, I actually wanted to get a little bit of a civics lesson, ‘cause I don’t think we do civics enough. And, you know, it’s been a long time since I’ve listened to Schoolhouse Rock, you know, “I’m Just a Bill,” in terms of like how a bill moves through Congress.
Rafael Anchía: I will literally sing that song for you, by the way. I love that song.
Joshua Rhodes: That would be great. If we have time, we’ll get a rendition. Maybe we can get a harmony going there.
Rafael Anchía: Love it.
Joshua Rhodes: That would be amazing. For someone who doesn’t follow the Legislature closely, can you walk us through how an idea becomes a law in Texas? Like, who typically comes up with it, who writes the bill, what happens it’s filed, gets through the chambers, and ultimately gets all the way to the governor’s desk? Can you just give me, like, what’s the life cycle of a bill in Texas?
Rafael Anchía: For sure. And I always let people know that, you know, despite what we learned in Schoolhouse Rock, the legislative process is not a bill-passing machine. It is not—
Joshua Rhodes: Okay.
Rafael Anchía: —a mechanism designed to pass legislation. It is a mechanism designed to kill legislation. And so, you know, when he says, “I think I’m gonna be a law someday, I hope I” anyway. Yes, the bill usually ends up in a pool of blood on those steps and not sort of jumping for joy being signed. And, you know, a lot of times people think, “Wait. Isn’t it designed to pass bills?” Well, there’s only one way to pass bill. There are a million ways to kill bills. So ideas come from everywhere. They come from constituents, cities, agencies, advocates, industry, legislative studies during the interim period, and then oftentimes through a member’s own life experience. And what we do initially is we send a draft of the bill over to what’s called the Texas Legislative Council. They’re a nonpartisan group of lawyers that just make sure that your idea, whatever in your brain, your constituents’ brain, actually fits into an existing place in state law, has all the relevant definitions, et cetera, and makes sense more than anything. And then they send you back a draft, and you iterate that draft, and then finally you get to something that’s ready to be filed. Well, that prefiling period starts right after the November election on Saturday, November 8. And you’ll have people, you know, who are usually wanna file a red-meat bill, and they will literally wait in line at the clerk’s office so that they can be among the first people to file the bill, and they’ll put out a press release, and then they’ll do some media around that. The session, however, does not begin until January 17, 2027. So we meet for 140 days during odd-numbered years. There are 150 of us in the House, and then a really rational number of senators, which is 31. Don’t know how they came up with 31, but there are 31 senators. Our founding mothers and fathers who drafted the structure of our governments said 31. Okay. When you get a bill and you’re really excited about it and you file it, the first gating item is that the speaker has to refer the bill. So I’m a House member, same thing happens on the Senate side where the lieutenant governor’s the presiding officer. The presiding officer needs to refer the bill to a committee. And then the committee chair decides whether or not it even gets a hearing at all. If it gets a hearing and everything goes well, then the committee chair decides whether it comes up for a vote. And then in committee, the members get to vote on it. Most of the bills do not get out of committee, so getting out of committee is a big deal. Then finally, it goes through a procedural committee that’s called the Calendars Committee, and ultimately is placed by this Calendars Committee on the agenda that we have to take up and consider bills on the House floor, and then we vote on it. And once that’s done, you think you’re done, but you’re not done, because there’s this other chamber, the lower chamber, as I call it, which is the Texas Senate, and then we send it over to the Texas Senate and the process starts all over again. And then if it gets through that process, it goes to the governor for signature. So again, I point out there are a lot of places where your great little idea, your great little bill, is gonna get tripped up. And— there’s another piece to it, which I’m sure your listeners don’t wanna hear about. Well, if the House passes one version of the bill and the Senate passes another version of the bill, you have to convene a committee, which is called a conference committee, and they need to work out the differences, and then that gets sent on to the governor. So to give you a sense of scale, members filed almost 9,000 bills last session, and only about just a little over 1,000 reached the governor. Most of them do not fail on a vote. They’re either tripped up on procedural grounds in this bill-killing process, or they simply run out of time.
Joshua Rhodes: Okay. Got it. They wouldn’t wanna put a bill laying in a pool of blood on Saturday morning cartoons, I guess. Like, so that’s probably with the other, the other version of that.
Rafael Anchía: Yeah, no, it doesn’t pair well with “Conjunction Junction,” you know? It’s just doesn’t work.
Joshua Rhodes: Sorry. I guess you grew up listening to those same ones. In fact, I actually remember another one. It was about conserving water, and it was like someone in a house, they’re brushing their teeth, they don’t turn off the spigot, and there’s like a little pond going down, and there’s a fish inside who, like, asks to— them to not, like, keep wasting water.
Rafael Anchía: My favorite was “I Hanker for a Hunk of Cheese.” I don’t know if you remember that one, but that was set to kind of a hoedown theme. I think it got me started on my lifelong addiction to cheese.
Joshua Rhodes: Sure. Okay. That’s great.
Rafael Anchía: That’s niche. Very niche stuff.
Joshua Rhodes: That’s gonna bring up some memories, I think, for a lot of folks. When a bill’s moving through, if it can get through the landmine, the minefield, I guess, of where it has to move through, there’s various different ways where input can come into these from outside the chambers, right? So you’ve got your internal checks, people putting amendments and all kinds of things at some point. But there are places, and I think it’s more so these committee meetings, which are pretty important, where basically anyone, in fact, they’ve let me in there before, anyone can show up, you know, to talk about these types. So can you talk about, like, the public hearings versus floor debates for stuff? Like, when is input from outside put into these things?
Rafael Anchía: I always remind people that even though the legislative session starts in January, it’s really important to work during the interim when we’re not in session during that even-numbered year to get in the ear of legislators to start, you know, winning hearts and minds in that process. Because by the time you get to a hearing, you really want to have a well-choreographed presentation. Hearings. Hearings oftentimes are not about quantity, they’re about quality, making sure that you have the right experts lined up, make sure that you have opinion leaders that are representative of your community if it’s a local issue. If you are doing this right, you will have met with either the staffs or the members themselves of each person on the committee so that they’re not hearing your issue for the first time when they’re walking in. You know, if you do this right, there should be a lot of nodding, there should be a lot of understanding. If it’s a controversial issue, you know, you’ll have people for and people against, and you’ll have members on the dais that are either for or against. I’ll say that about 85 percent of the things that we deal with in the Legislature are nonpartisan.
Joshua Rhodes: Hmm.
Rafael Anchía: So that you may find your allies in one place or another. You might find it, you know, from a rural Republican or, and an urban Democrat. And so I always tell people, build as broad of a coalition as you can in anticipation of a legislative session, ‘cause most of what we do doesn’t involve your, you know, Republican jersey or Democratic jersey.
Joshua Rhodes: Got it. A lot going on in this economy, a lot going on in this state we gotta agree on or get together, or at least, you know, live together with. Let’s use an example of, like, something that happened with one of your bills last time. So let’s use your H— last year, or the last odd, yeah. We always say it’s odd when the Legislature’s in session, right? ‘Cause it’s every odd year. So a couple years ago, you know, you introduced HB 5200 on grid-enhancing technologies. I believe it passed State Affairs 15-0, passed the House 128-0. Sounds like the most bipartisan thing I’ve ever heard of in my life, but it never even received a Senate hearing. So what happened? How can a bill that supposedly has, like, unanimous across the board, like, support in one chamber not even see the light of day in the other one?
Rafael Anchía: Let me just start by saying I don’t pretend to understand the vagaries of the Senate, especially under Dan Patrick. And, you know, I think, I think senators—
Joshua Rhodes: Fair enough.
Rafael Anchía: —senators have de— devolved a lot of their independence to the presiding officer. And if you talk to senators behind closed doors, they say they don’t have all that much autonomy and everything has to get past the lieutenant governor. So who knows? It may have been completely unrelated to the bill. It may have been sort of the industry groups thinking, “Well, you know, we may need Rafael’s support on something else, so we don’t wanna kill the bill, have his bill end up in a pool of blood at his feet. Rather, we’ll do it very, very quietly in the Senate.”
Joshua Rhodes: Yeah.
Rafael Anchía: Again, there are many, many ways to do this. The bill did get filed a little bit late. If you get a 5200, you know, that’s not a high bill number, and that’s because we were working with stakeholders to try to come up with something that made sense. We were trying to work with our TDUs on something that made sense. And in the end, who knows? I say this to groups all the time. The nice thing is that we had a really great result in the first session that we introduced this.
Joshua Rhodes: Mm.
Rafael Anchía: Usually an idea takes a while to germinate, become part of the consciousness of the Legislature, and then usually in your second or your third session you can get something passed. It is not for those who wanna go real fast, you know? We really do take things slowly in the Legislature. I’m hopeful that next session we’ll have a Senate author— I couldn’t get anybody to author it— so that you have two bites of the apple, a Senate vehicle moving and a House vehicle moving.
Joshua Rhodes: Okay.
Rafael Anchía: So we’ll do things to increase the chances of passage. I will say, here are a couple positives. Number one, we worked with the TDUs. They gave us extensive comments. We incorporated all of their comments to where we had nobody testifying against it in committee.
Joshua Rhodes: Okay.
Rafael Anchía: Number two, we had three Republican members of the State Affairs Committee who signed onto it as joint authors. So that’s really telling, and there were some very, very senior members like John Smithee and Drew Darby, who’s kind of the transmission czar in the state. He gets it. And then John McQueeney. Ironically, hey, this is for you, McQueeney. You may have voted against it on the House floor, or at least not voted for it on the House floor. Maybe you abstained. Maybe he wasn’t on the floor. But anyway, he supported in committee, which is the important part. And so we have, I think, a core group now that wants to work on this. Then the other thing that is going to put wind in its sails rather than present headwinds is that you do have a lot of rural Republicans that are hearing about transmission in their communities, and they’re saying, “Do we really need these high-voltage transmission lines? Do they need to cross my massive ranch,” et cetera. There’s a real willing audience for the narrative that, hey, let’s try to squeeze as much as we can out of our existing system—
Joshua Rhodes: Absolutely.
Rafael Anchía: —either alongside or prior to our authorization of these higher-voltage transmission lines. I believe it is not a binary decision. I think we need both. However, I do believe we’ll have a more willing audience among my colleagues on the other side of the aisle.
Joshua Rhodes: Yeah. No, absolutely things. And I want to dig into transmission a little bit later on—
Rafael Anchía: Mm-hmm.
Joshua Rhodes: —in our chat here. Loud and clear, I heard you. I’m pretty sure, I think I heard you with what happened there in the Senate, so I guess we’ll see. Okay. So thanks for the civics lesson. I think it’s good to be reminded every once in a while kind of how things work so we can know how to enter into those conversations if we want to. So let’s start talking about energy issues in Texas. So, you know, you’ve served in the Texas House since 2005. You’ve seen a lot of changes in the Legislature and Texas energy kind of over that time, massive changes in the electricity sector, hydraulic fracturing, all kinds of massive changes in the energy sector. But it seems like lately that energy, and particularly electricity, has really become one of your kind of core issues and a core issue of, like, the state or the general populace understanding. But if you look back over those two decades, like, how has your perspective on the indus— industry changed in the time that you’ve been in the office?
Rafael Anchía: In a couple of ways. I think it’s changed in a couple of ways. I mean, I do spend a lot of time, as you point out, at that intersection between energy production, new technology, and stewardship of the Earth. Wherever those axes intersect—
Joshua Rhodes: Yeah.
Rafael Anchía: —I like to give that a lot of legislative oxygen. The question is why. For two reasons. I was elected shortly after Texas deregulated, and there was a discussion at the time about whether deregulation was working. There were some major energy-related mergers. You’ll recall that the KKR and TPG purchase of TXU at the time.
Joshua Rhodes: Yep.
Rafael Anchía: I was sort of knee-deep in that activity. And then it was the beginning of wind in Texas and—
Joshua Rhodes: Yeah.
Rafael Anchía: —it was exciting how much was happening. We quickly became number one in wind, outpacing, you know, the next three states combined, and I saw how a balanced energy portfolio was very helpful to the state and incredibly powerful vis-a-vis our competitor states and other economies. And so the other thing was, when you come in, you think you know it all, but you realize shortly thereafter that you know absolutely very little, and I found it intellectually interesting. I thought to myself, “My gosh, this stuff is super complex.” My predecessor in office would say, “The only reason to do something in the, in the Legislature is ‘cause it’s hard, so jump into the hard stuff.” And this has been hard. This has been really hard. So dereg, a competitive market. Then we did CREZ, which is the competitive reinvestment zones that built out sort of the long power lines to West Texas to connect energy sources there with our urban areas. Shortly after that, we had Winter Storm Uri. All the while, y— I’m concerned about climate change, I’m concerned about the warming of the Earth and fugitive methane emissions from our industrial activity, which we are now living in real time—
Joshua Rhodes: Yeah.
Rafael Anchía: —and try to, you know, figure out how do we in— incent methane capture, greenhouse gas capture and sequestration. So there’s always been something that has been new and interesting. Then fracking happened, and on and on and on. And then the real pivotal sort of modern point, by modern I mean sort of since COVID, was Uri. That’s what took sort of an intellectual curiosity and put it on everybody’s radar screen, put it on the front page, the blackouts, the, you know, the loss of life. Hundreds of people died. And then, you know, a lot of profiteering where companies during this widespread disaster made a boatload of money— privatized a bunch of profits and then losses were widely socialized. I mean, Texans are still paying for the cost of Uri today. And so we wanted to spend a lot of time mitigating that risk. You’ll never end the risk, especially with the increase of frequency and severity of natural disasters. It seems like between fires and hurricanes and—
Joshua Rhodes: Mm.
Rafael Anchía: —tornadoes and droughts, all these natural disasters, we’ve had a number of 100-year events in just in the last decade, winter freezes. But you’re trying to build a more resilient system to lower systemic risk on the grid, and that’s been an interesting challenge as well.
Joshua Rhodes: Absolutely. And then before we like get to today, I guess like, yeah, it is worth kind of like reflecting a little bit on Winter Storm Uri and the after— the impacts. You’ve already brought it up. I know a lot of work has been done since Winter Storm Uri. Is there work yet to do post-Uri for particularly winter-type events? We set new summer peak demand records and prices were, you know, a yawn, you know, not a big deal. We’ve built a lot of resources. Is there anything that you’re thinking about for like winter risk in the electricity sector still?
Rafael Anchía: Yeah. I mean, the Railroad Commission in 2022 just adopted its first rules on weatherization. The oil and gas industry was like, “Us? Never. We were part of the solution, not a problem.” And they fought tooth and nail, not only at the state level, but then at the federal level to absolve themselves of any culpability in that process, when in fact the generators failed for sure, but so did getting natural gas out of the ground. And so while the generators had to immediately weatherize, it did take a while for the Railroad Commission to publish their weatherization rules. It covers the critical gas facilities, fines up to $1 million, and I think that’s progress. Don’t get me wrong.
Joshua Rhodes: Yeah.
Rafael Anchía: I do wanna, however, see the results, inspections, enforcement, and candidly, how gas supplies hold up in the next Uri, right?
Joshua Rhodes: Yeah.
Rafael Anchía: That remains to be seen, ‘cause we will have another Uri. We have what’s called a 1-in-10 standard in Texas, and that means that you’re gonna have a one Uri-type event every 10 years. It’s what kind of resiliency you’ve built into the system to handle that. And when I talk to experts, they’re less worried about summer peaks, thank you, solar, you know, than they are about winter peaks. Solar and batteries have saved the day. You mentioned we hit a new peak. Yawn. We handled it comfortably with plenty of margin. The real test for us is gonna be another real vicious winter storm.
Joshua Rhodes: Yeah, I mean, I think that’s right, it’s like, I remember I was part of the three-person team that did the official postmortem for the PU— for the Public Utility Commission post-Uri. I think we lost like 85 percent of our natural gas production in Permian, and we have a just-in-time delivery system, right? And so any piece of that system goes down and power plants can’t get gas, they’re not gonna make power. And I think there was about 6,000 MW of like natural gas power plants that listed that they just couldn’t get fuel during that time. So frozen or not, you’re not making anything without fuel going in. But let’s fast-forward to today. In April, y’all had a hearing with ERCOT’s Pablo Vegas where he talked about this 410 GW or 400, make it 500, I don’t know. It’s like a very large number of—
Rafael Anchía: It’s close to 500, yeah.
Joshua Rhodes: Yeah. That’s what my bingo card was on, was 500, by the way. But like 90 percent of that roughly is data centers. You said, “Sounds like we’re gonna need every electron to bear,” and Pablo said, “Yep, we’re gonna need it all.” But like, if you take 500,000 MW, I mean, that like quadruples the size of the ERCOT grid in a few years. Like—
Rafael Anchía: At its peak.
Joshua Rhodes: Yeah, at its peak. I’m of the persuasion you can build fast in Texas, but I don’t think we can build that fast. As you’re looking for to make policy around this, like what do you believe is coming? Like if you have an answer. If you don’t have an answer for that, it’s fine. “It depends” is totally a valid answer right now. But how are you looking at these large load numbers?
Rafael Anchía: As you’re asking me that question, I’m hearkening back to a dialogue I had with Pablo Vegas at the time, and it may have been in the same hearing that you’re referring to. And I asked him, I said, “Hey, how much of this is real?”
Joshua Rhodes: Yeah.
Rafael Anchía: “And how much of it is speculative?” ‘Cause we all know a certain percentage is speculative. And I asked him like, “How much do you discount it at ERCOT?” And it’s a pretty significant discount. I can’t remember if he said they haircut it by like 60 percent or 80 percent.
Joshua Rhodes: Yeah.
Rafael Anchía: But it’s pretty substantial. Many of the requests that are being made in ERCOT are duplicative of requests made in other markets. It’s basically forum shopping to see how quick to sort of ensure speed to market. So everybody’s got a bunch of irons in the fire. The risks, however, they cut a couple of different ways. If you underbuild, we get scarcity and high prices, right?
Joshua Rhodes: Yeah.
Rafael Anchía: And then if you overbuild for transmission for projects that never show up, my constituents bear the brunt of that. And so I totally get why, you know, the Batch Zero process needed to be very deliberate. We passed a bill that tried to separate the wheat from the chaff on these projects. The PUC adopted that forecasting rule where they said that only large loads with a signed interconnection agreement that met the new standards and were going to be put in the queue. So it was like, “Hey, look, we wanna see real money, we wanna see real projects, and we wanna see real planning.” And that’s before anybody starts paying for infrastructure, and we want developers to largely bear the brunt of their infrastructure build-out needs. You know, we passed SB 6, that was important as well. You know, I don’t know how much you wanna get into, but the large loads had to pay study fees of $100,000 to $300,000. They had to post $50,000 of security per megawatt, 100 percent of the cost of their hookup, and there were real penalties if you walked away, which I think creates a lot of risk for the developers, candidly. We finance apartments and hotels, and those are some pretty steep requirements.
Joshua Rhodes: Hmm.
Rafael Anchía: If you’ve got that much equity at stake, it is hard to put that much of a financial commitment at stake on spec. You really need to be well down the road before you start making those commitments.
Joshua Rhodes: Yeah. A lot of the processes, Batch Zero process, kinda PUC’s large-load rule that they, you know, adopted mid-September, so are kinda stemming from SB 6 from, like, last session, which really designed to really kind of help us manage this. I mean, everything is moving so fast, like all these numbers have— even since SB 6 came around and, you know, it’s been rolling out, like things have been changing. Like, are things moving so fast that more needs to be done, like this semester? Like, it’s this semester.
Rafael Anchía: This semester. We have homework, Josh. We do.
Joshua Rhodes: Yeah. Y’all got homework to do. You can cheat on it with AI like all my students do.
Rafael Anchía: Yeah, no, the finals are quickly approaching. Like, I find this period that we’re in incredibly vexing because we’ve got massive investment. I mean, these are investments, these dwarf the investments that we saw post-hydraulic fracturing and horizontal drilling—
Joshua Rhodes: Yeah.
Rafael Anchía: —innovation, right? That big boom. This is, I think, even bigger. At the same time, we’re in historic droughts. At the same time, we have foreign actors who are trying to prevent us from taking the lead in AI. Then there are legitimate concerns—
Joshua Rhodes: Yeah.
Rafael Anchía: —good-neighbor concerns of people who are gonna live next to some of these facilities, and there are process concerns about how much notice I get if I want to contest these facilities.
Joshua Rhodes: Yeah.
Rafael Anchía: And then innovation, like Moore’s Law is no longer five years. Moore’s Law is, feels like five weeks, you know, where—
Joshua Rhodes: Yeah, five minutes, yeah.
Rafael Anchía: —technology, five minutes, it’s changing and changing and changing and changing. And Moore’s Law was based on a, on human innovation, and now we have machine innovation. And by the way, there’s an existential threat out there that even the executives at Anthropic and others are only placing at about 10 to 20 percent. What?
Joshua Rhodes: I mean, yeah. Pretty good odds.
Rafael Anchía: Yeah. Like, I wouldn’t board a flight if my chances of, you know, dying were 10 to 20 percent. So you have all these things hitting us at one time, and figuring— and then separate and apart from all these things that are hitting at one time, guess what? We have a moral responsibility to take care of our constituents. We’ve reflected those values in our laws so that our generators can’t let people die, right? And if not, there are serious penalties. And so we are also experiencing, we’ve also grown by 2.5 million people since the last census was taken.
Joshua Rhodes: Yeah.
Rafael Anchía: I mean, we’ve got all these things happening. We’re growing, all this investment, new technology, and in politics, let’s not forget, you know, the governor just ordered an audit in August, and he halted state permitting in September because data centers have become so unpopular in the public consciousness, kinda like fracking was, you know, back in the day. I think we’re sort of at the same period of kind of public reaction and consciousness. I think the concerns that people were articulating on data centers are legitimate.
Joshua Rhodes: Yeah.
Rafael Anchía: You know, the governor had championed data center growth and location to Texas in the past, championed the tax breaks, and, you know, now I think the reaction to that has been pretty powerful so that he’s saying, “Okay, we have to stop. We have to stop,” and then put a pause on it. The question is, you know, if he wins reelection, does he turn the spigot back on? If there’s a new governor, you know, what is Gina Hinojosa, for example, what is her view? She’s been pretty critical in the past. What does that do to public investment and the need to produce more electrons to meet this growth? As much as we’re preparing for the final, a lot of the prompts are still unclear.
Joshua Rhodes: You said it earlier in terms of like, you know, SB 6 designed to kind of separate wheat from chaff. I mean, I think that’s a pretty apt metaphor for this, and then the— ERCOT’s response to that was this Batch Zero process. We’ve got the governor putting an audit in front of that. I was calling it the step zero to the Batch Zero process at some point. Being in Texas, it is an interesting kind of place, right? Because we generally have been like, “More development, come here, everybody.” But we’re now we’re putting up some roadblocks. Now, I think it’s— we need some because we can’t quadruple the grid in five years. We just literally can’t put that much steel in the ground that fast. And so like— and that puts inflationary pressures on everything, and we’ve got this pushback against data centers. Like, do you think a lot of this is just due to the pace? Just like how fast it’s shown up and how fast it wants to move? Like, that’s what I’m feeling like.
Rafael Anchía: Yes. For sure. And, you know, and there’s some acknowledgement that if you develop a regulatory regime today, is it gonna make sense in two years?
Joshua Rhodes: Yeah. Well, fair enough.
Rafael Anchía: The flip side, if you’re looking to invest capital in the state of Texas, and forget data centers for a minute, sort of oil and gas operations in the Permian Basin, industrial activity associated with that that is not oiling, you know, that is sort of oil and gas adjacent—
Joshua Rhodes: Yeah.
Rafael Anchía: —manufacturing activity that is non-data center, non-oil and gas, they all need power. So I’ll tell you the things that don’t help. The staccato pace of tariffs, maybe, that change on a regular basis do not provide predictability for the marketplace, for oftentimes delicate supply chains, all of which feed this ecosystem of energy that we’re talking about. That doesn’t help. Immediately changing the rules of the game each session or threatening to—
Joshua Rhodes: Yeah.
Rafael Anchía: —with market design, that doesn’t help. I mean, I was in a conference committee with a pretty prominent member of the Senate on the Texas Energy Fund, and they were like, “You better take the Senate approach or we’re just gonna re-reg.” It’s like, “What? You are from which party, sir?” You know? I mean, like, wait, re-reg, like, so this is like the Chinese Communist model for state-owned control of energy. Then you had the Berkshire Hathaway plan that was proposed by members of the Senate and seemed to be kind of like a favored state-dispatchable system that would compete with the private market. So none of that stuff helps.
Joshua Rhodes: Yeah.
Rafael Anchía: None of it. I maybe started as in a place when I first got elected, I was skeptical of the competitive market. I am no longer. I believe that it largely functions if the market is permitted to function without sort of anomalies, where the marketplace is able to respond to the rules of the road with some predictability. And then the last thing I think doesn’t help is when, you know, members of the Legislature say, well, they wanna favor one type of fuel source versus another—
Joshua Rhodes: Yeah.
Rafael Anchía: —which we’ve seen, you know, repeatedly. And my mantra is like, every electron, every electron, every electron, the market will tell us, you know, what the favored fuel sources are. The market will invest in what is most efficient. That has happened to be over the course of years, it’s been wind, and increasingly now it’s solar, it’s batteries, and maybe we’ll see peaker plants. But the narrative in the Legislature is, “We need baseload combined cycle,” which we do, which we do, but we can’t pick winners and losers. That does not help.
Joshua Rhodes: Yeah, I mean, I think it’s loud and clear. I mean, I think business in general has been very clear, it’s like we’d prefer bad policy over uncertain policy. Let us know where the goalposts are. Like even if they’re 200 yards that way, we’ll figure out how to kick the ball through it, right? If they’re moving back and if they’re moving side to side, that just makes it tough. And I think you’re right on like the market when given clear rules and allowed resources to compete with each other, I think we end up in a better spot. I was on a panel for the Texas Economic Development Council last week in Houston, and we were talking about firming and all this other stuff, and, you know, it’s really— I was like, my hope is that like if we adopt some of these things, we make them technology agnostic ‘cause maybe the answer is gas right now for some of these things. But like let geothermal compete, let longer duration storage compete. You know, it’s like the more things that are able to show up, you know, the better off it’s gonna be. And right now, as you said, we need it all and we need it all for the cheapest, you know, we can do ‘cause that’s how Texas miracle works. At least that’s how it works from where I’m sitting. So yeah, I mean, I think that makes a lot of sense. Let’s talk about transmission a little bit. We’ve brought it up. So it’s like, you know, you talked about the CREZ lines a little bit earlier. It did a great job of connecting the eastern and western parts of the state is, you know, we nominally built those to gather sources of energy and bring them over. Ended up figuring out, hey, it’s really, you know, helps oil and gas if you electrify these downhole pumps, you can get more out of it. Now we’ve got this, you know, 765 backbone STEP lines nominally designed, at least the western portion to, you know, electrify oil and gas operations. But that op— also opens up a lot of good solar resources and other places like that. But they become pretty contentious, right? So the PUC’s approved two of these lines and has kicked a third of the western lines kind of back down for more. So where are you landing on this? I think clearly we need more transmission, but like, you know, how do we make sure we get the right balance in terms of like, you know, getting the input of the folks that, you know, these transmission lines are gonna cross?
Rafael Anchía: I’d love to see a world and the Public Utility Commission said, “Hey, if you want to be one of the developers of what we call these import paths, right, import path one, two, or three—
Joshua Rhodes: Mm-hmm.
Rafael Anchía: —Oncor or LCRA, AEP, you have to install grid-enhancing technology in your existing system,” right? ‘Cause right now the way the incentives work, and I’ll use my hometown friends here at Oncor, they get a thing called a certificate of convenience and necessity, which is basically a little monopoly to build out one of these import path, one of these corridors. And they love that ‘cause that’s new revenue beyond their current system, and this certificate of convenience and necessity does not require them to go before the public and try to make a rate case. It’s like, build it—
Joshua Rhodes: Mm.
Rafael Anchía: —you’ll get reimbursed, and so it really is attractive for their bottom line. What they don’t wanna do— you know, the incentives are not there for them to put in grid-enhancing technology in their existing system to squeeze more out of it and make it more efficient, because then they have to go to a rate case and they may not get a, you know, full reimbursement on it. So we have to figure out a way to align their financial incentives and make them invest in more efficiency in their current system before or coterminous with them doing a build-out. I am for 765 lines. I think they’re really important. Texas needs to continue to be a leader in transmission, and I’m for it for a couple of different reasons. Number one, we already have about $3 billion in stranded electricity. Everybody thinks, well, you know, our electricity system is like a highway system and it’s just a matter of bottlenecks. But actually some areas are not served and you have parts of the system that are not connected to the broader ERCOT grid. It causes dispatchability problems and it drives up costs for everybody.
Joshua Rhodes: Yeah.
Rafael Anchía: So we need 765s to eliminate some of these bottlenecks, or we need transmission to— more transmission to eliminate these bottlenecks. That’s $3 billion, not per biennium, it’s $3 billion a year. So let’s say over a five-year period, if you’re eliminating these bottlenecks, you’re actually saving about $15 billion, which is probably the cost of a large part of this import pathways, these corridors. Not all of it, though. It’s a pretty big price tag. So number one, it eliminates the bottlenecks. Number two, there is a lot of inefficiency in the oil patch, not just the Permian, but other parts of our oil and gas infrastructure where they’re running on— because they don’t have predictable power, they’re running on diesel generation, tons of methane emissions—
Joshua Rhodes: Yeah.
Rafael Anchía: —very inefficient. So we need to get it. They’re electrifying—
Joshua Rhodes: Expensive right now, too.
Rafael Anchía: —and super expensive, right? And that inures to our detriment as consumers. We need to make sure that they can electrify, reduce emissions, and at the same time have predictable power. That’s really important. And then, as I said earlier, hey, we need to keep our population alive. We cannot let it die. We have a moral responsibility.
Joshua Rhodes: Yeah.
Rafael Anchía: And when you add 2.5 million people to your state in a matter of, you know, half a decade, you have to meet that growth. Like, hey, we have to. We just have to. And then finally, everybody thinks about data centers. But with the electrification of all industrial processes, not just data centers, not just oil and gas, you have a lot of other uses that require additional transmission and distribution, yet another reason to invest in it if we wanna continue to be the eighth-largest economy in the world.
Joshua Rhodes: Yeah, absolutely. I’ve been— it’s one of the things I’ve been saying, it’s like I’ve been talking about electricity load growth since when data centers were still cool, I guess, is the way that I’ll put it, like, before the current— but I wanna pull that thread just a little bit before moving on to, like, the legislative session on grid-enhancing technologies. Like, I mean, I think you hit it, you hit the nail on the head there. It’s like it’s about incentives, right? Incentives matter. And, you know, right now with a lot of, like, the regulated, the wires and poles companies, they make more money the more money they spend. And for operational expenses, that’s just a pass-through, so they just don’t make as much money, you know, doing that. And so it’s like, do we have ideas for how we realign incentives around some of these things that right now just don’t look as good on a balance sheet as, you know, building a new greenfield line?
Rafael Anchía: Couple ways to do it. You condition the building of greenfield lines on a stair-stepped implementation of grid-enhancing technologies. That’s one way. You can deem grid-enhancing technologies to be reimbursable expenses, y— and even provide like a little vig on top. I don’t love that idea, but it’s a way through this process, and I don’t love the idea because it increases ratepayer—
Joshua Rhodes: Yeah.
Rafael Anchía: —costs slightly. There is a way to apply a formula that mandates GETs if it achieves a certain cost benefit, you know?
Joshua Rhodes: Okay.
Rafael Anchía: They don’t— mandates make the t— poles and wires companies grumpy. They don’t like mandates, and makes some of my colleagues in the Legislature very grumpy. So you really need to align financial incentives so they can make more money by doing the right thing, but getting that balance is tough. We’ve been battling on using, you know, the programs that allow you to use less energy, you know, conserve energy ‘cause it’s the cheapest energy, and we’ve tried to install incentives and they fight us every session. It’s been a little frustrating.
Joshua Rhodes: Yeah.
Rafael Anchía: Energy efficiency is what I meant to say.
Joshua Rhodes: No, I mean, it is tough, and I mean, I think we don’t have to talk about this, but zooming out to the federal level right now with, like, the siting bills and things like that that are going through, I mean, I think that’s one of the big arguments that, like, the green and clean groups are having about this is like it’s around incentives, right? And so it’s like if you have a functioning market like Texas, if you can just make the clean thing cheap or, you know, make clean energy cheap, like that’s just gonna win out in the system ‘cause that wins out for everybody. And if you align incentives such that it doesn’t matter if you spend money on building a new transmission line or grid-enhancing technologies if it looks the same on the book. I mean, I know that’s probably easier said than done like that. I mean, incentives matter.
Rafael Anchía: Or you get a bonus for selling less of your product.
Joshua Rhodes: Oh, yeah.
Rafael Anchía: I mean, that’s another way to do it. You know, they wanna sell more electricity, and if they’re conserving electricity or they sell less electricity ‘cause their system is more efficient, you know, maybe they get to share in some of the upside.
Joshua Rhodes: Yeah, that’s a good idea. Okay. Let’s look a little bit forward. So, you know, legislative session starts in January. What are the two or three biggest energy policy changes or things that you would personally are looking forward to for the session?
Rafael Anchía: First of all, I’m not looking forward to the regular session, for the record. That’s not true. I actually am. I think there are gonna be some pretty significant changes this election cycle, which, you know, I’m not making any predictions.
Joshua Rhodes: That’s for the next section of the chat, is predictions, so we’ll get there.
Rafael Anchía: Okay. But, you know, I think the people in positions of power may change a little bit, and that may put a new lens on how we view energy here. So first and foremost, this entire data center discussion has required us to revisit ratepayer protection, right? And we’re in an inflationary environment, the economy, you know, inflation is going through the roof in the economy. People are getting hit everywhere, and so ratepayer protection, affordability, has to be, you know, at the top of the list. I imagine we’ll have some energy— and, you know, we’ll have some transparency, increased transparency around energy usage and water usage for data centers.
Joshua Rhodes: Okay.
Rafael Anchía: We’ll eliminate taxpayer subsidies. I’m fairly certain all those things get done.
Joshua Rhodes: Yep.
Rafael Anchía: And what I’d like to see is the creation of— remember the System vet— Benefit Fund? Remember that old thing?
Joshua Rhodes: Yeah.
Rafael Anchía: That was used to balance the budget primarily, but create a new fund that would allow Texans who can least afford increases in their electricity bill with some sort of, you know, temporary adjustment or subsidy. Again, temporary is the operative word, but—
Joshua Rhodes: Yeah.
Rafael Anchía: —to protect everyday Texans against price shocks. You know, second, get more out of the existing grid. We talked about that. Thirdly, we’ve heard that the PUC is looking at possibly ending energy efficiency and load management programs. We need to not do that. Energy efficiency is the highest yield, best ROI that we can have with respect to electricity, so rather than end, we need to double down. And then on SB 6, I think we’re gonna have to come back to it and make some targeted fixes—
Joshua Rhodes: Okay.
Rafael Anchía: —where once we evaluate whether there are any gaps in the rules that the PUC adopts, I think something targeted rather than a reopening the whole law would make sense.
Joshua Rhodes: Got it. Okay. Yeah. No, that totally makes sense. Now we’re to the part where I’m gonna try to get you to make predictions about November ‘cause we’re getting toward the end. But, like, I will say, like, it does feel like that there’s a lot of things in play right now, like in terms of at the national level, maybe, you know, here at the Texas level. And maybe one of the issues is like the two biggest forms of the way that energy shows up or that hits people’s pocketbooks is front and center, right? There’s, you know, diesel hitting $6, $7, you know, a gallon, gasoline at $4, and everyone, you know, fears around ele— electricity prices have gone up, fears around them going up even more. So as we’re recording this, we’re only a couple weeks away from the November elections, and obviously I won’t hold you to any of this. Like, do you have any predictions you’d like to share? Like, a lot of these races are a lot closer than I think I’ve seen in a long time. Like, how are you feeling about it?
Rafael Anchía: So I do think that creating, you know, mechanisms to keep prices down have been kind of a consistent discussion among Democrats. It’s really awesome now that Democrats are anti-tariff. I’ve, by the way, I’ve been there the whole time. But I think eliminating a lot of the things that make things more expensive, whether it’s, you know, industrials pushing more costs onto average Texas consumers because they’re able to arbitrage the energy market, ending things like that. Or instead of ending things like that, maybe opening it up, you know, to consumer dis— demand response, doing more on energy efficiency, all that stuff. I’m hopeful that Democrats winning more seats, which I absolutely predict, and if Democrats are not in the majority, I think we’re gonna be really close. I think that’s gonna send a pretty strong signal to Republicans to course-correct whether in the we’re in the majority or not.
Joshua Rhodes: Mm-hmm.
Rafael Anchía: I’m hopeful that they do instead of, you know, sort of doubling down. You’ll recall the Republican autopsy about 2012—
Joshua Rhodes: Yeah.
Rafael Anchía: —you know, when, where Barack Obama, President Obama won reelection, and then Republicans sort of were wringing their hands and thinking about, “Hey, you know, we need to broaden the tent.” And then Trump comes along and takes the autopsy and he puts it back in the morgue. He’s like, “Forget this. You know, I’m gonna drive a wedge in this country.” And it was successful. It’s been successful for him. And I think that’s fundamentally changed our politics. We’ll see if Republicans course-correct after this, what I think is gonna be a pretty significant loss of seats in the House. And then in the statewides, you know, the races I’m really following, obviously my former deskmate, Jon Rosenthal, who’s running for railroad commissioner, you know, against a bona fide white supremacist. I’m not even calling him names. Members of his own party have called him out as racist. That one’s one to watch. And then obviously James Talarico, who, you know, has been in the driver’s seat in virtually every poll. I think it’s his to lose. I think we will have a Democratic senator unless things change, you know, materially. And then finally, the governor’s race is a lot closer than Greg Abbott would’ve hoped. We’re seeing polling that has Gina Hinojosa now in the margin of error or ahead in some polls. And Abbott had that firewall of hundreds of millions of dollars’ worth of campaign contributions that he was gonna deploy to help others, and now he’s using every penny of it to defend himself. So I think that one is maybe a surprise. And then, you know, we’ve got a bunch of down-ballot races that I think are gonna be closer than anybody expected. So the one thing I’m gonna predict is that in the Texas House of Representatives, we’re either gonna be in the majority or really darn close after election night.
Joshua Rhodes: Okay. When was the last time—
Rafael Anchía: Last time we’ve been in the majority?
Joshua Rhodes: Yeah.
Rafael Anchía: So I’ve been in the Legislature 22 years, and in 2009, after the 2008 Obama election, we got 76 Republicans and 74 Democrats with one race decided by less than two z— dozen votes. It would’ve been interesting if we were at parity.
Joshua Rhodes: Okay.
Rafael Anchía: But what we mi— we missed out on it by a vote. And then before that, you have to go in early 2000s to find a Democratic majority in the House.
Joshua Rhodes: Okay. So we may have some changes in the state House. We’ve touched a little bit on kind of the federal. If— just one question on the federal. So it does seem like that there’s maybe a bigger chance that the federal House of Representatives changes hands or possibly so. Do you think that would have any ramifications for Texas for energy? Would it be enough to move the needle or are we insulated enough from the feds in Washington on that? Or like how might that impact us if that happens?
Rafael Anchía: You’re correct to point out, you know, most nonpartisan forecasters expect Democrats to win the House. In Texas, however, because we’re mostly islanded in ERCOT, we have our own grid rules. However, Washington sets the economics, you know, tax credits, tariffs, environmental rules, permitting LNG exports, which is really important to Texas. You know, the 2025 federal law that cut wind and solar credits, they cut those solar credit deadlines short. We’ve been leading in solar, but, you know, project cancellations have risen nationally since then. We’re likely to see divided government, in my view, at some level. I think Democrats will also win the Senate, by the way. So what I believe that means is just more oversight, which many would argue has been lacking on the executive branch and a reinstitution of checks and balances as our founders designed. So I think you’ll see a lot more of that at the federal level.
Joshua Rhodes: Got it. All right, Chairman Anchía, good luck in November, and thank you for coming on the Energy Capital Podcast.
Rafael Anchía: Thanks, Josh. It was a pleasure. Really enjoyed it.
Joshua Rhodes: Absolutely.
