You might notice TDU delivery charges on your Texas electricity bill. What are they, and why are they on your bill?
TDU is short for Transmission and Distribution Utility. The charge is money paid to the electric utility that delivers power to your home or business.
What are TDU delivery charges?
The TDU charges on your electrical bills pay for poles, wires, substations and electrical meters—essentially, all of the infrastructure that transmits electricity from where it’s generated to your home. The organization that provides that service is called a Transmission and Distribution Utility (TDU) or a Transportation and Distribution Service Provider (TDSP).
Let’s dive into explaining the TDU charges.
Firstly, you need to know how the deregulated energy market in Texas is structured. There are three components:
- The companies that generate electricity in various types of power plants, such as through wind turbines or solar panels.
- The companies that distribute electricity through high-tension wires, substations and local poles to the meter at your home. These are the TDUs or TDSPs.
- The retail electricity providers (REPs) that market electricity to consumers. Constellation is a leading REP in Texas.
Your REP buys electricity at wholesale rates from the companies that generate it. They then use the infrastructure of the TDUs to transmit the electricity to your home, paying the TDU charge for that service.
The rate that TDUs can charge is set by a regulator. Your REP is legally required to add the TDU charge to your bill without mark-up. They are often called TDU pass-through charges due to this requirement of being passed on to the customer.
The utility company must invest in upgrades that keep the system running as efficiently and safely as possible, including employing experts to repair downed wires after a weather event.
There are six TDUs that currently serve Texas:
- American Electric Power (AEP) Texas Central
- AEP Texas North
- CenterPoint Energy
- Lubbock Power & Light (LP&L)
- Oncor Electric Delivery
- Texas-New Mexico Power (TNMP)
How are TDU delivery charges calculated?
TDU rates are set by the Public Utility Commission of Texas (PUCT). When setting the rate, this regulator considers four factors:
- The Energy Efficiency Cost Recovery Factor helps TDUs cover the costs of their energy-efficiency programs.
- The Transmission Cost Recovery Factor covers the costs of building, maintaining, repairing and upgrading the components of the electricity transmission system.
- The Accumulated Deferred Federal Income Tax Credit accounts for the timing difference between when a utility collects the tax from customers and when they pay taxes to the government.
- The Transition Charges are the costs of transitioning from a regulated market to a competitive one.
The TDU delivery charges in Texas that appear on your electricity bill don’t include all of these details. You’ll simply see a rate from one of the six TDUs operating in Texas, each of which covers a specific area of the state.
So, how is your TDU delivery charge calculated? It’s the base TDU delivery charge rate multiplied by the number of kilowatt hours (kWh) you used in a month. If you live in an area served by the AEP Texas Central TDU, for example, you would multiply your electricity usage by their rate of $0.055254.
Here are the current rates as of May 2024 that the PUCT regulator has set for each TDU in Texas:
