Citi: Texas governor transition may slow data center approvals, leaving power-stock prospects divided

Why could the governor transition affect the outlook for data centers?

Citi said Democratic candidate Hinojosa unexpectedly defeated Republican incumbent Governor Abbott, and data centers were one of the main issues in the campaign. The bank believes the new administration will strengthen protections for the public, which could slow project approvals.
Citi previously estimated that about 30% to 40% of new data centers in the U.S. over the next several years would be located in Texas. Changes in the pace of Texas approvals therefore affect the bank’s view of where data centers will be built across the U.S.
Political resistance had already increased before the election: from May to June this year, opposition to data centers grew, projects went through pauses and verification, and regulatory scrutiny expanded to projects beyond the first queue.

In the first large-load project queue of Texas grid operator ERCOT, firm load and load under study total 191.8 gigawatts. Load under study amounts to 125.4 gigawatts across 158 projects; firm load amounts to 66.4 gigawatts across 204 projects. The scale may change as disputes are addressed and eligibility is verified.
Outside the queue, there are another 302.2 gigawatts of large-load projects involving 373 projects; some behind-the-meter or campus projects are also outside the queue. Citi said projects both inside and outside the queue are awaiting regulatory or political decisions by 10 December 2026.
Citi believes the decision on 10 December faces a substantial risk of delay, although ERCOT and the Public Utility Commission of Texas want to move forward. The bank expects the state legislative session beginning 12 January 2027 to focus on data centers, including extending reviews of transmission lines and protecting water rights, and potentially introducing new legislation addressing issues such as noise, home prices, and local tax revenue.

Citi expects Texas power stocks CenterPoint Energy, Sempra, and American Electric Power to underperform on a relative basis; all three have Neutral ratings from the bank. Some power companies in other states may benefit.
The bank also expects independent power producers to weaken: the recent decline in power demand could weigh on near-term power prices. These stocks also underperformed when news of delays to the first project queue was announced previously.