Ask most Texas businesses when power is most expensive and they’ll say August. Summer does set the highest demand records. But some of the most expensive days in ERCOT’s history happened in winter, and the forward curve now carries that lesson into every renewal.
Why winter is different
Summer demand is high but predictable. It builds through the afternoon and fades after sunset, and the grid plans for it all year.
Winter works differently. A hard freeze can push demand up sharply in a matter of hours, because much of Texas heats with electricity. Demand often peaks in the early morning, before the sun is up and before solar can help. And the cold that drives demand up can also take supply down.
When supply and demand move the wrong way at once
Most of ERCOT’s generation runs on natural gas. In extreme cold, wellheads and gathering lines can freeze, gas supply drops, and some power plants struggle to run. The grid gets squeezed from both directions: more demand, less fuel.
That is what happened during Winter Storm Uri in February 2021. Wholesale prices sat at the market cap for days, and the costs reached commercial customers through their contracts for years afterward. Winter Storm Elliott in December 2022 set a new winter demand record, and the grid held, but it was a reminder that cold snaps remain a real risk.
What has changed since
A lot. Generators and gas facilities now face weatherization requirements. The wholesale price cap was lowered after Uri. ERCOT has added programs to secure backup fuel, and the state has added a large amount of battery storage. The grid is better prepared than it was in 2021.
But better prepared is not risk free. The market still prices winter as a period where a few bad days can matter a great deal.
How winter risk shows up on your bill
On the forward curve, January and February often carry more premium than the mild months around them. That premium flows into fixed-rate quotes for any term that includes winter.
For indexed customers, exposure is direct. A cold week can drive that month’s cost well above budget. For fixed customers, the commodity is protected, but check the contract for what can still pass through: ancillary service costs, ERCOT fees, and charges tied to past grid events can all appear outside the fixed rate.
What to do before the cold arrives
Know which parts of your contract are fixed and which are not. If you are indexed or partly indexed, model a bad winter week and confirm the budget can absorb it. And if your operation can reduce load during a grid emergency, there may be value in planning for that now rather than in the middle of one.
Sector 7 watches the winter forward curve so clients aren’t surprised by it →