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.
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 They 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.
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.