Texas Governor Greg Abbott has paused new data center connections to the state’s grid pending audits on the requirements for new and proposed constructions. The audits will cover the revenue lost from data center tax exemptions, power usage and generation, infrastructure upgrades, water usage, and the impact on the local communities and environment.

Texans have seen their electricity and water bills increase significantly over the past five years. Data from Electric Choice shows the average residential electricity price has risen by over 25%, and data from the Texas Municipal League demonstrates the average residential water bill has risen by over 26%.

But the prices in Texas sit below the national average. So why then are they rising so fast, and what does it mean for other states in the US?

Prices rapidly rising

As new industries and houses are constructed, new connections need to be added. These connections are constructed by power grid operators, with the cost of upgrades generally passed on to consumers through utility transmission fees.

Infrastructural upgrades are also paid for by grid operators, with the costs of construction again passed back down to consumers through their bills.

The rapid increase in data center construction projects has been a particular issue in this regard. As data centers require enormous amounts of electricity, they require far more complex and expensive connections than are required of a typical residential connection.

But alongside the moratorium on new data center construction, Gov. Abbott has required data center projects that pass the states’ audit will be required to pay for their own connections and infrastructure. In a letter to the Public Utility Commission of Texas and the Electric Reliability Council of Texas, Abbot highlighted that 90% of new grid connections are data centers.

Electricity prices are also rising due to an increasingly unpredictable climate. Soaring temperatures place increased demand on electricity grids, especially as cooling systems for homes and businesses are switched on during peak times. The heat also causes electricity infrastructure to fail at a higher rate, causing additional costs as grids are repaired and replaced.

As for water prices, Texas has been subject to a four year drought. Per Washington Post reporting, Texas has been seeking alternative sources of water to extend supply. The downside is that in one such project, the state ended up paying the contractor responsible for a new groundwater collection project an extra 40% on top of the originally proposed $500 million.

The increasingly unpredictable weather is also wreaking havoc on existing infrastructure, especially when there are short periods of torrential rainfall. Sudden downpours can quickly overwhelm water infrastructure, damaging it or washing it away. Water treatment plants can also become overwhelmed and damaged. The cost of repairing and replacing infrastructure, as well as funding the much needed projects to create new water sources, once again gets passed down to consumers.

Couple this with the rapid increase in data center projects, which requires water usage during construction and for cooling, and prices will further increase. Texas currently sits in the number two spot for active data centers, slightly behind Virginia, but the number of planned and approved projects for Texas means the Lone Star state could soon become the number one state for active data centers.

Lessons for the rest of the US

As with all new technology, the pace of regulation falls a few thousand steps behind.

Numerous states have already begun issuing moratoriums on tax exemptions for data centers as the actual loss of revenue far exceeds earlier predictions. In Ohio, the loss of revenue has been $1.6 billion - far higher than the projected $136 million.

The new regulations introduced in Texas requiring data centers to pass the state audit before being hooked up to the grid have presented a second problem. Data centers providing their own on-site power are not subject to new grid connections, and can therefore bypass the audit.

One of the most cost effective means for producing on-site power are gas burning turbine generators. The downside for local residents in the vicinity of these sites is that noise levels have been compared to living near an international airport, and there are under-studied phenomena surrounding the infra-sound produced by these power projects.

There are also the climate implications of these sites. Despite the name, natural gas is a highly polluting fuel source that distributes pollutants both into the local area and the atmosphere, causing damage to local livestock, fauna, and the rest of the world.

• Multiple US states are repealing or enacting moratoriums on sales tax exemptions for data centers
• Estimates on lost tax revenue are far below the billions of dollars some states have missed out on
• Ongoing data center constructions may not be subject, but costs are expected to increase for new or planned projects

In a blow to US firms trying to expand AI compute capacity by building more data centers, multiple states are now repealing tax exemptions for equipment costs.

According to exclusive The Information reporting, the estimated costs could rise by upwards of 7%, as the exemptions previously allowed data centers to be kitted out with equipment without having to pay sales tax.

But as soon as Ohio Governor Mike DeWine revealed that the lost tax revenue amounted to $1.6 billion, instead of the projected $136 million, other states have started following suit.

States repeal data center tax exemptions

Ohio repealed its tax exemptions for data centers in June 2026, and since July, Illinois and Arizona have both paused their own exemptions. Illinois’ program has been paused indefinitely, and Arizona has enacted a 3-year moratorium.

A further nine states are also considering halting their own exemptions, and a further 28 states have introduced bills to limit the effects of their own exemptions.

Per Avalra data, the sales tax in Ohio sits at almost 6%, with Illinois just over the same figure. These sales taxes will immediately increase the costs of new data center projects, but some projects already under way could be subject to indefinite exemptions.

Are data center costs already unsustainable?

The costs of data center construction have already been rising due to the sudden expansion in capacity. Electricity costs have skyrocketed as more data centers join grids without suitable additions in energy sources.

In an attempt to combat this, President Donald Trump has rolled back regulations on fossil-fuel burning power stations, with multiple data centers being built with on-site natural gas turbine electricity generation. This has caused a string of issues with local residents complaining of sickness caused by infra-sound, and deafening noise levels similar to that of an international airport.

Funding and incentives for renewable wind and solar sources have also been scrapped by Trump, which ironically are some of the cheapest energy sources in the US. This has compounded consumer electricity price rises, acting as a catalyst for data center opposition in the US. AI companies have been urged by the UN to disclose the full environmental damage of the technology.

Additionally, a study by Nikkei has found that numerous big tech firms looking to expand data center capacity have almost $1.65 trillion in ‘hidden’ debt, where contracts are signed between subsidiary companies and data center operators. This means the debt does not appear on the company’s balance sheet, and will only show up as annotations in quarterly financial statements.

This hidden debt at big tech companies has exploded eightfold in the last four years, alongside the visible balance sheet debt for big tech companies which stands at $1.35 trillion. Many businesses are still struggling to justify the ROI on adopting AI technologies, especially as token costs increase.

Sales exemptions are an attractive benefit for data center construction projects, and states that keep or enact sales exemptions will likely see an explosion in new project applications.

• Amazon's gaming boss thinks ballooning hardware prices could push more hardcore gamers towards cloud streaming services
• He argued that the price of consoles increasing by 'six, seven times' would mean some gamers become 'priced out of the market'
• He thinks the RAM crisis, and rising prices, will not be 'going away anytime soon'

Amazon GM of gaming Jeff Gattis thinks the rising cost of consoles and PC components could push more hardcore gamers towards cloud streaming, via services such as Amazon's own Luna.

In a recent interview about the service, I asked whether Gattis anticipates cloud gaming becoming a more popular option for core players as traditional systems become much more expensive.

"Yeah. I wouldn't have said that 18 months ago, and I will say our business model is not really predicated on this this massive shift where everybody turns in their consoles and PCs and comes over to cloud" he said.

"But gosh, when you start to see the prices of the Steam Machine and the rumors of PlayStation and Xbox. As you get to $1,000, $1,500 hardware [...] you're going to see more people that are priced out of the market. They're going to consider other technologies".

Gattis, who previously led platform and subscriptions at Xbox, went on to share an anecdote to illustrate just how much prices have risen.

"I was telling somebody the other day that when I was back at Xbox a couple of years ago, we had our Series S console on discount [for a] holiday. I think it was about $199. To think in a span of two to three years we've gone from $200 to what's likely going to be six, seven times that price.

"I understand it's a it's a RAM crisis, it's worldwide, but I don't think that's going away anytime soon."

He was, however, careful to clarify that hardcore gamers moving to the cloud isn't a core part of Amazon's strategy: "It's not our strategy to accelerate that, but it's a nice tailwind if it does happen, and it's realistic to think that it might."

The comments come as Amazon rolls out a Fire TV update that gives Amazon Prime subscribers the ability to stream games like Fallout 4 or Fortnite from directly within Prime Video via Luna in a bid to get more eyes on the service.

• Amazon's AWS cloud services billing system went wild on Friday
• Customers saw bills in the trillions
• AWS apologized and is working on a fix

AWS, the cloud platform that serves millions who use Amazon's servers to run websites and businesses you use every day, just freaked out many of its customers with usage bills that literally went into the trillions.

"I just saw $1.5 trillion on my AWS bill and my soul left my body," wrote Bharath_uwu on X (formerly Twitter) on Friday, and he wasn't alone.

The Guardian originally spotted the Tweet and multiple social posts relating to the seemingly widespread glitch.

AWS doesn't mail out invoices. Instead, customers logging into the Billing and Cost Management console spotted the billion- and trillion-dollar bills and expressed emotions ranging from concern to panic.

As Dan Harvey, who heads marketing at Learning Through Landscapes, told the Guardian, "I almost had a heart attack when I received an email alert from Amazon Web Services with the billing for our charity’s school grounds audit app."

Some tried to take the billing error in stride. Chinmay on X encouraged others to post their highest AWS bills. As of 10 hours ago, he was at $333B.

Others called out AWS for the error with something less than good humor. "I bet someone must have had a real heart attack. This shouldn't be legal...," wrote Mr Doob on X.

Amazon, to its credit, has been delivering multiple updates starting at around 1:30AM PDT on Friday, July 17, when they first spotted the error: "We are investigating issues with Cost Explorer reflecting inaccurate estimated billing data."

A few hours later, AWS reported it had found the culprit: "We have identified the root cause as an issue with unit pricing within the estimated billing computation subsystem, and we are working on a mitigation," they wrote on the AWS Status page.

However, hours later, AWS admitted, "Our efforts to backfill corrected estimated cost and usage data are still underway. We are progressing slower than anticipated."

The good news is that AWS is not asking anyone to pay these incorrect fees and that, while this has been a big frustration for services that run their websites and businesses on AWS, the cloud system has been working flawlessly, and there have been no reports of outages or performance issues on Friday (if you don't count the years shaved off freaked-out customers' lives).

AWS has even tried to make light of the mistake, posting this on X:

"Typo alert: Some customers saw quadrillion-dollar AWS billing estimates today. Slight miscalculation on our end (very slight ). We're fixing it now. No action needed on your end. Sorry for the confusion. Real question: what will you do with those trillions instead?"

Yes, everyone can all laugh now, though I'm not certain customers like Harvey, Bharath, and others are chuckling along with them.

Was your business affected? How big was your AWS Billing mistake? Let us know the "damage" in the comments below.