Texas Electricity Terms Series: Part 2 — What are Those TDU Fees?

Texas Electricity Terms Series: Part 2 – What are Those TDU Fees?

When Texas deregulated its electricity market in 2002, the Texas Public Utility Commission set out to protect consumers by establishing rules that standardized bills. But while these rules required retail energy providers to put term and conditions in “plain language,” it’s easy for Texas electricity consumers to get confused. With the Texas Electricity Terms series, we will examine common features of the Texas electricity market and clear up areas where plain language can sometimes seem a little misleading. We will also highlight key places where consumers need to pay closer attention.

The TDU Fees on Your Texas Electricity Bill

You see them filling up large portions of your bill each month, but you don’t always understand what they are, so we’re here to help you understand those TDU fees.

Texas Electricity Terms Series: Part 2 — What are Those TDU Fees?
Figuring out how to read and understand the terms on your electricity bill is an important part of being an educated energy consumer.

Assessed by your local utility company (also known as the Transmission & Distribution Service Provider, or TDSP), Transmission & Distribution Utility (TDU) fees (or surcharges) represent the costs incurred from making sure the energy you buy from your power company gets to your home. These 5 utility companies serving the deregulated parts of Texas – Oncor, CenterPoint, Texas-New Mexico Power, AEP North, and AEP Central – are responsible for maintaining, repairing, and reading the lines, poles, and meters in their area, and they pass these costs along to you, the consumer, including charges billed as “tariff riders.”

Because these companies are responsible for reliably moving huge amounts of electricity across the Texas grid, they face enormous costs. These fees include maintaining and repairing the electric utility transmission stations, switching substations, and the utility poles that bring the electric wires to your home. TDU surcharges reflect these and other costs which are passed without markup through directly to Texas energy consumers.

Texas Electricity Terms Series: Part 2 — What are Those TDU Fees?
Simply put – those TDU fees pay to make sure structures like this stay in good working order so you get power delivered to your house.

TDU tariffs must be approved by the Public Utility Commission of Texas (PUCT). Your retail energy provider (for example, First Choice Power) places the order for your home’s electricity, and the TDU transmits that power first through high-capacity power lines and then through local distribution lines to your home.

Depending on the tariffs assessed by the utility company for your area, the most common surcharges include:

  • Transmission System Charge: The cost for transmitting electricity from generators across the gird to a local substation. Determined by the amount of kilowatt-hours (kWh) used.
  • Distribution System Charge: The cost for transmitting electricity from substations through local wiring for delivery to homes. Determined by the amount of kWh used.
  • Transmission Cost Recovery Factor: Because wholesale electricity transmission prices fluctuate, this fee (or credit) allows the utility company to raise or lower charges accordingly without having to file a formal request each time with the PUCT.
  • Transition Charge: When Texas transitioned to a competitive, deregulated market, the old monopoly power companies still faced huge costs associated with generation, power lines, and other projects. Utilities are allowed to recover these “stranded costs” through this fee charged to consumers. Determined by the amount of kWh used.
  • Energy Efficiency Cost Recovery Factor (EECRF): Texas utilities are required to meet energy efficiency goals by setting up energy efficiency programs in their service areas. This charge recovers those costs to the TDU. Determined by the amount of kWh used.
  • Nuclear Decommissioning Charge: This fee covers the expense of safely shutting down and dismantling nuclear generator plants. Texas currently has 2 active nuclear plants, both with two reactors. Determined by the amount of kWh used.

While all these charges sound like they add up to a sackful of money on your electric bill, most of these surcharges on average cost less than 1¢/kWh. To learn more information on the fees you may have on your electric bill, check out the PUCT’s “Charges On Your Electric Bill” page.

Stay tuned for the next installment of the Texas Electricity Terms series: POLR and that Smart Meter Fee.

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Vernon Trollinger is a writer with a background in home improvement, electronics, fiction writing, and archaeology. He now writes about green energy technology, home energy efficiency, the natural gas industry, and the electrical grid.