Texas vs California- Two Powerful Energy Markets

Texas and California have the two largest populations and economies among all states. Texas has a population of 29.5 million and a GDP of $1,759.7 billion, while California has a population of 39.2 million and a GDP of $3,091.9 billion. Both states consume large amounts of electricity and gas, but there are important differences when you compare their energy profiles and utility service prices.

Texas is the largest oil and gas producer in the US, with 43% of the national crude oil output and 25% of natural gas output. California also produces both fuels, but in much smaller amounts: less than 4% of oil output and 1% of natural gas output. There is also also important difference in how the power grid operates in each state:

• Texas has a fully independent grid that is managed by ERCOT, and almost all the electricity is generated inside the state.
• California is part of the WECC (Western Electricity Coordinating Council), which covers the entire US west coast and some regions of Canada and Mexico. California does not generate enough electricity to meet its demand, importing between 20% and 33% from other states and Mexico.

Both states are rich in renewable resources. Texas has the highest wind power output among all states; while California has the highest solar, geothermal and biomass power output. California is also a major producer of hydroelectricity, surpassed only by three states: Washington, Oregon, and New York.

Texas and California are both dependent on natural gas, which is used to generate almost half of their electricity. However, while Texas has a high local production, California relies on inputs. Texas has more than enough gas production to keep all local power plants running, while California can only cover around 10% of its gas demand with local production.

Both California and Texas have a deregulated energy market.

Comparing Energy Prices in Texas and California

California has higher electricity and natural gas prices than Texas, and this is reflected in the latest data published by the US Energy Information Administration. 

The following table compares the electricity prices reported in March 2022 for Texas and California. The US EIA provides a breakdown of prices by sector (residential, commercial, industrial and transportation) and the average price considering all sectors. Normally, the latest figures available at the US EIA website are from a few months ago, since gathering energy data for all states is a time-consuming process.

In the 12-month period from March 2021 to March 2022, residential electricity prices increased from 11.50 to 12.80 cents/kWh in Texas (+11.3%), and from 22.71 to 26.71 cents/kWh in California (+17.6%). For comparison, the US average price of residential electricity increased from 13.30 to 14.47 cents/kWh (+17%) in the same period. Texas’ kWh prices are currently lower than the US average, while California’s kWh prices are much higher.

Natural gas prices show the same trend, but the price difference between California and Texas is less drastic with respect to electricity prices. The following table summarizes the latest data reported by the US EIA, which covers February 2022:

In the 12-month period from February 2021 to February 2022, residential gas prices increased from $8.89 to $12.00 per thousand cubic feet in Texas (+35.0%), and from $15.49 to $18.85 per thousand cubic feet in California (+21.7%). For comparison, the US average price of residential gas increased from $9.31 to $12.17 per thousand cubic feet (+30.7%). Natural gas prices are slightly below the US average in Texas, and above-average in California.

You can read more about US electricity rates at Quick Electricity.