Independent guide. Based on ERCOT public market reports, PUCT orders and state legislative records.Verified May 2026

ERCOT electricity prices 2026: PowerToChoose mechanics and winter storm precedent

ERCOT covers about 90 percent of Texas load with a unique energy-only market design that produces low wholesale prices most of the time, with extreme-event volatility that bankrupted indexed-pricing customers in the 2021 winter storm. This page covers how the market actually works, the practical advice for residential customers shopping on PowerToChoose, and the post-storm reforms that still leave meaningful tail risk.

How an energy-only market works

ERCOT pays generators only for the kWh they produce. There is no separate capacity payment (unlike PJM, NYISO, ISO-NE), no resource-adequacy auction (unlike CAISO), no must-take baseload payments. The market design rests on a key assumption: generators will invest in new capacity if they expect to recover their costs through energy-market revenue alone. During tight grid conditions, prices spike to scarcity levels (currently capped at $5,000 per MWh, lowered from $9,000 after the 2021 storm), giving generators meaningful revenue from those high-price hours that funds their fixed costs.

The design has produced consistently low average wholesale prices over the past decade ($25 to $40 per MWh annual average through 2022, rising to $40 to $55 in 2023-2025). It has also produced multiple multi-hour scarcity events: summer 2011, summer 2019, winter 2021 (the Uri disaster), summer 2023 (multiple grid-stress days), summer 2024 (continued reliability strain). Generators have stayed in the market because the scarcity revenue does, on average, cover their costs. Households on fixed-rate retail contracts are insulated from the scarcity events; households on indexed pricing are not.

The 2021 winter storm: what went wrong

Winter Storm Uri hit Texas on February 13, 2021, with temperatures dropping below 0F in Dallas and Houston for several consecutive nights. The cold caused widespread generation failures: gas plants whose fuel supply lines froze, wind turbines whose blades iced over, even some nuclear units that tripped on cold-weather protection. Generation supply dropped by about 40 percent of typical winter peak; meanwhile heating demand surged to record levels. ERCOT was forced to shed about 20 GW of load through rolling blackouts; many of the blackouts became extended outages because the rotation couldn't be maintained.

The wholesale market hit the then-$9,000 per MWh price cap and stayed there for nearly 4 days as the PUCT ordered ERCOT to maintain scarcity pricing to incentivise any available generation. The total wholesale-market settlement was about $50 billion over those few days, on a footprint that normally settles $4 to $8 billion per year. Indexed-pricing retail customers (Griddy was the most prominent, but other plans had similar exposure) received bills of $5,000 to $20,000+ for the week. Griddy went bankrupt; the PUCT mandated other REPs to absorb the worst customer impacts.

Post-storm reforms (and what they did not fix)

The Texas legislature passed several bills in the 2021 session in response. SB 2 created a new state energy emergency alert system. SB 3 required generation and gas-supply weatherisation, with penalties for non-compliance. HB 4492 lowered the wholesale price cap to $5,000 per MWh. The PUCT subsequently approved a new Performance Credit Mechanism (PCM) intended to provide a small additional payment for generators that remain available during winter scarcity events. These reforms have reduced the worst-case tail risk modestly but have not changed the fundamental market structure.

The structural risks that remain: continued reliance on gas generation whose supply can be interrupted in extreme cold, intermittent renewable generation that produces little during winter storm conditions, weak interconnection to neighboring grids (Texas chose grid isolation in part to avoid federal regulation), and growing demand from data centers and EV charging. Most independent reliability analyses (NERC, ERCOT's own seasonal assessments) suggest summer 2026 is well-positioned but winter remains a moderate-tail-risk environment for another major event.

How to shop wisely on PowerToChoose

PowerToChoose.org is the official Texas PUC portal for retail-electricity shopping. Enter your ZIP code; the portal returns all licensed REPs serving your address with their current offers. Each offer has an Electricity Facts Label (EFL) showing the all-in rate at 500, 1,000 and 2,000 kWh monthly usage. The rate varies with usage tier because most plans include either a monthly minimum-usage fee or a usage-bonus credit; comparing at your actual usage avoids the marketing-trap rates that are only achievable at narrow usage windows.

Three rules. First, always choose a fixed-rate plan with explicit contract term (typically 12, 24 or 36 months). Variable-rate and indexed-pricing plans are not appropriate for residential customers given the tail-risk discussion above. Second, check the early termination fee; reasonable ETFs run $150 to $300. Avoid plans with $20+ per remaining month ETFs that effectively lock you in. Third, evaluate based on the rate at your actual monthly usage, not the cheapest tier; if you average 1,200 kWh per month, compare offers at 1,000 kWh tier (since the EFL displays 500 / 1,000 / 2,000), not at 500 kWh where rates are often artificially low.

Renewals: the most common Texas mistake

When a fixed-rate contract expires, most REPs auto-renew the customer to either a variable-rate "month-to-month" plan or a much-higher-priced renewal rate. The auto-renewal rate is typically 30 to 80 percent higher than the original contract rate. The renewal notification is required by Texas regulation but is often easy to miss; it typically arrives 30 to 45 days before contract expiration as a small notice on the regular bill or as a separate mailing.

The fix is to set a calendar reminder for 60 days before your contract expires and shop again on PowerToChoose. The new fixed-rate offer is almost always materially better than the auto-renewal rate. Many Texans end up paying meaningfully more than necessary because they assume the REP will renew at a similar rate; this is rarely the case. The 5-minute shopping process every 12 to 36 months is the single highest-leverage residential-rate decision in deregulated Texas.

Sources and further reading

FAQ

What makes ERCOT different from other US grids?
ERCOT (Electric Reliability Council of Texas) covers about 90 percent of Texas load and operates as an energy-only market, meaning generators only get paid for the kWh they actually produce, with no separate capacity payment (unlike PJM, MISO, NYISO and others). The design relies on scarcity pricing during tight grid conditions to incentivise generation investment. The result: most hours have very low wholesale prices, but extreme events can produce hour-long spikes to the $5,000 per MWh price cap (which was lowered from $9,000 after the 2021 storm).
What happened during the February 2021 winter storm?
Winter Storm Uri (February 13-17, 2021) caused widespread generation failures across Texas: gas plants froze, wind turbines iced over, the cold snap pushed demand past the system's capacity to deliver. ERCOT held wholesale prices at the then-$9,000 per MWh cap for nearly 4 days. Residential customers on indexed-pricing plans (mostly Griddy customers) saw bills of $5,000 to $17,000 for a single week of February. Hundreds of Texans died from the related power outages. The state legislature passed reforms after the storm but did not fundamentally change the energy-only market design.
Is it safe to use indexed pricing in ERCOT?
No, for most households. Indexed-pricing plans (where your supply rate tracks the real-time wholesale market) expose you to the full spike risk during grid-stress events. The 2021 storm produced $20,000+ monthly bills for Griddy customers and bankrupted the company. Post-storm reforms include price caps and consumer protections, but the risk of multi-thousand-dollar bills during winter or summer extreme events remains real. Fixed-rate contracts are essentially always the right choice for residential customers; the small premium versus indexed pricing buys meaningful insurance.
How do I shop on PowerToChoose?
PowerToChoose.org is the state-run portal where ERCOT-region residential customers shop for retail electricity providers (REPs). Enter your ZIP code; the portal lists all licensed REPs serving your address with their offer details. Always evaluate three numbers: the Electricity Facts Label (EFL) shows the rate at 500 / 1,000 / 2,000 kWh monthly usage tiers. Use the tier that matches your typical usage. Check the contract term (12, 24, 36 months) and the early termination fee. Never sign a variable-rate plan or one without an explicit fixed term.
What is the typical ERCOT residential rate?
All-in residential rates on PowerToChoose ran 12 to 17 cents per kWh for fixed-rate plans in 2025. The exact number depends on the REP, contract term, usage tier and ZIP code; lock-in rates have crept up since 2023 as wholesale prices stayed elevated. Compared to the US national average of 18.05 cents, Texas remains slightly below average for residential customers who shop carefully; customers who never shopped and have stayed on default plans typically pay 25 to 50 percent more than the best available fixed-rate offer.
Does deregulation apply to all of Texas?
No. Most of Texas (Houston, Dallas, Fort Worth, San Antonio area for now) is deregulated and in ERCOT. El Paso (served by El Paso Electric) is regulated and outside ERCOT (part of WECC). Most of East Texas and parts of the Panhandle are served by cooperatives or municipal utilities outside ERCOT, and supply is not shoppable. Some Texas municipalities (San Antonio, Austin) opted out of deregulation entirely and remain served by their municipal utility (CPS Energy, Austin Energy).
What about grid reliability going forward?
ERCOT reliability is a politically charged topic. Reforms after 2021 added some weatherisation requirements for generators and gas suppliers, modest changes to operating reserves, and a new Performance Credit Mechanism (PCM) intended to provide a small additional payment for reliable winter availability. Critics argue the reforms are insufficient given continued load growth (data centers, EV charging, electrification) and the heavy reliance on intermittent renewable generation. Most independent analyses suggest summer reliability is okay and winter remains a moderate risk for another major grid event.
Disclaimer. ERCOT wholesale price and reliability discussion based on public market reports and post-storm legislative record. Retail-rate comparisons should use the latest PowerToChoose offers for your specific service address. Independent resource.

Updated 2026-05-11