Understanding TDU Charges

If you compare electricity rates in Texas, you will notice differences from city to city. Texas has a deregulated power sector, and you can choose your electricity provider – the company who supplies the kilowatt-hours. However, that energy must be delivered from power plants to consumers, and specific companies are in charge of the power grid in each region.

  • These companies are called transmission and distribution utilities (TDU), and they charge for delivery of electricity.
  • Even if you find identical electricity plans in different parts of Texas, the final kWh price may change because of TDU charges.

The main TDUs in Texas are CenterPoint Energy, Oncor Electric Delivery, American Electric Power (AEP) Central, AEP North, and Texas-New Mexico Power (TNMP). TDU delivery charges are reviewed twice per year by the Public Utility Commission of Texas, on March 1 and September 1.

How Much Do Texas Utilities Charge to Deliver Electricity?

The following table summarizes the latest TDU charges published by the PUCT (March 1, 2020). These rates include the COVID-19 Electricity Relief Program from April 1, which adds $0.00033/kWh for all utility companies.

Utility Company Fixed Charge ($) TDU Charges ($/kWh)
Oncor $3.42 $0.035601 / kWh
CenterPoint $5.47 $0.034815 / kWh
AEP Central $4.79 $0.042616 / kWh
AEP North $4.79 $0.036135 / kWh
TNMP $7.85 $0.041524 / kWh

Assume you are comparing power bills for five homes, with a consumption of 1,000 kWh  per month and a fixed rate of 7.5 cents/kWh. However, final kWh prices will vary if each home is served by a different utility company.

TDU in the Service Territory Cost of 1000 kWh at 7.5 cents / kWh Cost of 1000 kWh after TDU Charges Average kWh Price
Oncor $75 $114.02 $0.1140 / kWh
CenterPoint $75 $115.29 $0.1153 / kWh
AEP Central $75 $122.41 $0.1224 / kWh
AEP North $75 $115.93 $0.1159 / kWh
TNMP $75 $124.37 $0.1244 / kWh

In this example, the TNMP customer pays 9% more than the Oncor customer, even when all homes have a fixed rate of $0.075 per kWh.

The availability of electricity plans in your city can also affect kWh prices. However, when you compare identical electricity plans in different regions of Texas, the power bill differences can be explained by transmission and distribution charges. You can choose freely among the Retail Electricity Providers (REP) where you live, but you cannot switch your TDU unless you change your residence. For example, if you move from Houston to Dallas, your utility company will change from CenterPoint to Oncor.

The Public Utilities Commission of Texas has compared average electricity prices for residential users in the five service territories, based on 12-month electricity plans.

TDU in the 

Service Territory

Avg. kWh price at

500 kWh

Avg. kWh price at 

1000 kWh

Avg. kWh price at 

2000 kWh

Oncor 11.76 cents 10.74 cents 10.25 cents
CenterPoint 12.34 cents 11.25 cents 10.72 cents
AEP Central 14.01 cents 12.49 cents 11.73 cents
AEP North 13.63 cents 12.23 cents 11.54 cents
TNMP 14.07 cents 12.53 cents 11.76 cents

The effect of TDU charges can be observed here: AEP Central and TNMP both have TDU charges above 4.1 cents/kWh, and the final kWh price in their territories is also higher. On the other hand, Oncor has the lowest monthly fee ($3.42) and the second-lowest kWh charge (3.5601 cents/kWh), and this helps achieve the lowest kWh prices on average.

In Conclusion

Retail electricity providers can compete with each other because they use the same power lines, poles and transformers. If you switch your electricity plan, you will continue using the same power meter and grid connection. However, competition between TDUs would require a separate grid for each company, which would be impractical and a waste of money – imagine having five times more power lines and utility poles in your city!