Last Updated on October 15, 2021 by Mary Pressler

Who is ERCOT?

If you live in Texas, you have surely heard the name ERCOT in news related with the energy industry. However, given the complexity of the state’s electric sector, the functions of each organization are not always clear.

ERCOT is an acronym that stands for the Electric Reliability Council of Texas, and they manage electricity flows and payments for roughly 85% of the state.

Texas Power Grid

The scope of the ERCOT grid is massive: the organization manages electric delivery for over 24 million Texan homes and businesses, relying on a power grid that spans over 46,500 miles.

The electricity supply comes from more than 550 power stations connected to the grid, and there are five major utility companies that manage transmission and distribution under ERCOT oversight:

You can choose your electricity provider in Texas, but the transmission and distribution utility (TDU) depends on your location. This has a simple reason: having many power companies competing to sell electricity in the same market makes sense, but having a separate power grid for each company is absurd and extremely expensive. Therefore, Texas energy companies compete for the same customers, but the physical grid is shared.

What Type of Organization is ERCOT?

Although ERCOT manages most of the electricity sector in Texas, it cannot be described as a power generation company, an electricity retailer, or a transmission and distribution utility.

ERCOT is considered an independent system operator (ISO), and there are only nine organizations of its type in North America, with ERCOT being the first in the USA.

ERCOT was developed from the Texas Interconnected System (TIS), an alliance of many Texan utilities formed during World War II, which had the purpose of sending excess power to military manufacturing centers in the Gulf Coast.

Utility companies saw the benefits of interconnected operation and officially formed ERCOT in 1970, following the requirements of the Federal Energy Regulatory Commission (FERC).

Currently, ERCOT is composed of over 160 members from the entire electricity supply chain. These members include power generators, investor-owned utilities, municipal utilities, electricity retailers, and of course energy consumers.

An interesting feature of the Texan power grid is that it operates as an isolated circuit, lacking interconnection points with other states, similar to how the isolated Alaskan power grid operates.

How Does ERCOT Work?

What Functions Does ERCOT Perform?

A key responsibility of ERCOT is power dispatch: scheduling and managing how electricity will flow through the network. The process is carried out on a daily basis, subject to the operating constraints of generation systems and individual power lines.

  • If the capacity of any system component is exceeded, a fault can occur, potentially leading to a massive blackout.
  • The Texan summer is the most challenging time of the year, since grid demand reaches its highest point due to air conditioning loads.

Power dispatch is much more complex than it seems. To visualize the technical complexity, assume all the consumers connected to a power grid need 1 million kilowatt-hours per day.

  • Simply producing 1 million kWh and injecting them into the grid is not enough to guarantee a reliable supply. Energy must be provided exactly where it is needed, and at the correct time of the day.
  • The process must be carried out subject to the physical limitations of power lines, transformers and other grid equipment.
  • There are situations that demand a very fast response. For example, this can happen during summer if many large buildings activate their air conditioning systems at once

Other Responsibilities of ERCOT

ERCOT is also responsible for planning new power plant additions and ensuring that the mix of generation technologies is suitable for Texas – effective power dispatch is only possible with the right combination of generation systems.

For example, you can’t rely on solar farms to provide electricity at night, and you can’t power a city with wind turbines on a day with calm weather. Natural gas turbines and hydroelectric units are normally used when a lot of power is needed in a short time, since both systems are capable of a very fast response. Recently, batteries have emerged as a viable solution to manage sudden changes in generation and demand.

Managing the Wholesale Electricity Market and Customer Choice

In addition to ensuring power delivery, ERCOT operates the electricity market in Texas, performing financial settlements for sellers and buyers. It would be impossible to track every single kilowatt-hour injected to the grid, but total inputs and outputs can be measured and balanced. Although the actual process is very complex, it can be summarized as follows:

Electricity Consumption = Electricity Supplied – Total Losses in the Power Network

ERCOT is also the organization in charge of managing the process when you switch electricity providers in Texas, making sure your data is delivered correctly to your new power company after the switching procedure.

As previously mentioned, it would be impractical to have a separate power network for every retailer, so provider switching is carried out digitally and not physically. This is possible thanks to the smart meters that have been installed throughout Texas, and the process is comparable to changing the mobile network operator for your smartphone.


Switching Your Electricity Provider Online

At, you can compare electricity plans from multiple power retailers in Texas. You can filter options based on price, contract duration and other key features, and you can manage the entire process without leaving your home or office.

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  1. […] ERCOT was formed in 1970, and Texas had deregulated its electric sector by 1999 – generators compete in a wholesale market, while retailers compete to sell electricity plans for homes and businesses. […]

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