Last Updated on April 22, 2021 by Mary Pressler

General Information About the Texas Electricity Market

Texas Electricity: Facts and Figures

With a population of 29.4 million and a thriving industrial sector, Texas is the state with the highest energy consumption. Considering both electricity and fuel, Texas accounts for 14% of total US energy usage. The US Energy Information Administration has analyzed how energy consumption in Texas is broken down by sector.

  • Industrial  = 51.1%
  • Transportation = 24.8%
  • Commercial = 11.6%
  • Residential = 12.5%

In August 2019, the Texas electric grid reached a peak demand of 74,820 MW – the highest value ever recorded. In August 2020, there was a similar peak of 74,328 MW, but the power grid had more generation capacity available. The Electric Reliability Council of Texas (ERCOT) is forecasting a summer peak demand of over 77,000 MW for 2021, which will set a new record, but there will be over 87,000 MW of available capacity.

  • The Texas oil and gas industry contributes to the high demand for electricity. Regions like the Gulf of Mexico and the Permian Basin have considerable fossil fuel reserves, and the state’s 31 refineries can process 5.9 million barrels per day.
  • During summer, air conditioning is also a major load for the Texas power grid. A single air conditioner has a negligible impact, but demand reaches the scale of gigawatts when thousands of buildings are using them

General Figures About Texas Electricity Sources 

The top 4 electricity sources in Texas are natural gas, wind, coal and nuclear power. The following table provides January 2021 generation data from the US EIA.

Electricity Source January 2021 Generation

(In Millions of kWh)

Percentage of Total

Generation

Natural gas 17,707 46.1%
Wind & other non-hydro renewables 8,770 22.8%
Coal 7,959 20.7%
Nuclear 3,799 9.9%
Hydroelectric 159 0.4%
Petroleum 4 Less than 0.1%

*Source: US EIA

Texas uses over 70% more electricity than California, which is the state with the 2nd highest consumption. Most of the power is still generated from fossil fuels in Texas, but the growth of renewable sources has been remarkable in recent years. They only accounted for 3% of generation in 2006 and 10% in 2010, but are now the second-largest source of electricity.

  • Wind power has grown very fast: The state has over 31,000 MW of wind generation capacity, which is 1/4 of the total US capacity.
  • Solar power also has significant potential in Texas, and the best sites are found to the west of the state. According to the Solar Energy Industries Association, Texas deployed 3,425 MW of solar power in 2020, surpassed only by California with 3,904 MW.

A common misconception is that Texas wastes a lot of power, but that is simply not the case. When you calculate residential energy consumption per person, Texas is among the most efficient states, according to the Energy Information Administration. Statewide energy demand is high due to its sheer population and size, as well as the highly industrialized economy.

How the Texas Electricity Market Works

Texas has a deregulated electric sector, which means you can choose your electricity provider in most areas. The companies selling power are called Retail Electricity Providers (REPs), and they offer a wide range of Texas electricity plans.

  • According to the Public Utilities Commission of Texas (PUCT), there are over 120 REPs offering electricity plans in Texas.
  • The generation mix of each plan is disclosed in the Electricity Facts Label. You can choose a provider offering 100% renewable energy, or you can simply choose the lowest kWh prices to minimize power bills.
  • Over 90% of electricity consumers have already changed providers at least once, according to the PUCT.

Retail Electricity Providers (REP) share the grid when delivering electricity to their clients, since having a separate network for each provider would be impractical and extremely expensive. There are five transmission and distribution utilities (TDU) in the deregulated electric market, and each has it own service territory:

  • American Electric Power – Texas Central Company
  • American Electric Power – Texas North Company
  • CenterPoint Energy
  • Oncor Electric Delivery Company
  • Texas-New Mexico Power

The entire deregulated market is under the oversight of the Electric Reliability Council of Texas (ERCOT). The responsibilities of ERCOT include managing the flow of electricity, financial settlement in the wholesale electricity market, and managing the provider switching process. Electricity consumption and payments are managed with smart power meters: the entire process is carried out digitally when you want to switch providers, with no rewiring needed.

Complementary Activities by the Public Utilities Commission

The PUCT manages energy efficiency programs where utilities are legally required to participate, including the power companies still outside of the deregulated market. The Oncor incentive program is currently the largest in Texas, with a 2021 budget of over $26.6 million and covering a service area with over 10 million customers.

Electricity provider choice brings options, but it may also lead to confusion. The PUCT also manages educational programs, to help customers make informed decisions when comparing power providers. Before choosing an electricity plan, we strongly recommend you read the Electricity Facts Label carefully.

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