Understanding Your Texas Commercial Electricity Bill
A detailed breakdown of every line item on your electricity bill. Learn which charges are negotiable and where you can find savings opportunities.
Negotiable Charges
These charges vary by provider and can be reduced by shopping for better rates:
- •Energy Charges: Your per-kWh rate
- •Demand Charges: Peak usage fees
- •Base Charge: Monthly account fee
Non-Negotiable Charges
These charges are the same regardless of which provider you choose:
- •TDU Delivery Charges: Regulated utility fees
- •Power Factor Charges: Efficiency penalties
- •Taxes & Fees: Government charges
Line-by-Line Bill Component Breakdown
Typical Range: $900-1,800/month
What It Is:
The cost of the electricity you consume, calculated by multiplying your usage (kWh) by your contracted energy rate (¢/kWh). This is the only component you can negotiate by shopping for a better rate.
How It's Calculated:
Energy Charges = Usage (kWh) × Energy Rate (¢/kWh)
Example: 15,000 kWh × $0.095/kWh = $1,425
Savings Opportunity:
High - Shopping for a 1-2¢/kWh lower rate can save $150-300/month on 15,000 kWh usage.
Typical Range: $450-750/month
What It Is:
Regulated fees charged by your local Transmission and Distribution Utility (Oncor, CenterPoint, AEP Texas) for delivering electricity over poles and wires. These charges are set by the Public Utility Commission of Texas and are identical regardless of which REP you choose.
How It's Calculated:
TDU Charges = (Fixed Monthly Fee) + (Usage × TDU Rate) + (Demand × TDU Demand Rate)
Example: $25 base + (15,000 kWh × $0.035/kWh) + (50 kW × $4.50/kW) = $25 + $525 + $225 = $775
Savings Opportunity:
None - These are non-negotiable regulated charges. However, reducing peak demand can lower the demand portion.
Typical Range: $200-800/month
What It Is:
A fee based on your highest 15-minute peak power draw (measured in kW) during the billing month. Demand charges reward consistent usage and penalize businesses with high, short-duration power spikes. Common in manufacturing, cold storage, and data centers.
How It's Calculated:
Demand Charges = Peak Demand (kW) × Demand Rate ($/kW)
Example: 75 kW peak × $12/kW = $900
Savings Opportunity:
Medium-High - Implementing demand management strategies (load shifting, equipment scheduling) can reduce peak demand by 10-30%.
Typical Range: $15-50/month
What It Is:
A fixed monthly fee that covers administrative costs, meter reading, and account maintenance. This charge applies regardless of your electricity usage and varies by provider and contract type.
How It's Calculated:
Fixed monthly fee (no calculation)
Example: $29.95/month
Savings Opportunity:
Low - Base charges are relatively small compared to energy and TDU charges, but some providers offer lower base fees.
Typical Range: $0-200/month
What It Is:
A penalty charged when your power factor falls below 0.90-0.95, indicating inefficient use of electricity. Power factor measures the ratio of real power (doing useful work) to apparent power (total power drawn). Common in facilities with motors, transformers, or inductive loads.
How It's Calculated:
Varies by TDU - typically a percentage surcharge on energy charges when PF < 0.90
Example: If power factor is 0.85 and energy charges are $1,500, a 5% penalty = $75
Savings Opportunity:
Medium - Installing power factor correction equipment (capacitors) can eliminate these penalties and reduce TDU demand charges.
Typical Range: $50-150/month
What It Is:
State and local taxes, franchise fees, and regulatory assessments. Texas has no state sales tax on commercial electricity, but cities may impose franchise fees (typically 1-4% of total charges). ERCOT administrative fees are also included here.
How It's Calculated:
Varies by city - typically 1-4% of total electricity charges
Example: Total charges $2,500 × 2% city franchise fee = $50
Savings Opportunity:
None - These are mandatory government fees.
Sample Commercial Electricity Bill
Sample Manufacturing Co.
Account #: 123456789
Billing Period
January 1 - January 31, 2026
Service Address
1234 Industrial Blvd, Dallas, TX 75201
Meter Number
ESI ID: 10123456789012345678
Usage Summary
Current Month Usage
18,500 kWh
Previous Month Usage
17,200 kWh
Peak Demand
82 kW
Charges Breakdown
Energy Charges
18,500 kWh × $0.0920/kWh
$1702.00
TDU Delivery Charges
Base + Usage + Demand
$892.50
- TDU Base Charge
Fixed monthly fee
$28.75
- TDU Energy Charge
18,500 kWh × $0.0348/kWh
$643.80
- TDU Demand Charge
82 kW × $2.68/kW
$219.95
Demand Charges
82 kW × $11.50/kW
$943.00
Base Customer Charge
Fixed monthly fee
$34.95
Power Factor Charge
PF 0.88 - 3% penalty
$51.06
City Franchise Fee
2.5% of total charges
$90.56
ERCOT Administrative Fee
Fixed monthly fee
$4.25
Subtotal
$3718.32
State Tax
$0.00
Total Amount Due
$3718.32
✅ Energy Charges ($1,702)
At 9.2¢/kWh, this business could save $185-370/month by shopping for an 8-8.5¢/kWh rate (typical for this usage level). Annual savings: $2,220-4,440.
✅ Demand Charges ($943)
At $11.50/kW, this business could negotiate a lower demand rate ($9-10/kW) or implement demand management to reduce the 82 kW peak by 10-15%. Potential savings: $100-200/month.
⚠️ Power Factor Charge ($51)
The 0.88 power factor is below the 0.90 threshold, triggering a 3% penalty. Installing power factor correction equipment could eliminate this $51/month charge ($612/year).
ℹ️ TDU Charges ($893)
These are non-negotiable regulated charges. However, reducing peak demand from 82 kW to 70 kW would save $32/month on TDU demand charges alone.
Total Savings Potential: $300-600/month ($3,600-7,200/year)
By shopping for better rates, implementing demand management, and correcting power factor, this business could reduce their annual electricity costs by 10-20%.
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