(TEXAS TRIBUNE) - Gov. Greg Abbott on Tuesday released sweeping regulatory recommendations on data centers for the Legislature to pass in the 2027 session, as Texas grapples with an explosion of artificial intelligence-driven development and soaring power demands.

In a letter to state regulators, Abbott outlined a series of proposals designed to ensure data centers shoulder the costs of their growth rather than Texas ratepayers.

Among his legislative priorities:requiring new facilities to add power generation to the state's power gridrequiring data centers pay for their own grid interconnection and infrastructure costsmandating the use of "closed-loop" water systems, which draw a large amount of water at the start but reuse it over some period of yearsrequire annual reporting by all data centers on electricity and water useestablishing best-practice standards to address community concerns like noiserepealing data center sales tax exemptions and "other outdated or unnecessary incentives for data centers"The Texas Tribune reported earlier this year that the state is poised to lose $3. 2 billion in sales tax revenue over the next two years because of a sales tax exemption."The rapid scale of data center development requires oversight to ensure everyday Texans are not burdened with the costs of infrastructure driven by data center expansion, and to ensure that as data centers interconnect to the Electric Reliability Council of Texas (ERCOT) grid, residential electric bills are not negatively affected," Abbott wrote in the letter first obtained by the Texas Bullpen.