Texas has its own power grid because its utilities deliberately refused to send electricity across state lines, which would have placed them under federal regulation. By keeping every electron inside Texas borders, the industry kept the Federal Energy Regulatory Commission out of its business and preserved state-level control over how electricity gets generated, moved, and priced. Roughly 90 percent of the state’s power now flows through that independent system, run by a nonprofit called the Electric Reliability Council of Texas (ERCOT) and overseen by Texas regulators rather than Washington.
The Federal Law Texas Was Avoiding
The whole arrangement traces back to a 1935 expansion of the Federal Power Act, now codified at 16 U.S.C. § 824. The statute declared interstate electricity transmission and wholesale sales “affected with a public interest” and gave the federal government authority over them. But Congress limited that authority to electricity moving “in interstate commerce” and specifically excluded “facilities used only for the transmission of electric energy in intrastate commerce.”1Office of the Law Revision Counsel. 16 USC 824 – Declaration of Policy; Application of Subchapter
Texas utilities read that language and saw a loophole worth protecting. If no power crossed into Oklahoma, Louisiana, or New Mexico, federal regulators had nothing to regulate. They built the system accordingly. FERC still acknowledges on its own website that “the transmission of electric energy occurring wholly within ERCOT is not subject to the Commission’s jurisdiction under sections 203, 205, or 206 of the Federal Power Act.”2Federal Energy Regulatory Commission. ERCOT
Congress has since written ERCOT’s special status into federal law. Under 16 U.S.C. § 824k(k), when FERC orders transmission services inside ERCOT, the compensation must follow the Public Utility Commission of Texas ratemaking method rather than FERC’s own rate framework.3Office of the Law Revision Counsel. 16 USC 824k – Orders Requiring Interconnection or Wheeling Federal statute now recognizes and accommodates the separation Texas built.
How the Grid Grew That Way
The independent grid wasn’t founded as a political statement. It grew into one. Texas got its first power plant in Galveston in 1883, and over the following decades individual cities built their own generating stations. During World War I, utilities started linking their local networks to share resources, and in 1941 several of them formally joined as the Texas Interconnected System to funnel surplus power to Gulf Coast factories supporting the war.
That wartime cooperative locked in the pattern: Texas utilities were connected to each other but not to anyone else. After the war, nobody had a reason to change the arrangement. The informal system ran that way for decades until the 1965 Northeast blackout prompted new federal reliability rules. In response, the Texas Interconnected System formalized itself as the Electric Reliability Council of Texas in 1970.4Comptroller of Public Accounts. Texas Energy Tour – ERCOT ERCOT today manages scheduling, transmission flow, and supply-demand balance for more than 26 million Texans, reporting to the PUCT rather than to FERC.5Comptroller of Public Accounts. ERCOT Snapshot – Electric Reliability Council of Texas
What “Independent” Actually Means Physically
The rest of the continental United States runs on two massive synchronized grids: the Eastern Interconnection, which covers everything from the Great Plains to the Atlantic, and the Western Interconnection, which covers the Rockies to the Pacific. Texas stays off both. Instead of the conventional high-voltage AC lines that would synchronize its system with its neighbors and trigger federal jurisdiction, Texas uses a handful of direct current (DC) ties. These asynchronous links let limited amounts of power move in or out without electrically merging the grids.4Comptroller of Public Accounts. Texas Energy Tour – ERCOT
The total capacity of those ties is small. ERCOT’s February 2026 resource adequacy outlook lists four active DC ties totaling 1,220 megawatts:
- East Tie: 600 MW
- Sharyland Railroad Tie: 300 MW
- North Tie: 220 MW
- Laredo VFT Tie: 100 MW
For scale, ERCOT hit an all-time peak demand of 80,560 MW in February 2025.6ERCOT. 2025 Peak Demand Records The DC ties amount to roughly 1.5 percent of that peak.7ERCOT. Monthly Outlook for Resource Adequacy – February 2026
Not all of Texas sits on the independent grid, either. About 10 percent of the state’s electricity customers are connected to the national interconnections. El Paso, served by El Paso Electric, is on the Western Interconnection. Parts of the Panhandle and areas along the eastern border near Beaumont fall within the Eastern Interconnection.4Comptroller of Public Accounts. Texas Energy Tour – ERCOT Those areas answer to FERC and follow national reliability standards.
What Texas Gets Out of It
The independence pays off in ways that matter to ratepayers and policymakers. Because transmission projects stay inside ERCOT’s footprint, the PUCT can approve them on its own, without the multi-state proceedings and FERC supervision required for lines in the Eastern and Western Interconnections.
The clearest example is the Competitive Renewable Energy Zones (CREZ) build-out. In 2005 the legislature identified wind-rich areas in West Texas and the Panhandle and authorized a massive transmission expansion to connect those remote generators to population centers in Central and East Texas. The project finished in 2013: roughly 3,500 miles of new high-voltage transmission capable of carrying 18,500 megawatts, at a cost of about $7 billion. A comparable project crossing state lines would have taken years longer and involved multiple state regulators plus FERC. The CREZ lines helped make Texas the national leader in wind generation.
Independence also enabled the retail market Texans know today. In 1999, Governor George W. Bush signed Senate Bill 7, deregulating the retail side within ERCOT territory. Most residential and commercial customers in that footprint can pick from more than 140 competing Retail Electric Providers, which handle pricing, billing, and customer service. The wires themselves remain the responsibility of regulated Transmission and Distribution Utilities, which charge a delivery fee on the bill regardless of which provider you choose. As of early 2026, the average residential rate in Texas sits around 14 cents per kilowatt-hour, below the national average of roughly 20 cents. Municipal utilities and electric cooperatives can opt out of the competitive market and set their own rates.
On the wholesale side, ERCOT runs an “energy-only” market: generators get paid when they sell electricity, with no separate capacity payments for keeping plants on standby.2Federal Energy Regulatory Commission. ERCOT The theory is that price signals during scarcity will drive investment in new generation. Whether that theory holds up has been one of the central arguments in Texas energy policy for years.
What It Costs
The downside of isolation became impossible to ignore in February 2021. Winter Storm Uri brought days of subfreezing temperatures. Natural gas wellheads and pipelines froze, power plants that weren’t weatherized tripped offline, and wind turbines iced over. ERCOT came within minutes of total collapse. Millions of Texans lost power for days. The official state death count reached 246; researchers using excess mortality data estimate the true toll was closer to 800.
States tied into the Eastern or Western Interconnection can import large volumes of emergency power when local generation fails. Texas, with 1,220 MW of DC tie capacity, could not. The parts of Texas on the national grids, including El Paso, fared better during Uri in part because they had access to out-of-state power and had already implemented weatherization standards after a 2011 freeze.
The legislative response came in Senate Bills 2 and 3 that year. The laws require power plants, natural gas facilities, and transmission infrastructure to weatherize for extreme conditions, with the Texas Railroad Commission and ERCOT conducting inspections and penalties of up to $1 million per violation.8Office of the Texas Governor. Governor Abbott Signs ERCOT Reforms, Power Grid Weatherization Legislation Into Law In 2023, voters approved the Powering Texas Forward Act, creating the Texas Energy Fund to finance new generation and backup power for critical facilities.9Public Utility Commission of Texas. The Texas Energy Fund
Will Texas Stay Separate?
Uri revived a question that had been mostly theoretical: should Congress force Texas to connect? In February 2026, Senator Edward Markey and Representatives Greg Casar and Alexandria Ocasio-Cortez reintroduced the Connect the Grid Act, which would require ERCOT to interconnect with neighboring grids and subject those connections to FERC oversight.10Senator Edward Markey of Massachusetts. Markey, Casar, Ocasio-Cortez Reintroduce Connect the Grid Act The bill has been introduced in multiple sessions without advancing, and Texas officials have treated it as an intrusion on state sovereignty.
A commercial alternative is further along. The Southern Spirit Transmission project would build roughly 320 miles of high-voltage DC line connecting ERCOT to the Southeastern grid in Mississippi, with a capacity near 3,000 MW. The developers structured it as a DC tie to preserve ERCOT’s jurisdictional independence, and the project has federal approval on that basis. If completed around 2032, it would nearly triple the current import and export capacity without triggering the interstate commerce hook that kept Texas separate for nine decades. Grid independence, in other words, is holding, but the lines connecting Texas to the rest of the country are slowly getting bigger.