We pay our electric bills every month — but most of us have only a foggy idea of where that power comes from, who decides what it costs, or why Texas does things its own way. Here’s the story.
If you’ve lived in East Texas for any length of time, you’ve probably heard the name ERCOT come up on the news — usually around February cold snaps or hot August afternoons when the grid gets tight. It stands for the Electric Reliability Council of Texas, and it manages the flow of about 90 percent of the electricity used in our state. That covers more than 27 million customers across most of the Texas land mass, including every home, school, business, and chicken house in the Pineywoods.
Here’s something that surprises a lot of folks: Texas runs its own electric grid. Almost every other state shares power across regional networks that span huge sections of the country. Texas, for the most part, doesn’t. We have our own grid, our own rules, and our own market — by design. That choice was made nearly a hundred years ago to keep Texas’s electric system out from under federal regulation, and the consequences of that choice are still shaping our bills today.
Over the next ten weeks, this column is going to walk through the Texas electricity market in plain language. No jargon. No politics. Just the basics of how the grid works, why bills look the way they do, and what families and small business owners can do to manage what is, for most of us, one of our largest monthly expenses.
Three Things That Make Texas Different
We’re our own island. Because Texas runs its own grid, we can’t easily borrow power from neighboring states the way Louisiana or Oklahoma can. That’s part of why winter storms hit us so hard — when our generation gets in trouble, we mostly have to fix it ourselves.
We pay only for what we use. Most other states pay power plants twice: once for the electricity they actually produce, and again just for being available. Texas pays only for energy produced. That tends to keep day-to-day prices low, but it also means generators have to earn their keep during the few hours a year when demand spikes. That’s why you’ll occasionally hear about wholesale prices going from $30 to several thousand dollars in the same afternoon.
You get to choose your provider. In most of Texas, you don’t buy power from a utility — you buy it from a Retail Electric Provider that competes for your business. Oncor or another wires company still delivers the electricity to your meter, but the price you pay for the electricity itself is set in a competitive market. That’s a real advantage if you know how to use it, and a real cost if you don’t.
Texas runs an electric market that’s free, competitive, and unlike anywhere else in the country. It rewards people who pay attention. It also penalizes people who don’t.
Why You Should Care
If you’ve shopped for an electric plan in the last few years, you already know that the rate quoted on the front of the offer is only part of the story. There’s the energy charge, the delivery charge, the base fee, the various pass-throughs, and sometimes a minimum-usage credit that vanishes the month you turn the air conditioner off. Two plans with nearly identical advertised rates can produce very different bills, depending on how you actually use power.
For families, getting this right is worth real money — often a couple hundred dollars a year, sometimes much more. For Main Street businesses — restaurants, shops, professional offices, churches, agricultural operations — the stakes are higher still. Electricity is one of the few costs in those operations that’s both significant and negotiable, and the businesses that take it seriously tend to pay noticeably less than the businesses that just take whatever shows up in the mail.
What’s Coming in This Series
Over the next nine weeks, we’ll cover how prices actually get set, what the recent boom in data center construction means for everyone else, why summer reliability has been such a hot topic, how to read your bill, the tradeoff between fixed and variable rates, and what every Texan should know going into winter. We’ll also look at the lasting changes that came out of the 2021 storm, and what the next several years are likely to look like for the Texas grid.
The goal isn’t to make anyone an expert. It’s to give you enough background that the next time you see an electric plan in your mailbox, hear a news story about ERCOT, or open a bill that looks higher than it should, you have a fighting chance of knowing what’s actually going on.
— Lee Miller
Lee Miller publishes Texas Forest Country Living and is co-founder of Amerigy Energy, a Texas-based electricity brokerage.
