Ever wonder what really happens behind the scenes when you flip on a light switch in Texas? The answer lies in one of the most unique energy systems in the country: the Texas power grid. Unlike other states, Texas runs almost entirely on its own electric grid, managed by the Electric Reliability Council of Texas (ERCOT). This independence, combined with the state’s deregulated electricity market, gives most Texans more control and choice over their power, but understanding how it all works is key to making smarter energy decisions.
In this guide, we’ll break down how the Texas power grid operates, what ERCOT does, and how deregulation impacts your electricity rates, reliability, and freedom to choose.
Texas stands apart from the rest of the nation when it comes to electricity. While most states are connected to one of two major national grids — the Eastern or Western Interconnections — Texas operates almost entirely on its own. The Electric Reliability Council of Texas (ERCOT) manages about 90% of the state’s electric load, making it the only state in the continental U.S. with an independent power grid. Most Texans, whether they live in deregulated or regulated areas, still rely on the ERCOT grid. Only a few regions near the borders, like El Paso, parts of the Panhandle, and East Texas, connect to the national grids instead.
This setup gives most of Texas significant control over how it produces, distributes, and regulates electricity. Because ERCOT’s grid doesn’t cross state lines, it isn’t subject to federal oversight from agencies like the Federal Energy Regulatory Commission (FERC). That independence has facilitated the state to create its own market rules, encourage competition among electricity providers, and give consumers the power to choose who supplies their energy.
However, this autonomy comes with tradeoffs. Being largely isolated from the national grid means most of Texas can’t easily import power from other regions during emergencies or extreme weather events. While the system’s independence supports innovation and market freedom, it also makes reliability and demand management critical to keeping the lights on across the Lone Star State.
The Texas power grid is the infrastructure that delivers electricity from generation sources to homes and businesses across the state. It includes:
The grid also distributes electricity to different parts of the state. For example, if a power plant in West Texas generates more electricity than needed in that area, the grid will send the excess electricity to a part of the state that needs it. This helps ensure that everyone has the electricity they need, when they need it.
Quick Fact: Texas has over 46,500 miles of transmission lines and 650+ generation units.
Texas operates its own electric grid largely because the state chose to remain separate from the federally regulated power networks that serve the rest of the country. There is federal oversight of the electric grids in other states, but the federal government does not have the same authority over Texas’ grid.
Texas began separating its electricity market from federal oversight decades ago, creating what’s now known as the Texas Interconnection—an independent power grid that covers most of the state. This independence laid the foundation for electricity market deregulation in 1999. Deregulation means the state does not control the prices that retail energy providers (REPs) can charge for electricity. Instead, the market sets the prices. The Public Utility Commission of Texas (PUCT) oversees and regulates the state’s electric utilities and REPs and ensures consumer protection in the deregulated market. However, not all areas of Texas participate in the deregulated market, meaning that not all residents can choose who they buy electricity from.
Deregulation has its benefits, but it has also posed challenges for the Texas power grid. For example, during the February 2021 winter storm, electricity prices surged to $9,000 per megawatt-hour as demand skyrocketed and power generation plummeted. The extreme conditions forced rolling blackouts across the state and pushed several electricity providers, including Griddy, into bankruptcy.
Sources of power for the Texas grid have changed over time as the state has moved away from coal and toward renewable sources like wind and solar. Texas has various sources of electricity, including oil- and natural gas-fired power plants, wind power, solar energy, and coal.
Fossil fuels continue to dominate electricity generation in Texas. As of mid-2025, natural gas powers about 52% of the state’s utility-scale electricity — more than any other source or any other state in the nation. Coal provides another 12%, making it the second-largest contributor among fossil fuels.
Renewable energy is playing an increasingly important role in Texas’s electricity mix. As of 2024, wind power accounted for about 22% of the state’s total electricity generation, while solar power contributed roughly 8%.
Texas leads the nation in wind and is rapidly growing its solar capacity. The state’s vast open plains provide ideal conditions for wind farms, while its sunny climate supports rapid solar expansion. Together, these renewable sources help lower generation costs, diversify the grid, and reduce reliance on fossil fuels, all while taking advantage of some of the most abundant natural resources in the country.
While natural gas, wind, and solar dominate Texas’s energy mix, nuclear power and battery storage also play key supporting roles in maintaining grid reliability and stability.
| Source | ~% of Total Generation |
|---|---|
| Natural Gas | 51% |
| Wind | 22% |
| Solar | 8% |
| Coal | 12% |
| Nuclear | 7% |
There are three main electric grids that touch parts of Texas:
The largest power grid in Texas is operated by a nonprofit corporation created by the Texas legislature in 1970. ERCOT’s portion of the Texas power grid serves more than 26 million customers, representing about 90% of the state’s electric load.
The Eastern Interconnection covers most of the eastern United States and a small part of eastern Texas, including areas near the Louisiana border and parts of the Panhandle. Unlike ERCOT, this grid is connected to other states, allowing electricity to flow across state lines. It operates under federal oversight and coordinates power delivery through multiple regional grid operators.
The Western Interconnection, managed by Western Electricity Coordinating Council (WECC), serves the western United States and a small portion of far West Texas, including the El Paso area. It links Texas to neighboring states like New Mexico and Arizona, enabling power sharing across the region. Like the Eastern Interconnection, it’s federally regulated to maintain reliability across all connected systems.
Texas faces several ongoing challenges with its power grid, including rolling blackouts during extreme heat and winter storms, as well as limited energy capacity during periods of high demand. Together, these issues continue to strain the state’s electric system and highlight the need for improved grid resilience.
One of the most pressing issues is the rolling blackouts that can occur during the winter and summer months. These blackouts can be due to the extreme weather conditions that Texas experiences.
During both winter and summer, Texas can experience extreme temperatures that drive up electricity demand. When demand spikes, the grid can become strained, leading to higher prices and, in severe cases, rolling blackouts. To prevent blackouts, ERCOT has implemented winterization requirements for power plants and grid equipment to reduce the risk of freeze-related failures. During periods of high demand or emergency conditions, ERCOT also issues conservation requests, asking Texans to reduce usage by turning off unnecessary lights, adjusting thermostats, and delaying the use of large appliances.
This can happen when electricity demand exceeds the available power in the market. When this happens, electricity prices can spike and become unaffordable for some consumers. The fact that power plants can take years to build compounds the problem.
These challenges can be addressed by power companies investing in new power plants, implementing demand management programs, and using additional power-generating units. Each of these solutions has its own benefits and drawbacks, so power companies must carefully consider which options best meet future power demand.
For Texans living in deregulated areas, electricity prices are shaped by market competition rather than a single utility. Deregulation allows multiple retail electricity providers (REPs) to compete for customers, leading to better rates, flexible plan options, and special incentives such as free usage periods, rewards programs, satisfaction guarantees, and more.
Because prices are set by the market, they can also change based on factors such as fuel costs, weather, and statewide electricity demand. During periods of extreme heat or cold, when energy use increases, wholesale prices can rise, potentially affecting what consumers pay.
Overall, deregulation gives most Texans more choice and control over their electricity, but it requires staying aware of rates and plan details to find the best long-term value.
Texans in deregulated areas have the power to choose their REP. With so many options available, finding the right plan can be challenging. Power Wizard simplifies the process by showing you the REPs, plans, and rates available in your area side by side. Enter your ZIP code into our comparison tool now to get started!
Yes, you can switch providers anytime in Texas. However, switching early for any reason other than moving or outside of the 14-day window before your current contract’s expiration date may incur an Early Termination Fee (ETF).
Whether a fixed-rate plan is better than a variable-rate plan depends on your energy needs and preferences. However, fixed-rate plans are the better option for most households because they offer more stability, especially during periods of high demand.
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