Texas Electricity Market Explained

How The Texas Electricity Market Works

Texas has a deregulated electric sector, which means that power generation companies sell their electricity in a competitive market. Homes and businesses have the freedom to choose an retail electricity provider, and there are many types of promotions and plans.

In this article, we will highlights the types of companies and organizations that participate in the Texas electricity sector. Deregulation has been possible by assigning functions to different organizations, instead of having one company with a monopoly over the entire Texas power industry.

Learn More About ERCOT

ERCOT – Electric Reliability Council of Texas

The Electric Reliability Council of Texas (ERCOT) is the independent system operator that coordinates the flow of electricity from power plants to homes and businesses. Technically, ERCOT is not a utility company. Instead, different portions of the Texas grid are operated by individual utilities, who are coordinated by ERCOT.

• ERCOT manages the power supply for 26 million Texans, who represent around 90% of the state’s electricity consumption.
• There are more than 680 power plants under ERCOT oversight, and 46,500 miles of transmission lines that are operated by different utility companies.
• ERCOT also settles financial transactions that occur in the wholesale energy market.

ERCOT is a nonprofit organization, and its members include power generators, electricity retailers, investor-owned utilities, electric cooperatives, municipal utilities, and even consumers. Although ERCOT manages the power sector, it is under the authority of the Public Utility Commission of Texas and the Texas Legislature.

PUCT – Public Utility Commission of Texas

The Public Utility Commission of Texas (PUCT) regulates several utility services in the state: electricity, telecommunication, water and sewers. There are some exceptions; for example, municipal electric companies are regulated locally, and natural gas is regulated by the Railroad Commission of Texas.

The main functions of the PUCT are implementing laws related to utility services, providing customer assistance, keeping utility infrastructure in good working condition, and promoting fair competition. In other words, the PUCT enforces regulations for utility companies.

Texas Power Generation Companies

These companies are in charge of producing electricity for Texan homes and businesses, as their name implies. However, power consumers don’t purchase directly from them. Instead, consumers purchase electricity plants from Retail Electricity Providers (REPs), who in turn purchase energy in bulk from generation companies.

According to the PUCT, there are 494 power generation companies in Texas. The list has 603 names in total, since there are 109 commercial names owned by many of these companies. The following are some of the largest power plants of each type in Texas:

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Transmission and Distribution Utilities

Transmission and Distribution Utilities (TDUs) are also known as Transmission and Distribution Service Providers (TDSPs). These companies are responsible for the power lines, towers, substations, transformers and poles that carry electricity from power plants to consumers.

The 5 main TDUs in Texas are:

• AEP Texas Central
• AEP Texas North
• CenterPoint Energy
• Oncor Electric Delivery
• Texas-New Mexico Power

You can choose your electricity provider in Texas, but the TDU depends on your location. For example, Dallas-Fort Worth is in the Oncor service territory, and Houston is in the CenterPoint Energy service territory. The power grid is shared by electricity retailers, and TDU charges are added to all electricity plans in the same ZIP code.

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Retail Electricity Providers

Retail Electricity Providers (REPs) are the companies that sell you electricity plans. They determine the contract terms and kilowatt-hour price, and electricity is sold through the networks operated by TDUs.

When you receive an electric bill, energy is charged by the REP, while transmission and distribution are charged by the TDU. TDU charges are equal for all consumers in the same service territory, but energy prices change depending on the electricity plan selected.

There are more than 300 REPs selling electricity plans in Texas. At Quick Electricity, we work with plans from the following light companies:

• Acacia Energy
• Amigo Energy
• Bounce Energy
• Direct Energy
• Frontier Utilities
• First Choice Power
• Green Mountain Energy
• Infinite Energy
• Payless Power
• Tara Energy

Texas Energy Brokers

Energy brokers like Quick Electricity are the companies or individuals that help consumers purchase electricity from providers. We help our customers compare the electricity plans available in their ZIP code, so they can choose the best option according to their consumption.

ERCOT and the PUCT are constantly making decisions about the electricity sector, which means that kWh prices and electricity plans are constantly changing. An energy broker like Quick Electricity can keep you updated about the options available, helping you purchase the best electricity plan for your needs, under changing market conditions.

• Wholesale prices normally peak around summer, when consumption reaches its highest point in the year, and this leads to higher retail prices.
• However, extreme events like the February 2021 winter storm can also take the power grid to its limit.
• Also, TDU charges are reviewed and updated twice per year, in March and September.