Texas Paused Data Center Hookups—2 Power Stocks Are Waiting on the Verdict

Key Points

• Texas regulators are auditing data center projects on the ERCOT grid, creating uncertainty for NRG Energy and Vistra's growth prospects.
• NRG Energy has concrete contracts, including nearly 300 megawatts of retail agreements and a 1.2-gigawatt power project, giving it a clearer near-term outlook.
• Vistra lacks disclosed specific contracts but could still benefit from rising electricity demand, with more clarity expected at its early November earnings report.

Two power companies that have sizable Texas exposure are stuck in limbo while regulators audit every project in the state's data center queue. NRG Energy Inc. NYSE: NRG and Vistra Corp. NYSE: VST could be major beneficiaries of surging demand for electricity as AI drives investment in facilities across the state. However, an Aug. 3 directive from Governor Greg Abbott has paused development of these projects on the Electric Reliability Council of Texas (ERCOT) grid, raising questions about when that demand may translate into business for these firms.

There is a lot of potential business at stake. ERCOT is weighing over 474 gigawatts of connection requests, about 90% of which are from data centers. For investors, the question is how much of NRG's and Vista's growth cases depend on Texas data center power loads arriving on schedule. Despite their similarities, the companies below have distinct positions and could perform differently depending on the outcome of the review.

Why Texas Is Putting Data Center Growth Under Review and What It Means for Power Companies

The review aims to evaluate whether proposed facilities have credible financing, sufficient protections, and realistic power plans. Texas's electricity grid and water resources are already strained by mounting demand and other factors, so the outcome of this audit is far from predetermined. Developers were expected to return responses to ERCOT's info request by Oct. 12, and a report is expected by Dec. 10. In the meantime, the Texas Commission on Environmental Quality (TCEQ) has temporarily shut down its electronic filing system after watchdogs said that it had continued to issue permits related to data center construction after the governor's pause.

This means that companies like NRG and Vistra are primarily facing a question of how long it takes for projects to move through the pipeline, rather than a more fundamental risk that electricity demand collapses or shifts materially downward.

NRG Energy's Texas Commitments Are Firm, But Timing and More Opportunities Remain Unclear

NRG's opportunity in Texas is significant. The company has previously reported close to 300 megawatts of retail agreements to supply data centers across two Texas sites, with initial power delivery originally slated for late 2026. A 1.2-gigawatt "bring your own power project" should generate some $500 million in annual adjusted EBITDA as well.

In this way, NRG has a concrete plan for data center power in Texas that goes far beyond a developer just requesting grid capacity. However, risks related to construction, permitting, and so on still remain. If the governor's regulatory review continues to delay the relevant facilities, it could pressure NRG in the meantime.

Additionally, it's important for investors to keep in mind the distinction between NRG's agreed-upon power contracts and the significantly larger volume of potential demand that is currently in ERCOT's queue. If the audit can be resolved quickly, it would likely boost investor confidence in NRG's potential for growth. However, a delay into next year would push back when this pent-up demand could start contributing to NRG's results, potentially calling into question some of the analysts' optimism about the stock.

Vistra Is Lighter on Specific Details for Now

Vistra's diversified generation fleet provides exposure to the ERCOT market, but investors should not rush to assign the company a specific revenue opportunity related to Texas data centers. So far, the company's public filings establish exposure without confirming exact figures for these contracts.

With this in mind, Vistra's potential to benefit comes from its ability to supply electricity in a more competitive market—investors will need to wait to confirm the exact scope. If electricity demand does surge after the state's review, Vistra could benefit even without a disclosed contract for a particular project.

Vistra may provide more concrete updates in its upcoming earnings report, anticipated in early November. Analysts are optimistic, calling for nearly 55% year-over-year (YOY) earnings per share (EPS) growth and nearly 35% revenue growth over the same period.

Timeline and What to Watch For

Investors should monitor the ERCOT report, anticipated in early December, as a critical checkpoint for Texas data center projects. Until regulators clarify which types of projects may proceed, both NRG and Vistra face uncertainty despite their disclosed agreements, with different project timelines and outstanding conditions.

A delay into 2027 may introduce broader uncertainty for these projects and could have a near-term impact on earnings forecasts and results for both companies. Still, the long-term outlook may remain bullish even with delays, so long as the projects do eventually move forward.