The owner posts financial security so a utility can begin committing capital. The utility then calls that security as interconnection costs arise. At the same time, the owner may still owe a cash contribution in aid of construction for direct-interconnection facilities.
If the campus underwriting treats those amounts as interchangeable, the same development phase can create two liquidity demands before its tenant revenue begins.
That is the decision hidden inside the large-load framework now being implemented in Texas. The issue is not simply whether a data center campus can obtain a place in an interconnection process. It is whether the owner can preserve land control, fund utility commitments, carry CIAC, support backup operations and reach its load ramp without losing control of the capital sequence.
The campus problem
Illustrative scenario, not a claimed client result.
Consider an illustrative three-phase data center campus.
The first phase has a defined tenant ramp. The second has reserved land and shared infrastructure but no final lease. The third remains an expansion option. The utility requires financial security before advancing major commitments. Direct-interconnection equipment also creates a cash CIAC obligation. Long-lead electrical equipment must be released before the first tenant reaches full operation.
The development model shows all three amounts, but in different tabs. Security is described as refundable. CIAC is described as infrastructure cost. Procurement is shown in the construction schedule. The model never tests when they overlap.
The owner therefore knows the ultimate cost but not the peak cash exposure.
That is dangerous on a multi-phase data center campus. A refundable posting can still be unavailable for years. A utility draw can occur before tenant payments start. A CIAC true-up can move after scope changes. A later phase can consume security even when the shared asset also supports the first phase. The legal labels differ, but the liquidity comes from the same sponsor balance sheet.
What the Texas framework actually changes
Texas Senate Bill 6 directs the Public Utility Commission of Texas to establish standards for large loads in ERCOT, using 75 MW as the statutory threshold unless the commission sets a lower one.
The enacted framework requires site control, disclosure of substantially similar service requests, an initial transmission-screening fee of at least $100,000, and uniform financial-commitment requirements for transmission infrastructure. Acceptable commitment may include dollar-per-megawatt security, CIAC, advance payment for significant equipment or services, or another commission-approved form.
It also says an unused portion of the initial screening fee must be credited toward procurement or interconnection obligations at the same geographic site.
The PUCT filing supplied for this analysis matters because it moves the discussion from statute toward working utility agreements. Those documents define the commercial machinery: what must be posted, what may be drawn, when CIAC is paid, how costs are credited or trued up, and which milestones preserve the customer’s position.
The important point is not that security becomes free construction money. It does not.
The important point is that posted security can be consumed by eligible obligations under the governing agreement. Once drawn, that cash is no longer available to support the next phase, even if the development model still carries the original security amount as a recoverable asset.
Security, CIAC and procurement are three different exposures
Financial security
Security protects the utility and the system from a large-load customer that reserves capacity and then fails to perform. Its amount, form, draw conditions, replenishment requirements and release tests determine how much sponsor liquidity is trapped and for how long.
Refundable does not mean liquid.
If the utility can draw security for incurred obligations, the campus model must show the draw as a cash use at the date it can occur. Any replenishment requirement should be shown separately. A later refund belongs at the date and under the conditions actually supported by the agreement, not at the date management hopes to receive it.
Contribution in aid of construction
CIAC is a customer payment supporting specified utility facilities. The applicable agreement controls the estimate, payment timing, credit mechanics, ownership, tax treatment and final true-up.
CIAC should not be collapsed into the security balance merely because both support interconnection. A campus can face a security draw and a CIAC payment in the same period. It can also receive a later credit while still carrying a separate unreleased security balance.
The decision metric is therefore not total refundable cash. It is peak unrecovered cash by phase and by responsible entity.
Advance procurement
Long-lead transformers, breakers, switchgear and related works may require payments before the complete electric-delivery agreement is in place. SB 6 expressly recognizes security under an agreement requiring advance payment for significant equipment or services as a form of financial commitment.
For the owner, advance procurement creates a different question: what exactly has been secured if the tenant ramp, service date or campus plan changes? The answer requires equipment title, cancellation rights, reassignment rights, storage obligations, warranty treatment and the utility’s ability to reuse the equipment.
Calling all three categories “interconnection deposits” hides the decision the owner must make.
Customer-built switchyards and TSP takeover
Self-procurement is a capital decision with an acceptance condition. A campus owner may be able to obtain equipment or build facilities earlier, but the useful milestone is accepted service to the tenant. Equipment on site does not resolve the design review, land delivery, testing or outage needed to energize it.
The supply constraint is real. DOE identifies transformers, circuit breakers, substation components and power electronics as facing supply-chain constraints that have produced lead times of two or more years for critical equipment. That supports investigating another procurement route. It does not establish an available slot or a delivery date for this campus. DOE, grid supply chain
Customer ownership does not remove the transmission interface
CenterPoint Energy’s customer-owned 345 kV substation specification says the substation becomes integral to its transmission network and ERCOT. Engineering documents listed in Article 14 require CenterPoint review before certain equipment is ordered or construction begins. The customer furnishes labor and equipment unless otherwise stated, and deviations from the specification or reviewed drawings require written acceptance. These are conditions in CenterPoint’s specification, not evidence that CenterPoint is this campus’s transmission service provider (TSP). CenterPoint Energy, Specification for Customer-Owned Substation Design, revision dated October 17, 2024, sections 2.2 and 2.4-2.6.
AEP Texas provides a separate retail example. Section 6.3.4.6 of its tariff includes a Retail Customer-owned Substation Agreement for 138 kV and below, under which the customer can design, construct, own, operate and maintain its substation. Equipment AEP determines is integral to its transmission network may be covered by a separate agreement granting AEP exclusive control, operation, maintenance or replacement rights. Required transmission-system upgrades may also require a Facilities Extension Agreement. AEP Texas, current tariff library
For the owner, those examples separate three decisions: who buys and builds, who holds equipment title, and who controls the connected facilities. A customer-owned substation is not evidence of a right to build a TSP switchyard and compel its takeover. Customer-build then TSP takeover needs an express agreement defining the assets, acceptance tests, transfer consideration, title date and responsibilities before and after acceptance. Purchasing first leaves the owner exposed to rejection, modification or a stranded asset.
Temporary equipment can bridge a specific gap
A PUCT-filed CPS Energy generation interconnection agreement, Control No. 35077 Item 2186, required the generator to provide three temporary 145 kV, 40 kA, 3000 A breakers by March 1, 2027, plus $240,000 CIAC. CPS-owned breakers were expected around March 2029, after which the temporary units would be returned. CPS retained design, procurement, ownership, installation, testing, operation and maintenance of the TSP switchyard. PUCT, Item 2186
This is a generation example, not a large-load rule. The datapoint is three breakers and an approximately two-year equipment bridge. It is not a customer-built switchyard takeover or a guaranteed two-year acceleration of service. The owner evaluating a comparable bridge must price the temporary units, CIAC, testing, replacement outage and return obligations against the tenant cash flow actually protected.
Local TSP involvement may create a second procurement or replacement path only if expressly documented. It is not automatic backup delivery, procurement, inventory, warranty or schedule protection. The agreement must identify the equipment, responsible buyer, committed milestones, acceptance conditions and consequences if either supply path slips. A permanent replacement expected in a particular month is still an expectation unless the governing commitments support more.
Land delivery can control the construction date
PUCT-filed generation agreements also illustrate developer obligations to acquire and transfer the switchyard site or land rights. Control No. 35077 Item 699 described an approximately 20-acre site to be acquired by the developer and conveyed to the TSP after deed, survey, title, archaeology and environmental review, together with access and utility easements, before TSP construction. PUCT, Item 699
Item 1713 shows an alternative structure: transfer land in fee or acceptable land rights, with an exclusive perpetual easement for the 345 kV yard. Both are generation precedents illustrating negotiable structures, not universal requirements for a load campus. PUCT, Item 1713
Fee ownership, exclusive easement, access easement and operating control are different legal interests and must not be conflated. Fee ownership concerns title to the parcel. An exclusive easement grants specified use rights within a defined area under its instrument. An access easement provides passage over a defined route. Operating control allocates authority over the equipment and switching; it does not itself convey land title or create access rights. Counsel must reconcile the actual instruments and their boundaries.
For a campus owner, the yard footprint therefore belongs in the phase plan before equipment release. Identify the fee parcel or easement area, permanent ingress/egress and utilities, delivery conditions and the effect on expansion land. A secured manufacturing slot has limited schedule value if the TSP cannot reach or construct on the site. Carry land acquisition, diligence and conveyance costs in the same ledger as equipment, security and CIAC.
Where the agreement requires those rights, the owner must fund the land value and the work needed to deliver an acceptable site: survey, title review, legal instruments, title insurance, environmental and archaeology diligence, roads, drainage, grading, and utility and communications access. Price the fee parcel, exclusive yard easement, permanent access route and utility/communications easements separately. A later equipment-title transfer does not itself satisfy any of those land-delivery obligations.
Land already owned is not free to the campus. Conveying it in fee or burdening it with exclusive or permanent rights can remove developable acreage, constrain building layouts and consume future expansion corridors. Show new acquisition and conveyance payments as cash uses and the loss of development capacity as an economic cost. Avoid counting the same land value twice. Costs and restrictions that would also apply under TSP-led construction belong in the common baseline; additional acreage, works or restrictions caused by the customer-build route belong in the comparison.
What the owner actually pays to build ahead
The full switchyard engineering, procurement and construction (EPC) price is a funding requirement, but it is not necessarily an entirely incremental cost. Some customer scope may replace facilities the owner would otherwise fund through TSP charges or CIAC. Reconcile the two routes against the same accepted load and service scope, then separate substituted scope, truly incremental owner costs and obligations retained after takeover. The following cost stack is a budgeting framework, not a statement that every TSP imposes every charge.
Swipe or scroll to compare all columns.
| Owner cost category | Cash or economic exposure to carry | Treatment against the TSP-led baseline and after takeover |
|---|---|---|
| Switchyard EPC/customer scope | Design, equipment, civil works and installation within the agreed customer package | Substitute only to the extent TSP/CIAC scope is actually displaced. Additional scope and acceptance rework are incremental; unpaid costs or defect duties may remain after transfer. |
| Land and rights | Site value, diligence, conveyance, easements, access works and lost developable acreage | Common baseline where both routes require them; incremental for additional land, rights or works. Permanent restrictions and assigned upkeep may remain after takeover. |
| TSP engineering/review/inspection | Design review, construction inspection, coordination and required resubmittals | Substitute if removed from an existing TSP charge; otherwise additional owner charges are incremental. Transfer does not settle unpaid review or correction costs. |
| Procurement finance/logistics | Deposits, progress payments, freight, carrying cost, taxes, insurance/bonds, storage and spares | Equipment payments may substitute for TSP/CIAC scope; additional financing and logistics are incremental. Supplier commitments and warranty or spares duties may survive takeover. |
| Temporary or duplicate equipment | Bridge breakers/switchgear, installation, replacement, removal and return | Generally incremental to the permanent solution unless documented scope is displaced. Residual ownership, return duties or disposal costs can remain with the owner. |
| Testing/energization | Acceptance tests, protection and controls checks, outage coordination, commissioning and retesting | Base commissioning may substitute for TSP scope. Additional interface work, failed tests and repeat outages are incremental; unresolved deficiencies may remain owner obligations. |
| Transfer/takeover closeout | As-built records, title and warranty assignments, lien releases, punch-list work, legal costs and final true-up | Additional transfer administration is incremental; underlying construction balances may already sit in EPC. Credits, payment and surviving duties require express agreement. |
| Ongoing retained obligations | Pre-acceptance O&M and liability; retained customer facilities, access/drainage upkeep, insurance and surviving defect or indemnity duties | Incremental where the customer-build route adds them; common customer-side duties remain in both routes. Only obligations expressly assumed or released leave the owner at takeover. |
| Schedule/opportunity cost | Capital tied up before service, delayed tenant cash flow, constrained expansion and exposure if acceptance slips | Compare the difference between routes. Economic losses are separate from cash invoices; past delay and permanently lost development options are not erased by takeover. |
For the defined customer-build package, use:
Incremental owner cash = customer-scope EPC + land/right costs + TSP oversight/testing + procurement carrying/bridge/spares + taxes/insurance + transfer/true-up - CIAC or TSP scope actually displaced - documented salvage/refund/reimbursement.
Assign each payment once. Deposits and progress payments are timing components of the equipment price, not additions to that price; freight, taxes, insurance, testing or closeout already included in EPC must not be added again. Deduct displaced scope only where it reduces an owner-funded baseline obligation, and reconcile common land and other costs shared by both routes. A reduction in TSP work is not automatically a reduction in the owner’s bill. Apply credits or recoveries at their supported dates so the net comparison does not hide the peak funding requirement. Model ongoing retained cash obligations separately over the comparison period.
Procurement moves cash forward even when it substitutes for utility scope. The owner must schedule deposits and progress payments, freight, taxes, insurance and bonds, storage and preservation, and any financing needed between payment and acceptance. Establish when the warranty clock starts, whether storage affects coverage and whether the warranty can be assigned to the TSP. Price required spares and cancellation or reassignment exposure. A bridge can require temporary or duplicate breaker/switchgear purchases while permanent equipment remains on order, with additional installation, testing, replacement-outage and return costs. The temporary units’ eventual return does not establish a resale value or reimbursement.
TSP takeover is not automatic. Even an agreed transfer may leave CIAC for undisplaced facilities, upstream network upgrades, customer-side transformers and the customer substation in the owner’s budget. The agreement must allocate pre-acceptance operation, maintenance, insurance and liability, including the consequences of late or failed acceptance. Taking title later does not by itself extinguish earlier liabilities or surviving contractual duties. Do not assume any credit, reimbursement, tax treatment, ownership transfer or liability release absent an executed agreement; responsible tax and legal advisors must establish the applicable treatment.
Compare the complete delivery routes
The comparison below is an owner decision framework. Availability and scope depend on the campus’s actual TSP and executed agreements.
Swipe or scroll to compare all columns.
| Delivery route | Land-right implications | Schedule value | Retained owner risk | Evidence required before release |
|---|---|---|---|---|
| TSP-led procurement | Establish the TSP’s required fee parcel or easements, permanent access and utilities | Aligns purchasing with TSP design and construction; value depends on documented delivery milestones | Funding and CIAC exposure, site delivery, supplier delay and conditional energization | Facilities scope, procurement responsibility, delivery basis, land acceptance and outage milestones |
| Customer-led/customer-owned construction | Customer retains its site interest subject to agreed TSP access and rights over integral facilities | May advance purchasing and construction within accepted design hold points | Specification compliance, title, warranty, testing, spares, maintenance and future modifications | Customer-owned agreement, approved manufacturer/specification, reviewed design, operating boundary and acceptance criteria |
| Customer-build then TSP takeover | Agree separately on equipment title and any fee conveyance or yard easement, access and utilities | May advance defined works if the TSP agrees to accept them; takeover remains a separate gate | Rejection or rework, carrying cost before acceptance, warranty assignment and liabilities retained after transfer | Executed build/transfer agreement, design hold points, testing and acceptance, title and land instruments, TSP control and maintenance allocation |
| Temporary bridge equipment | Provide rights for temporary installation, replacement access and the permanent arrangement | Can bridge an identified equipment gap if both temporary acceptance and replacement are scheduled | Temporary capital, CIAC, failure, spares, replacement delay, outage and return condition | Accepted ratings and manufacturer, title and warranty terms, test records, permanent procurement path, replacement/return duties and outage coordination |
Choose self-procurement only when the documented route advances the service milestone enough to justify the additional cash and retained obligations. Compare supplier delay, failed acceptance and late land delivery against the TSP-led case. Do not count a CIAC credit, purchase reimbursement or release of liability at takeover unless the agreement provides it.
The decision test is whether the present value of the verified schedule benefit, measured through tenant cash flow protected and supported avoided costs, exceeds the present value of incremental owner cash, additional retained obligations and downside exposure. Verify the link from procurement through land acceptance, testing and energization to the tenant’s payment milestone. Use net tenant cash flow, not headline rent, and do not count the same protected receipts again as a separate schedule benefit. Keep the economic cost of lost development options visible alongside the cash comparison.
Run the test with supplier delay, failed acceptance and late land delivery, including a case with no service acceleration. Show the resulting peak cash need and unrecovered exposure against committed sponsor liquidity. A positive base-case present value does not fund an interim cash shortfall. Use project quotes, executed scope and supported milestone ranges; the precedents above provide neither a current switchyard cost estimate nor a campus-specific schedule saving.
The delivery route changes who carries these commitments. It does not merge the three cash exposures:
Swipe or scroll to compare all columns.
| Exposure | What controls it | Owner question |
|---|---|---|
| Financial security | Posting, draw, replenishment and release terms | How much liquidity is trapped or consumed, and for how long? |
| CIAC | Facilities scope, estimate, payment, credit and true-up | Can this obligation overlap with a security draw? |
| Advance procurement | Equipment scope, title, cancellation and reassignment rights | What remains usable if the service route changes? |
Backup generation is part of the capital decision
The large-load framework also brings on-site backup generation into the operating relationship.
For the statutory disclosure, backup generation means non-exporting generation that can serve at least 50 percent of on-site demand in aggregate. During an energy emergency, and subject to the sequence in the statute, a qualifying customer may be directed to deploy that generation or curtail load. The law does not authorize violation of emissions or other operating limits.
For a data center campus, this links reliability planning to the same capital sequence as interconnection.
A backup fleet cannot be counted merely by nameplate capacity. The owner needs a supported operating envelope: protected tenant load, fuel duration, air authorization, maintenance condition, switching sequence, control authority and the portion of campus demand that can actually be served when called.
If backup power is required to protect the tenant ramp while permanent service remains conditional, its land, fuel and permitting path must be funded alongside security and CIAC. If the same equipment is also expected to support emergency curtailment, the two duties must be reconciled. Capacity reserved for tenant continuity is not automatically available for another obligation.
A practical decision model
Before the next irreversible release, the owner should build one campus capital-and-commitments ledger.
For each phase, record:
- controlled parcels, option dates and assignment rights, including any switchyard fee parcel or easement, permanent ingress/egress, utilities and land-delivery conditions;
- requested and supported load, ramp milestones and service conditions;
- screening fees, security postings, draw triggers, replenishment tests and release conditions;
- CIAC estimates, payment dates, credits and true-up mechanisms;
- procurement route, payments, approved manufacturer/specification, design hold points and cancellation exposure;
- equipment title, warranty and transfer rights, testing and acceptance, spares, and replacement/return duties;
- TSP control, maintenance responsibility and outage coordination before and after any takeover, with the evidence supporting each service milestone;
- tenant payments or sponsor capital available at each milestone;
- backup-power duty, permitted operating envelope and transition to permanent service.
Then run three cases against the same opening requirement.
Swipe or scroll to compare all columns.
| Route | Capital effect | Condition before release |
|---|---|---|
| Full opening phase | Concentrates security, CIAC and equipment cash early | Tenant-backed cash and sponsor liquidity cover the overlap |
| Staged opening load | Reduces the initial commitment while preserving expansion | Tenant, campus and utility ramps use the same staged basis |
| Shared works ahead of occupancy | Funds infrastructure before every beneficiary is contracted | Owner approves allocation, downside and reassignment rights |
Commit the full opening phase
This route fits when the first tenant, utility sequence and sponsor liquidity support the required security, CIAC and equipment overlap. The tradeoff is concentrated early exposure. The owner should not release the full route until utility obligations and tenant-backed cash dates have been reconciled.
Stage the load and infrastructure
A smaller opening block can reduce early security and CIAC exposure while preserving a path to later phases. The tradeoff is that later capacity remains conditional. The tenant agreement, campus design and utility milestones must all use the same staged ramp.
Advance shared works ahead of occupancy
The sponsor may choose to fund infrastructure that supports several tenants or phases before all revenue is contracted. The tradeoff is an owner-funded gap. The decision should identify who ultimately benefits, how cost is allocated, what happens if a phase does not proceed, and whether unused equipment or capacity can be reassigned.
How Sitebraid would support the decision
This decision begins with the same evidence discipline used in Sitebraid’s Site Selection & Assessment work and continues through our Power & energization scope. It addresses the related energy cost and commitments challenge across the campus capital sequence.
Reconcile the governing documents
Sitebraid would connect the utility study record, draft agreements, site-control documents, tenant ramp and campus infrastructure plan. Each payment and release would be tied to the clause, counterparty and milestone that supports it.
Model peak cash, not only ultimate cost
We would separate refundable security, drawn security, CIAC, advance procurement and operating expenditure. The model would show peak unrecovered cash under the planned ramp, a delayed tenant, a smaller accepted load and a reallocated-capacity case.
Protect the next capital release
The owner would receive a decision gate stating what can be released, the evidence still missing, the maximum approved exposure and the condition that stops or resizes the next phase. Legal, tax, utility and engineering conclusions remain with the responsible specialists.
Keep the campus record current
As the utility accepts milestones and costs change, the ledger would be updated across land, power, tenant and infrastructure workstreams. A later phase should not rely on an old security balance, an obsolete CIAC estimate or backup capacity already committed to the operating tenant.
How to protect the decision
Do not call security “refundable” without showing the conditions and timing of release.
Do not net CIAC against security unless the governing agreement expressly supports the treatment.
Do not count an unused study-fee balance until the utility confirms the credit and the obligation to which it applies.
Do not authorize shared infrastructure without assigning the unsupported portion to an owner-approved funding decision.
Do not release customer-procured equipment before the approved manufacturer/specification, design hold points and written acceptance of deviations support the order.
Do not underwrite TSP takeover without agreed equipment title, warranty transfer, testing and acceptance, spares, replacement/return obligations, TSP control, maintenance and outage coordination. Show the owner’s exposure if acceptance or permanent replacement is late.
Do not treat a fee parcel, exclusive yard easement, access easement or operating control as interchangeable. Require accepted land instruments covering permanent ingress/egress and utilities before the construction milestone that depends on them.
Do not count TSP involvement as a second procurement path without express commitments identifying who supplies what, when and on which conditions.
Do not treat backup nameplate capacity as an available operating service without fuel, permits, controls and tenant-reserve requirements.
Do not describe a nearby transmission line or active study as power-ready. The useful power position is a supported route from present conditions to accepted tenant load.
The result the owner should require
The useful deliverable is not a larger headline megawatt number.
It is an owner-approved capital sequence showing how land control, financial security, CIAC, procurement, tenant payments and backup readiness converge at each phase. The sequence should identify peak unrecovered cash, the party carrying it, the evidence required before the next release and the consequences of a delayed ramp.
Texas is making large-load customers prove that their requests are real. Data center campus owners should use the same discipline internally.
Before posting security or paying CIAC, require a single answer:
If the utility draws today and the tenant starts late, what capital remains to deliver the phase?
That determines whether the campus owns a credible power route or only an expensive place in line.
How to measure progress
- Peak unrecovered cash by phase and responsible entity.
- Security drawn, replenished and released against supported milestones.
- CIAC and procurement exposure unsupported by tenant-backed payments.
- Backup operating duty validated against tenant reserve and legal limits.
Sources and scope
Public Utility Commission of Texas, Project No. 58481, filing 206
CenterPoint Energy, Specification for Customer-Owned Substation Design, revision dated October 17, 2024, sections 2.2 and 2.4-2.6.
AEP Texas, current tariff library, section 6.3.4.6, Retail Customer-owned Substation Agreement.
PUCT, Control No. 35077 Item 2186, CPS Energy generation interconnection agreement
PUCT, Control No. 35077 Item 699, generation switchyard site conveyance precedent
PUCT, Control No. 35077 Item 1713, generation switchyard land-rights precedent
DOE, Strengthening America’s Grid Supply Chain, August 10, 2026
The public sources establish regulatory context. They do not establish a project-specific utility obligation, tariff, tax treatment, permit approval or Sitebraid client result. The scenario and decision method are illustrative Sitebraid analysis. Applicable agreements and final PUCT rules control. Specialist legal, tax, engineering, environmental and regulated work remains with the qualified project teams.