Recent Federal Policies Threaten Texas Energy Affordability
Recent federal policy changes could significantly impact energy costs for Texas families. Our analysis shows that the average Texas household could see an increase in their annual electricity bills by approximately $290 — a 14% increase — due to new tariff policies that affect crucial components of the Texas energy infrastructure.
This increase comes at a time when many Texans are already struggling with energy costs, making it essential for consumers to understand how these policies may impact their household budgets.
On March 4, 2025, the United States implemented 25% tariffs on imports from Mexico, with significant implications for Texas electricity markets. Some goods under the United States-Mexico-Canada Agreement (USMCA) received temporary exemptions. However, many critical electrical components remain subject to these new tariffs, creating a ripple effect through the energy supply chain that may ultimately affect Texan budgets.
The Transformer Crisis and Its Impact on Texas
At the heart of this issue is an ongoing global transformer shortage, which new tariffs may exacerbate. Transformers are an essential power grid component needed for electricity transmission and distribution — without them, power cannot efficiently reach Texas’s homes and businesses.
The electrical grid supply chain already faces a bottleneck, with transformer wait times more than doubling in recent years, going from 50 weeks in 2021 to a staggering 120 weeks in early 2024. What’s more, domestic manufacturing capabilities meet just one-fifth of U.S. demand, creating a critical vulnerability in our electrical infrastructure that threatens reliability and expansion efforts, according to the Atlantic Council.
Texas is particularly vulnerable to these tariffs because the state relies heavily on Mexico for transformer imports. According to the Atlantic Council, Texas is the top U.S. importer of transformer units. Mexico provides a vast amount of transformers to the U.S. through its Laredo Census District — providing nearly half of all high-voltage transformer imports, many of which go to Texas, although not all. The 25% tariff on these essential components may directly impact:
- Project development costs for new energy infrastructure
- Grid reliability across the Electric Reliability Council of Texas (ERCOT) network
- Recovery capability following extreme weather events
- Consumer electricity rates throughout Texas, adding to the many factors that already impact electricity rates
Breaking Down the $290 Annual Increase
Based on recent data from the U.S. Energy Information Administration (EIA), the average Texas monthly electricity bill is approximately $168, calculated based on the EIA-stated average usage level of 1,146 kWh per month at the statewide average of 14.68 cents per kWh. That’s an annual expense of $2,018. However, our estimates indicate that Texans may see an increase of 14% because of tariff policies. Our analysis of the tariff impact on Texas household electricity bills reveals three main factors that could drive an estimated increase in annual energy costs of up to $290.
1. Direct Component Cost Increases
The 25% tariff on Mexican-produced transformers and electrical components may immediately increase costs for Texas utility companies. These companies typically pass such costs directly to consumers through various rate adjustment mechanisms, a standard practice in regulated electricity markets where utilities transfer bulk tariffs and other uncontrollable costs to end-users.
Economic research confirms that recent tariffs have been passed almost entirely to U.S. citizens and businesses rather than those on whom the tariffs are ostensibly set.
Typically, Texans will see this cost as utility delivery fees, which are charges from the utility company for delivering power to your home or business. According to estimates from TXU Energy, utility delivery charges can make up 33% to 40% of your total energy bill. This direct impact accounts for approximately $110 (5.4% increase) of our estimated annual increase.
2. Infrastructure Development Delays
The transformer shortage, potentially exacerbated by tariffs, may cause significant delays in planned infrastructure upgrades across Texas. ERCOT has ambitious plans to double power generation by 2030, but component shortages could derail these plans.
Delays may result in higher maintenance costs for aging equipment and reduced electricity generation and transmission efficiency, adding approximately $95 (4.7% increase) to annual household costs. Utilities are already experiencing higher maintenance costs due to the need to reuse older transformers that have reached their recommended lifespan, with lead times for new transformers extending from three months to nearly two years in some cases, per the Atlantic Council.
Aging transformers can lose significant efficiency. Studies show that transformers older than their designed 20 to 25-year lifespan can cost businesses substantial amounts due to increased power losses. The average transformer efficiency typically ranges from 95% to 99%, but this decreases as equipment ages, directly affecting transmission costs and consumer prices.
3. Grid Reliability Costs
Texas has worked diligently to avoid repeating the 2021 Winter Storm Uri crisis by increasing electricity generation. Following Uri, when nearly 70% of Texans lost power, the legislature passed Senate Bill 3, which mandates the weatherization of power generation facilities and natural gas infrastructure. Noncompliance penalties range from $5,000 to $1 million per daily violation. These efforts have shown results, such as improved grid performance during subsequent extreme weather events.
With transformer shortages potentially creating bottlenecks in this expansion, ERCOT may need to implement additional ancillary services and reliability measures, already a significant driver of Texas electricity prices in 2025. The regulatory changes implemented after Uri, including new ancillary services fees, directly increase wholesale costs passed on to consumers.
ERCOT’s independent market monitor estimates that actions taken to hedge against blackout risks may cost Texas ratepayers approximately $1.5 billion annually through higher electric bills. These reliability measures account for the remaining $85 (4.2% increase) of projected annual increases.
Different Impacts Across Texas Households
While the financial impact of these tariffs can affect all Texans, the economic burden falls disproportionately on lower-income households. According to data from the American Council for an Energy-Efficient Economy (ACEEE), the national average energy burden for low-income households is 8.1%, nearly four times higher than that for non-low-income households at approximately 2.3%. In some parts of the country, including regions in Texas, energy burdens can reach as high as 30% of household income.
This energy burden disparity means that while luxury homes may see higher absolute dollar increases due to greater consumption, the relative economic impact is significantly more severe for lower-income Texans with less financial flexibility to absorb these additional costs.
Households facing high energy burdens often have to make difficult tradeoffs between paying utility bills and purchasing necessities like food and medicine. Moreover, high energy burdens are correlated with greater risk for respiratory diseases, increased stress and economic hardship, and difficulty moving out of poverty.
Our analysis shows three distinct impact levels across different household types:
Lower-Income Households (Annual Usage: 7,500 kWh)
- Estimated bill impact: $215 annual increase (19.5% higher than current costs)
- Total energy burden: May push energy costs to approximately 9.3% of household income for families at or below median income, adding 1.2% to already high energy burden
Middle-Income Households (Annual Usage: 12,000 kWh)
- Estimated bill impact: $290 annual increase (16.5% higher than current bills)
- Total energy burden: Represents approximately 4.0% of median household income (adding 0.5% to their existing energy burden)
Luxury Homes and Large Properties (Annual Usage: 24,000+ kWh)
- Estimated bill impact: $475+ annual increase (15.8% higher than current bills)
- Total energy burden: Typically less than 2.5% of household income (adding only 0.25% to their existing energy burden)
While the absolute dollar amount increases with usage, the economic burden falls disproportionately on lower-income Texas families who allocate a higher percentage of their income to essential energy costs.
Note that the energy usage levels above are estimates based on home and apartment sizes, common appliances in such living spaces, and average usage levels across each household type. The usage levels and price projections are all estimates. Real-world costs and price increases may differ.
What Texas Families Can Do Now
While policy changes occur at the federal level, Texas families can take several steps to mitigate the impact on their electricity bills.
1. Lock in Fixed-Rate Electricity Plans
With tariff impacts expected to increase costs throughout 2025, locking in a fixed-rate electricity plan now could provide significant savings. Understanding how the Texas deregulated electricity market works can help consumers navigate options effectively. Current market conditions suggest that 24 to 36-month contracts may offer the best value, as rates are relatively low due to decreased demand caused by the mild spring weather. Meanwhile, as we near summer and temperatures increase, rates may rise. And that’s without consideration of the increased costs potentially caused by the tariffs implemented on March 4, 2025.
2. Invest in Energy Efficiency
Energy efficiency improvements can reduce energy usage and offset rising electricity costs. According to data from the U.S Environmental Protection Agency (EPA), simple measures such as LED lighting, smart thermostats and improved insulation can reduce consumption by 10% to 30%, potentially negating much of the anticipated tariff-related cost increase. You may also want to look into smart power strips and other steps that can help you reduce energy loss to vampire power.
3. Explore Alternative Energy Options
Texas leads the nation in renewable energy production, particularly wind power. Exploring green energy plans may provide mild insulation from some aspects of the tariff impact, as domestically produced renewable energy is less likely to be directly impacted by global fuel source price increases. However, any cost increases caused by transformers or issues related to the power grid may still impact green energy plans, as renewable energy relies on the same power grid components as traditionally sourced energy.
4. Compare Electricity Providers Regularly
The Texas deregulated electricity market gives consumers the power of choice, but that power only provides value if you carefully research and compare electricity providers proactively. Regularly comparing electricity providers and plans and switching to a light company with lower rates than you currently pay can ensure you enjoy the perks of a deregulated energy market.
The Path Forward: Policy Alternatives and Industry Response
Energy industry leaders are already advocating for policy adjustments to minimize consumer impacts while addressing legitimate border security concerns. They have proposed several alternatives, including:
- Targeted exemptions: To reduce impact on critical grid infrastructure components
- Phased implementation: Allowing for domestic manufacturing capacity to increase
- Investment incentives: Aiming to increase domestic U.S. transformer production
- Grid modernization: Seeking funding to offset infrastructure costs
The American business community has expressed concerns about the broader economic impacts of these tariffs. Texas business leaders have noted that the uncertainty alone is already affecting the state’s economy, particularly in areas such as South Texas, where trade with Mexico is vital to the local economy.
Conclusion: Staying Informed in a Changing Market
The Texas electricity market continues to evolve in response to policy changes and market forces. While the full impact of these new tariff policies will only become clear in the coming months, our estimated $290 annual increase represents a significant concern for Texas families already navigating a complex energy landscape. Compared to average utility bills across other states, this increase could push Texas electricity bill costs even higher than the 32% it already has on the national average.
By staying informed and taking proactive steps to manage electricity costs, Texans can minimize the financial impact of these policy changes while supporting broader efforts to build a more resilient and affordable energy system.
