A closer look at ERCOT’s role in the Texas energy sector can help determine how valid these criticisms are. ERCOT was founded over 50 years ago in 1970. Its job was to manage the state’s power grid. But the full extent of the role it plays today developed under the governorship of George W. Bush in the 1990s. At this time, Texas moved to deregulate its energy market.
In the shift towards energy choice, Texas legislators made ERCOT the first independent system operator (ISO) in the U.S. in 1996. ERCOT was responsible for managing the flow of electricity across the power grid for most Texans.
This meant ERCOT was set to manage a wholesale market, where generators offer prices to ship energy onto the grid. In this deregulated market, Texans can choose their energy provider from various options.
Texas’ power grid isn’t connected to grids in other states, which helped the deregulation process. In other parts of the country, the electric sector is usually organized regionally. But Texas has sole jurisdiction over its individual power grid.
Running and developing the power grid involves the Public Utilities Commission (PUC). The PUC oversees ERCOT. The State House and Senate are also involved, which can pass energy-related legislation. Federal bodies, like the Federal Energy Regulatory Commission, don’t play a direct role in the ERCOT market.
Arguments in favor of deregulation were strong. It created a marketplace where power generators produced energy, retail electricity providers sold it to consumers, and transmission utilities transported it across the state. Many saw this as a major reason why Texas enjoys competitive energy prices. The buildout of wind energy since the late 2000s also showed that deregulation could help to grow sources of renewable energy.
But critics pointed out that customers found it increasingly difficult to find the best deals. This was because of the large number of electricity providers and an even greater number of plans they offer.
Following deregulation, ERCOT’s territory has grown to 26 million customers. These customers account for about 90 percent of Texas’ electricity load. ERCOT oversees around 46,000 miles of transmission lines and more than 680 power generation units. In light of the lack of readiness among power generators to cope with freezing temperatures, critics wonder whether ERCOT’s management was adequate.