Texas Energy News November 18, 2022

How Does the Texas Power Grid Work?

With so much talk about Texas’s power grid & the state’s energy needs, it’s overwhelming to figure out how the power grid works. Let Value Power help you understand Texas’s unique energy-only market.


There has been so much public discourse about the Texas power grid and the state’s energy needs since Winter Storm Uri in 2021. With all that information out there, it’s hard not to be overwhelmed just trying to figure out how the power grid actually works.

One thing that is often confusing is why is Texas on its own power grid to begin with? Well, the North American power grid is separated into two major sections, the Western and Eastern interconnections, and three minor sections, the Texas, Alaska, and Quebec interconnections. This separation occurred when the government started establishing regulations about which companies could sell electricity and how much they could charge.

The Texas power grid is set up so that it does not export power over state lines. A wholly-wholly contained grid within state lines is possible in Texas since, due to the size of the state, it covers two time zones. So the state is able to stagger peak electric use. While other states shared this same idea, Texas had the size and means to make this happen.

History of Texas Power

Power in Texas goes back to right after Edison turned on the lights in the first power plant in 1882 in Manhattan, NY. Texas became one of the places where small generating plants sprouted up. During World War I (also known as the Great War), the utilities started to link themselves together. After that, the history gets a little complicated.

  • 1935 - President Roosevelt signed the Federal Power Act, which let the Federal Power Commission oversee interstate electricity sales. Texas utilities avoided being subject to the Federal Power Commission by not crossing state lines.
  • 1941 - During World War II, the Texas Interconnected System began when there was a need for more power along the Gulf Coast. They originally built the system as two systems—one system for the Northern part of the state and another system for the Southern part of the state.
  • 1965 - One of the worst power outages occurred across the United States, and Texas wasn’t affected.
  • 1970 - The Electric Reliability Council of Texas (ERCOT) was formed in the wake of more federal regulations enacted in response to the 1965 power outage.
  • 1989 - In late December, there was a record freeze and a higher-than-usual demand for electricity. The utility companies had to interrupt services with rolling blackouts.
  • 1995 - Texas lawmakers pass legislation for the deregulation of the wholesale power market in the state. (Not all power in Texas is deregulated.)
  • 1999 - Texas lawmakers pass legislation for the deregulation of the distribution market in the state. (Not all power in Texas is deregulated.)
  • 2011 - During an early February blizzard that hit Texas, there were rolling blackouts across the state, causing millions of Texans to be without power for at least three days.
  • 2021 - Winter Storm Uri slams Texas causing a surge in demand for electricity that the power suppliers can’t meet during the peak of the storm. This storm left millions of Texans without power for days and caused billions of dollars worth of damage across the state.

This history is only an abbreviated version of the long history of Texas power. This history will continue as long as Texas has electricity.

What is ERCOT?

The Electric Reliability Council of Texas, which is better known as ERCOT, came about in 1970. ERCOT is the independent system operator (ISO) for the Texas power grid, and one of nine ISOs within the United States. Despite its name, the grid operated by ERCOT doesn’t cover the entirety of Texas. El Paso, the upper panhandle, and a chunk of East Texas are served by grids operated by different system operators.

There have been times in Texas history when the Texas power grid sent or received energy from across state lines. In what is now known as the “Midnight Connection,” a Texas utility in 1976 deliberately sent power to Oklahoma for a few hours. The legal battle that ensued after could have brought Texas under federal regulations, but the resolution let ERCOT continue unregulated. During the rolling blackouts of 2011, ERCOT imported power to Texas from Mexico.

The Public Utility Commission of Texas and the state Legislature oversee ERCOT. The overall operation is quite large. ERCOT manages the flow of electric power to over 26 million Texans. On top of scheduling the power on the electric grid, ERCOT connects over 52,700 miles of transmission lines and over 1,030 generation units.

What Does ERCOT Do?

Overall, ERCOT monitors the moving parts that keep electricity flowing from generators to Texas homes and businesses to make sure everything runs smoothly. It doesn’t own any utility assets or generates electricity. According to ERCOT, they have four primary responsibilities:

  1. To maintain system reliability.
  2. To facilitate a competitive wholesale market.
  3. To facilitate a competitive retail market.
  4. To ensure open access to transmission.

These responsibilities aren’t the only thing that ERCOT does. They also send Texans alerts asking them to conserve energy. These alerts tend to happen when end-use consumers are using a high amount of energy at the same time that some of the power plants that generate energy are unable to provide electricity under normal operations at the normal demand.

How Does the Power Grid Work?

Knowing the history of the Texas power grid and ERCOT is vital to understanding how the power grid actually works. The grid consists of lots of different companies that generate electricity with nuclear power, coal, natural gas, solar energy, and wind. After that, transmission and distribution companies send the electricity to homes and businesses. Then, the retail electricity providers, such as Value Power, purchase electricity at wholesale and sell it at retail to customers in the deregulated parts of Texas.

Ultimately, this all means that no single company owns the power plants, transmission lines, or distribution networks with the deregulated Texas power grid. However, natural gas as a fuel source is important to the flow of electricity, especially for Texas power plants.

Texas is unique in being an energy-only market. About 90% of the Texas power load is covered by ERCOT and includes major population centers like Dallas, Fort Worth, Austin, San Antonio, and Houston.

What Happened with the Texas Freeze in 2021?

All sources of electric generation struggled during the February freeze in Texas in 2021. Many factors led to the inability of the power plants to perform, including temperatures that plummeted to dangerous levels. Due to the freezing weather, natural gas production was severely impaired, depriving many generating units of the fuel needed to run. Wind turbines also failed due to the freezing weather. Texas is also getting more and more residents every day, which taxes the power grid further.

Because the demand for electricity on the grid exceeded the amount of electricity available for consumption, ERCOT ordered the transmission and distribution utilities to reduce demand (also called shedding load) by shutting off power to customers. Under less severe conditions, utilities can normally rotate customers, so no customer is without power for an extended period of time. That could not happen because so many generators were unable to produce electricity at normal levels.

These are only some of the factors that led to the Texas power grid failure. Over 4 million Texans were left without electricity for days, with the ice and snow causing further property damage that has been estimated at $2 billion.

What was the Aftermath of the February Freeze in 2021?

One major event following the 2021 freeze is that all three members of the Public Utility Commission and six members of the Electric Reliability Council of Texas board of directors resigned. At the same time, the CEO of ERCOT was fired.

In 2021, the Texas Legislature ordered electricity regulators to require Texas power plants to better prepare for extreme weather like the recent freeze. Especially since the winter storm caused billions in damage, and many homeowners had to wait months for repairs from plumbers due to problems like burst pipes. Natural gas infrastructure that is critical to the electricity supply chain has also been identified and mapped. In addition, the Public Utility Commission of Texas is studying possible options for larger reforms to the wholesale power market to incentivize the construction of new generation.

Anxiety about the power grid has bled over to concern for how the power grid can hold up to the ever-soaring temperatures of the Texas summer, especially in places like the Dallas-Fort Worth area. However, there is still so much discussion and changes that need to happen to the power grid to a further Texas power crisis.

The Benefit of the Texas Power Grid for Customers

With the power to choose your retail electric provider, Value Power has a proven track record, having served over 500,000 customers since the beginning of deregulation and Power To Choose in 2003. We understand our customers and your needs, so our customer-first approach is not limited to words but is practiced throughout the company. Make the switch to Value Power for electricity plans that are priced fairly and are easy to understand.