What are TDSP delivery charges on a Texas business electricity bill?

Core thesis

TDSP delivery charges are non‑negotiable, regulator‑set fees that reflect the cost of moving power from the ERCOT grid to a business’s service point. They appear on every retail electric provider (REP) invoice as separate line items for energy (cents/kWh) and demand (cents/kW), and they can be audited for billing errors that often amount to thousands of dollars per year.

In the first two paragraphs we answer the question directly: the charges are set by the Public Utility Commission of Texas (PUCT), collected by the transmission and distribution service provider (TDSP) that owns the local wires, and passed through unchanged by the REP. They consist of a volumetric charge based on actual kilowatt‑hours consumed and a demand charge based on the highest kilowatt demand recorded during the billing period.

Who are the TDSPs in Texas?

Texas has four primary TDSPs that own and operate the high‑voltage transmission lines and lower‑voltage distribution circuits serving most commercial customers:

TDSP	Service territory
Oncor Electric Delivery	North and Central Texas, including Dallas‑Fort Worth and the Metroplex suburbs
CenterPoint Energy	Houston, Beaumont, and surrounding Gulf Coast areas
AEP Texas (formerly TXU)	West Texas, including Midland, Odessa, and the Permian Basin
Texas‑New Mexico Power (TNMP)	West‑central Texas, including Lubbock and the Panhandle

Each TDSP files a tariff with the PUCT that defines the delivery rates, the methodology for calculating demand, and the timing of billing cycles. Because the tariffs are public, any business can review the underlying cost structure.

Charge components

Volumetric (energy) charge

The volumetric charge is expressed in cents per kilowatt‑hour (c/kWh) and reflects the cost of using the TDSP’s wires, substations, and ancillary services. It is calculated as:

Volumetric charge = Energy consumption (kWh) × Rate (c/kWh)

The rate varies by TDSP and by tariff class (e.g., commercial‑general, commercial‑large). For example, Oncor’s 2024 commercial‑general volumetric rate is approximately 2.5 c/kWh, while CenterPoint’s is around 2.8 c/kWh. These rates are adjusted annually for inflation and capital investment recovery.

Demand charge

The demand charge is expressed in cents per kilowatt (c/kW) and is based on the highest 15‑minute interval demand recorded during the billing month, often called the “peak demand.” The formula is:

Demand charge = Peak demand (kW) × Rate (c/kW)

Demand rates are substantially higher than volumetric rates because they fund the capacity of the transmission system. Oncor’s demand rate for commercial‑general customers is roughly 12 c/kW, while CenterPoint’s is about 13 c/kW. Because demand is a function of load shape, businesses can reduce this charge by managing peak usage.

Fixed and ancillary components

In addition to the two primary components, TDSP tariffs may include a small fixed charge (e.g., $5‑$10 per month) to cover meter reading and billing administration. Ancillary service fees—such as for voltage support or reliability services—are also passed through, but they are typically a fraction of a cent per kWh.

Why the charges are regulated and non‑negotiable

The PUCT regulates TDSP rates to ensure that the cost of maintaining the grid is fairly allocated among all users. Unlike the wholesale power market, where contracts can be negotiated, TDSP tariffs are a public utility function. The PUCT reviews each TDSP’s cost of service, capital expenditures, and return on equity before approving rates. Because the rates are set by law, a business cannot negotiate a lower TDSP charge with the provider.

However, the non‑negotiable nature of the charge does not mean the bill is immutable. Errors in meter reading, demand calculation, or tariff application can create overcharges that are fully recoverable.

How TDSP charges appear on REP invoices

Retail electric providers (REPs) such as Reliant, TXU Energy, or Direct Energy purchase wholesale electricity on the ERCOT market and then add the TDSP delivery charges as pass‑through line items. A typical commercial invoice will show:

1. Energy charge (c/kWh) – the wholesale price you paid plus the TDSP volumetric rate.
2. Demand charge (c/kW) – the peak demand multiplied by the TDSP demand rate.
3. Fixed charge – a small monthly fee.
4. Ancillary/Other – any additional PUCT‑approved fees.

Because the REP does not set these rates, the invoice will often label them as “TDSP Delivery – Energy” and “TDSP Delivery – Demand.” The amounts are calculated automatically from the meter data supplied to the REP by the TDSP.

Auditing TDSP delivery charges

A systematic audit can uncover three common error categories:

1. Metering errors

Incorrect kWh or kW readings—often due to mis‑configured smart meters—can inflate both volumetric and demand charges. Verify that the meter’s interval data matches the TDSP’s recorded usage.

2. Tariff mis‑application

Businesses sometimes get placed in the wrong tariff class (e.g., a small‑load commercial customer billed at a large‑load rate). Cross‑check the tariff code on the invoice against the TDSP’s published schedule.

3. Duplicate or phantom charges

Fixed charges may be applied twice, or ancillary fees may be billed for services the customer never requested. Review each line‑item for justification.

Audit process

1. Collect data – Gather the last 12 months of REP invoices, TDSP meter data, and the applicable tariff schedules from the PUCT website.
2. Re‑calculate – Using the tariff rates, independently compute the expected volumetric and demand charges.
3. Identify variances – Flag any differences greater than 2 % for further investigation.
4. Escalate – Submit a formal dispute to the REP and, if needed, to the PUCT’s Consumer Protection Division.
5. Recover – Successful disputes result in bill credits, and the TDSP may adjust future billing cycles.

Our experience shows that a focused audit can uncover $5,000‑$20,000 in overcharges for a typical mid‑size Texas business, contributing to the $3.2 M we save for clients collectively each year.

How United Power Group can help

United Power Group (UPG) offers a free Energy Health Check that includes a detailed review of your TDSP delivery charges. Leveraging 25 + years of Texas market expertise and a portfolio of 8,000 + business customers, our consultants compare your actual charges to the PUCT‑approved tariffs, flag anomalies, and work with your REP to secure refunds. Because we operate a 30‑plus‑supplier panel, we can also recommend demand‑management strategies that reduce the peak demand component by up to 27 %.

Bottom line

TDSP delivery charges are a regulated, pass‑through cost that every Texas business must pay, but they are not immune to error. By understanding the volumetric versus demand split, confirming the correct tariff class, and conducting a disciplined audit, finance leaders can protect their bottom line and recover thousands of dollars each year. United Power Group’s free Energy Health Check provides the expertise and data‑driven approach needed to verify those charges and identify savings opportunities.