Market Basics
Understanding Your Commercial Electricity Bill
Your monthly bill combines charges from two different companies, and not all of them work the same way. Here’s what each line item means and which ones you can actually control.
Why Your Bill Looks the Way It Does
A commercial electricity bill in Texas bundles charges from your REP and your TDU into a single statement, and the two work under completely different rules. Some line items shift based on your usage and your contract terms. Others are fixed by regulation and stay the same no matter who you buy electricity from.
This is why a “locked-in” rate doesn’t always mean a locked-in bill. Your energy charge can stay exactly where your contract set it, and your total can still move, because delivery charges are revised twice a year by the PUCT and apply automatically regardless of your contract terms. Add a demand charge, which depends on a single peak moment rather than total usage, and it’s easy to see why the bill total rarely matches a simple rate-times-usage calculation.
Knowing which charges come from your REP and which come from your TDU is what makes the rest of this bill readable. Once you can sort each line item into one bucket or the other, the number at the bottom stops looking arbitrary.
The Main Components
Energy charge
Your per-kWh rate multiplied by total consumption. This is the core of your REP’s charge and the piece that changes when you switch providers or contract types. On a fixed-rate plan it stays constant for the term. On an index plan it moves with the wholesale market.
Delivery (TDU) charges
Fees from your local utility for transmitting power to your building, including a fixed monthly TDU customer charge. These are identical across every REP in your territory, regulated by the PUCT, and adjusted twice a year, in March and September. Switching REPs never changes this number.
Demand charge
A fee based on the single highest 15-minute spike in your power draw during the billing month, not your total usage. It typically applies once your account crosses a certain size threshold, usually around 50 kW, which is why smaller accounts may not see this line item at all.
Base and regulatory charges
A small flat monthly fee from your REP for administrative costs, plus minor pass-through items like PUCT assessments and sales tax. Individually small, but worth confirming they match what your contract states.
Which of these charges appear on your bill, and at what rate, depends partly on your rate class, a classification your TDU assigns based on your meter type, usage, and demand profile. This is also why two businesses with similar square footage can have very different bill structures.
Why Demand Charges Catch Businesses Off Guard
Demand charges are the line item that confuses most business owners, mainly because they don’t track total consumption. A business could use less electricity overall in a given month and still see a higher demand charge, simply because of one 15-minute spike, often caused by equipment starting up at the same time HVAC is cycling at peak.
The math is mechanical: your peak kW during any single interval, multiplied by your demand rate. A 250 kW peak at $14/kW comes out to $3,500 for the month, regardless of what happened during the other 719 hours. This is why two months with nearly identical total usage can produce very different bills, and why demand management (staggering equipment startups, load shifting) is one of the few levers a business has to directly lower this specific charge.
What You Can Negotiate and What You Can’t
Negotiable, tied to your REP:
✮ Energy charge (rate per kWh)
✮ Contract length and structure
✮ Any demand component built into your supply contract
Fixed, tied to your TDU
✮ Delivery charges
✮ Base TDU customer charge
✮ Regulatory fees and taxes
Roughly half of a typical commercial bill falls into the fixed category. The other half is where shopping around and contract timing actually move the number.
Your contract type also affects how predictable these charges are month to month. A fixed-rate plan locks your energy charge for the full term. Variable and index plans let it move with the market, which changes how your bill behaves even when your usage doesn’t. We cover the differences in detail in our guide to contract options.
Reading Your Bill: A Quick Checklist
Calculate your all-in cost per kWh (total charges divided by total kWh) and compare it to current market rates.
Check what percentage of your bill comes from demand charges, if applicable.
Confirm your contract’s expiration date and note it 60 to 90 days in advance. Commercial contracts that lapse without action can roll over to a variable holdover rate 20 to 40 percent higher than your locked-in rate.
Keep your ESI ID and recent usage history on hand. Any REP or broker will need both to generate a real quote.
FAQ: Quick References
Need Help Making Sense of Your Energy Costs?
We help Texas businesses understand their options and find the right plan for their needs. Reach out to see how we can help.
