A Dallas manufacturing plant was overpaying $18,000 per year on electricity because they didn’t understand their TDU delivery charges and demand fees. We helped them restructure their contract and optimize their load profile. Here’s the exact playbook.
If you’re a Texas business owner or facility manager, you’ve probably seen confusing line items on your commercial energy bill. Most of the time, you’re not sure what each charge means or how it’s calculated. This guide breaks down the key components—especially demand charges and TDU delivery fees—so you can spot overcharges and negotiate smarter contracts.
Introduction
Commercial energy bills in Texas are more complex than residential ones. You’re not just paying for the electricity you use (kWh). You’re also paying for the infrastructure that delivers it and the peak demand your facility places on the grid.
Understanding these charges is critical for controlling costs. In Texas, demand charges and TDU delivery fees can make up 40-60% of your total bill, depending on your usage and location.
Let’s break down the three main sections of your bill: supply, delivery, and demand.
Breakdown of a Texas commercial energy bill: see how supply, delivery, and demand charges impact your total costs.
Supply Charges
Supply charges are what you pay for the actual electricity consumed, measured in kilowatt-hours (kWh). This is the part of your bill that varies based on your usage and the rate you negotiated with your Retail Electric Provider (REP).
Supply rates can be fixed or variable, and they’re influenced by market conditions, contract length, and your business’s load profile.
TDU Delivery Charges
TDU (Transmission and Distribution Utility) delivery charges cover the cost of moving electricity from the power plant to your facility. These are set by your local utility and approved by the Public Utility Commission of Texas (PUCT).
TDU charges include:
- Customer Charge (fixed monthly fee)
- Metering Charge
- Distribution System Charge
- Transmission System Charge
- Nuclear Decommissioning Charge
- Transmission Cost Recovery Factor
- Transition Charges
These fees change twice a year and are based on your meter type, usage, and demand. You can’t avoid TDU charges, but you can lower them by reducing your overall usage and peak demand.
Demand Charges
Demand charges are based on your facility’s highest power usage during any 15-minute interval in the billing period. This is measured in kilowatts (kW) and reflects the strain your business places on the grid.
Demand charges are set by your TDU and can range from $4 to $7 per kW in Texas, depending on your utility and tariff class.
For example, if your peak demand is 500 kW and your demand charge is $6/kW, you’ll pay $3,000 in demand charges for that month.
Broker's Take
If your business has a high peak demand, I recommend focusing on load management and demand response strategies. Even small reductions in your peak usage can lead to significant savings on your demand charges.
For businesses with stable, predictable usage, a fixed-rate plan can provide budget certainty. For those with variable loads, an index plan might offer better rates during low-demand periods.
Always review your TDU delivery charges and demand fees before signing a new contract. These can vary significantly between utilities and tariff classes.
Resource Bridge
To calculate your exact TDU delivery charges, use our TDU Delivery Charges Calculator. It estimates your monthly and annual delivery costs based on your utility and usage.
Conclusion
Understanding your commercial energy bill is the first step to reducing your electricity costs in Texas. By focusing on demand charges and TDU delivery fees, you can identify areas for savings and negotiate better contracts.
Don’t let confusing line items eat into your bottom line. Use this guide to take control of your energy expenses and keep more money in your pocket.
