Demand Response Programs in Texas

Published 2026-04-06 · By ChooseMyPower Editorial

What Is Demand Response?

Demand response is a way to balance the electricity grid by asking customers to temporarily reduce their power draw instead of turning on more power plants. When demand gets close to the grid’s limits, it is often cheaper and faster to reduce demand than to fire up expensive peaking generators.

In Texas, demand response programs come in several forms, from smart thermostat adjustments to large industrial curtailment contracts. For residential customers, these programs are simple to join, rarely noticeable in daily life, and come with real financial incentives.

How It Works for Your Home

The most common residential demand response program involves a smart thermostat. Here is the typical setup:

  1. You enroll through your REP, TDU, or a third-party program. Some programs send you a free smart thermostat; others work with thermostats you already own (like Nest, Ecobee, or Honeywell models).
  2. During normal days, your thermostat operates exactly as you set it.
  3. During a grid event (usually a hot summer afternoon when ERCOT reserves are low), the program sends a signal to your thermostat to raise the temperature setpoint by 2-4 degrees.
  4. The event lasts 2-4 hours, typically during peak demand (2 PM to 6 PM).
  5. After the event, your thermostat returns to your normal settings.
  6. You earn credits on your electricity bill for participating.

The adjustment is subtle. If your thermostat is normally set to 74 degrees, it might bump to 77 degrees during an event. Most people do not notice the difference, especially if they are away at work during peak hours.

Types of Demand Response Programs

Smart Thermostat Programs

These are the most common for homeowners. Your TDU or REP partners with a thermostat manufacturer or demand response aggregator to manage events. Bill credits typically range from $25 to $85 per cooling season.

Popular programs include:

  • CenterPoint Energy’s demand response program for Houston-area customers
  • Oncor’s residential demand response available through enrolled REPs
  • Third-party aggregators like OhmConnect, EnergyHub, and Virtual Peaker that work across multiple TDU areas

Time-of-Use Plans

Some electricity plans incentivize demand shifting through pricing. “Free nights” plans, for example, give you free electricity during overnight hours while charging a premium during the day. By shifting laundry, dishwashing, and EV charging to nighttime, you effectively move your demand away from peak periods.

Pool Pump and Water Heater Programs

Some programs specifically target pool pumps and electric water heaters, which can be shifted to off-peak hours without affecting comfort. These programs may offer separate incentives or be bundled with thermostat programs.

Industrial and Commercial Curtailment

Large industrial customers can sign contracts with ERCOT to reduce their electricity draw during grid emergencies. These contracts can be worth millions of dollars because industrial facilities can shed thousands of megawatts on short notice. While this does not directly affect residential customers, it is a major reason why rotating outages are rare.

The Grid-Level Impact

Demand response is one of ERCOT’s most valuable tools for managing tight conditions. During a summer peak, residential demand response programs across Texas can collectively reduce demand by several thousand megawatts. That is the equivalent of several large power plants — available at a fraction of the cost.

For context, ERCOT’s operating reserves can drop to concerning levels when summer demand passes 80,000 megawatts. If demand response shaves 3,000-5,000 megawatts off that peak, it can be the difference between a normal day and a conservation appeal.

How to Get Started

  1. Check with your REP. Many REPs offer their own demand response programs or partner with third-party aggregators. Ask what is available for your plan.
  2. Check with your TDU. Oncor, CenterPoint, and AEP Texas all have residential demand response initiatives.
  3. Get a smart thermostat. If you do not have one, some programs provide them free. Otherwise, a basic smart thermostat costs $80-$150 and pays for itself through energy savings and program credits within a year or two.
  4. Enroll and set your preferences. Most programs let you set temperature limits and opt out of individual events.

The Bottom Line

Demand response programs are one of the easiest ways to earn bill credits while helping keep the Texas grid stable during peak demand. Smart thermostat programs are low-effort, barely noticeable, and available to most Texas homeowners. If you already have a smart thermostat, enrolling takes minutes.

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Frequently Asked Questions

What is demand response?

Demand response is a system where electricity customers voluntarily reduce their power draw during periods of high demand in exchange for incentives like bill credits. It helps balance the grid without building additional power plants.

How much can I save with a smart thermostat program?

Most smart thermostat demand response programs offer $25-$85 per summer season in bill credits. The savings come on top of any energy savings from the thermostat itself. Some programs offer higher incentives during particularly stressful grid events.

Will I notice when a demand response event happens?

Barely. Smart thermostat programs typically raise your setpoint by 2-4 degrees during events, which most people do not notice. Events usually last 2-4 hours during the hottest part of the afternoon. You can always override the adjustment if you are uncomfortable.

Do I have to participate in every demand response event?

Most programs are voluntary. You can opt out of individual events without losing your enrollment. However, consistent participation usually earns you higher rewards, and some programs reduce credits if you opt out frequently.