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Electric Delivery Charges Too High?

Electric Delivery Charges

Electric delivery charges are known by many different names: Demand charges, transmission charges, TDSP (Transportation Distribution Service Provider) charges, and poles and wires charges. TDSP charges are the fees associates with servicing and delivering power to your meter from the generation source. The TDSP, sometimes called your Transmission and Distribution Utility (TDU), is the utility company that manages the energy grid in your area of the state. The TDSP is responsible for maintaining the poles, wires, meters, and other transmission equipment relating to the distribution of energy from the power production plant to the final delivery point.

The primary charges that fall under TDSP fees are: Distribution, Transmission, and Transition Charges. These fees are based on your meter’s “peak demand” which is the maximum electricity that you use at a given point in time. The grid has to work harder to have the capacity available for your peak demand at all times because that is the worst case scenario. If the grid doesn’t prepare accordingly, users could be forced to have rolling black outs. Although there are fixed costs and other components associated with your TDSP charges, higher demands are generally the primary cause of higher TDSP fee charges. Some examples of other fees included are Metering Charge, Advanced Metering Fee, and Nuclear Decommissioning Fee.

Electricity Demand vs. Consumption

Demand is the measure of the level of power you require at a single point in time, measured in kilowatts (kW) or kilo-volt amperes (kVa) as recorded in 15-minute intervals. In contrast, consumption is the quantity of energy you use over a period of time, measured in kilowatt-hours (kWh). For example, ten 100-watt light bulbs “demand” 1,000 watts, or 1 kW of electricity from the power grid. If you leave all ten lights on for two hours, you would “consume” 2 kWh of electricity over that given time.

Since TDSP charges are based predominately on “how” you use your electricity and not exactly “how much” you use, it is important to understand your facility’s electricity profile. You can have two facilities in the same congestion zone that consume the same amount of electricity over a year but can be charged very different TDSP charges. To explain this, we will look at two examples, a diner and a church. Justin’s Diner is a small mom and pop café open seven days a week, twenty-four hours a day, consuming 100,000 kWh of electricity annually. Since the diner is always consuming electricity, it is flowing in small consistent intervals causing the demand to remain relatively low.

On the other hand, there is First Church of Example, Texas that also consumes 100,000 kWh of electricity annually. The church only meets a few days a week when the majority of the electricity is consumed. The meter is barely active the rest of the week. When a facility has an immediate increase of usage, similar to a surge or a spike, the grid must be able to react instantly to the demand. Because the church uses the same amount of electricity in a shorter time span and due to the spike in demand when the meter goes from inactive to heavy use, the TDSP charges of the church will be considerably higher than that of the café.

How Are Electric Delivery Charges Calculated?

TDSP charges are calculated according to the rate tariff set forth by your specific Utility Provider. These tariffs have to be approved by the state Public Utility Commission (PUC). Please click the link below to view the tariffs for a specific utility zone.

Texas: Oncor, Centerpoint, AEP Central, AEP North, Texas-New Mexico Power

New Jersey: ACE, JCPL, PSE&G, ORU

New York: ConEd, National Grid, ORU, Central Hudson, NYSEG, NIMO

Pennsylvania:West Penn Power, PECO, PPL, Pennelec, Duquesne, Met-ED

Why Are My Demand Charges So High?

There are a few reasons why it might seem like you are paying too much for your TDSP charges.

1.) You may have a faulty meter or have just received a new digital “Smart Meter”. If you previously had an analog meter, there is a high possibility it was not accurately reading your demand and consumption. With the replacement of a new digital Smart Meter, your utility provider is now able to more accurately read your demand and consumption.

2.) For customers with minimal usage, TDSP charges can be proportionately larger than your energy consumption charges. The reason for this is because there are fixed components associated with the cost to deliver your power. It can cost more to deliver your electricity and to serve your meter than to pay for the actual commodity itself.

3.) Your demand may be abnormally high due to “Ratchet Charges”. Utilities assess a “ratchet” charge by levying a constant fee, based on an annual peak-demand level from an earlier month, for up to a year after it occurred. The utility must have resources available for the worst-case scenario and since you have used that peak previously, they have to charge you for your capability of demand. A customer is usually charged either the monthly peak or 80 percent of the peak demand based on the last 12 months of usage.

4.) Larger customers may receive penalties for congestion if their power factor is a low percentage.

5.) You may be using a provider that is marking up your TDSP charges.

What Can I Do to Save Money on TDSP Charges?

As a customer you have many options to ensure that you are not being charged too much on TDSP charges.

1.) Contact the utility provider for your area and have them check for a faulty meter.

2.) Understanding your bill and how you are being charged is key. Give us a call if you would like some guidance.

3.) Ramp up your usage slowly, waiting more than 15 minutes to bring each large component online. Limit the equipment running simultaneously if possible, or at least the level at which they operate. Also have your HVAC checked regularly. Heating and cooling equipment usually starts using considerably higher demand when it is in need of maintenance or replacement.

4.) For large commercial accounts, the Energy Consultant can check your Power Factor and determine if your facility needs Power Factor Correction. The Power Factor is the ratio of true power or watts to apparent power or volt amps.

5.) Marking up the cost of TDSP charges is completely legal and some retail energy providers do this to increase profits. We and many others in the industry frown on this practice because it makes it hard for consumers to get a good apples to apples comparison. To ensure that this is not the case for you, we can conduct a bill audit free of charge. Your Energy Consultant would need three months of bill copies and a Letter of Authorization allowing the Consultant to pull your facility’s past usage history which reflects demand and charges. If it is determined that your retail electric provider is marking up your TDSP charges, your consultant will suggest a provider that will not.

Last updated January 23, 2016.

8 Responses

  1. L0a1c0 says:

    I pay 200 a month for delivering

  2. Mike says:

    ive always asked the same thing, I live in CT and for instance, my actuall electric usage charge was $52, but my power company charged me $95 to deliver it to my condo for a total of $147 november bill…seems insane but is always been like this

  3. Loco says:

    Instead of making the bill more simplistic, they throw in a convoluted delivery charge. It’s just another way for the public utility companies to confuse the paying consumer. Is way, they can fatten the retirement packages of company executives.

  4. Daron says:

    I own a retail furniture store. Our usage charge was $98 last month and the delivery charge was $348. That’s completely insane.

    • Jolene says:

      Hi Daron, Are you by any chance in Houston Texas? Is Centerpoint the company that is charging the delivery charge? Your situation sounds similar to mine. Thanks,

  5. Jolene says:

    I have a commercial building that is not even being used as a business. My electric company is Green Mountain Energy and Centerpoint maintains the meter and the wires. I almost never go in to this building and rarely have more than 2 or 3 lights on at once, yet most of my recent electric bills have been over $100 a month. The energy charge is around $10, but the TDU surcharge is around $80! On my electric bill Centerpoint energy generally lists my demand around 8kv. I don’t even have enough things on at once to pull 8kv! Furthermore there aren’t even enough things in the building that work to be able to pull 8kv if the AC and heat are off. I am really backed in a corner because I can’t even have the power cut without paying Green Mountain a $250 early termination fee and besides, even if I changed electric companies, Centerpoint would probably continue charging the excessively high TDU surcharges with the new electric company! When I renewed my contract with Green Mountain for a longer term I did not even imagine this happening to me because all of my bills on the shorter contract were reasonable. Is there anyone else in Houston Texas who is having a similar problem? If enough people unite we can do something about this. What they are doing may be “legal” but it sure is corrupt. Or it may not be legal at all and someone may be manipulating the numbers on the smart meters……

  6. Olen R. Lunday says:

    I have been with TXU Energy for about a month and a half now. My rating for them is a big zero. A TXU Energy salesman came to our door, telling all about how we can save money on our electric. I told him up front that in the winter we use less than 500 kwh per month and in the summer we some times go on a long extended RV vacation. His first plan: .05 cents per kwh. I ask several questions which were answered with another sales pitch and a brochure of numbers, and why we should switch providers. We were also led to believe that if we switch to TXU Energy we were promised a $250.00 MC/ Visa Gift card. That never happened. Three days later received our info pack. That plan was unacceptable. I had signed up for a 2 year contract and to get .05 cents per kwh on this plan, I would have to use lots and lots of electrical power. I called up to have them switch me back to my other provider ( no contract) Well once again I was deceived. I received my 3 day electric bill I used $5.00 of electric. My bill from TXU Energy was over $20.00. The plan I am stuck with now for the next 11 months is NG. My billing for the month of March 2016, $24.65 for electric. ONCOR TDU Delivery chargers $18.68. total billing $50.21. TXU Energy deceived me again. My plan is not better as promised. Do I have any recourse of action for me?

  7. BT says:

    Doran and Jolene,
    My business in Houston, TX is having the same problem with the TDU charges. No matter if we use less than 1000 kWh, over 1000, or even over 2000, our TDU charges are always $100-130. The TDU charges are almost always higher than the energy charges. I spoke with customer service from StarTex and they told me that TDU charges will vary because rates change based on usage. He mentioned something about a multiplier that is applied based on usage. I can’t find anything on the internet about this in regards to TDU, only a meter multiplier which is something different. I am truly confused and frustrated. Based on this article, I’m thinking high TDU charges are caused by “demand” and not usage. This applies to commercial and not residential.

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