Texas business electricity guide
Why Texas business delivery and demand charges are high
If a business customer searches “Why are my delivery charges so high?”, the answer is usually that the electric bill has two different parts: the competitive supply rate and the regulated delivery charges. The supply rate is the part a customer can shop. Delivery and demand charges are set by the local delivery utility’s tariff and passed through on the bill.
This guide explains how each major Texas delivery company generally calculates commercial delivery and demand charges. The shopping blocks in each section are included only so a customer can compare cheapest business rates, lowest electricity rates, and current commercial supply options after they understand that delivery charges are separate.
Quick answer: delivery charges vs. retail energy rates
Retail energy charges are the cents-per-kWh price from the retail electric provider. These can be shopped in deregulated Texas.
Delivery charges are regulated TDSP/TDU charges for the poles, wires, substations, meters, service work, transmission access, and approved tariff riders used to deliver power to the meter. The REP bills the customer, but the delivery company’s tariff determines the pass-through delivery charges.
Demand charges are different from usage charges. Usage is total kWh over the billing cycle. Demand is the highest draw on the system, often measured as kW or kVA during a 15-minute interval. A business can have moderate total kWh and still have a high demand charge if HVAC, refrigeration, pumps, compressors, ovens, or production equipment start at the same time.
Who approves delivery charges in Texas?
The Public Utility Commission of Texas TDU rate page publishes transmission and distribution utility rate information, and the PUCT’s rate-case explanation describes the process for setting delivery utility rates. In general, the PUCT allows regulated delivery utilities to recover the cost of providing delivery service, subject to approved tariffs and regulatory review.
PUCT Substantive Rule 25.214 is the framework for terms and conditions of retail delivery service provided by investor-owned transmission and distribution utilities. ERCOT manages the electric grid for most of Texas and publishes Four Coincident Peak (4CP) calculations for distribution service providers for the June through September peak months.
How demand charges usually work on a Texas business bill
Each tariff has its own terms, but most commercial delivery calculations start with the customer’s service class and billing determinants:
- Service class: residential, small secondary service, larger secondary service, primary service, transmission service, lighting, or a special class.
- kWh: total energy used during the billing cycle.
- NCP demand: non-coincident peak demand, typically the customer’s highest measured demand during the billing month, not necessarily during the ERCOT system peak.
- Billing kW or kVA: the demand value used for billing. It may be the current month’s NCP, or it may include a ratchet depending on the class.
- 4CP demand: for some larger or interval-metered customers, transmission-related charges can be tied to the customer’s load during ERCOT’s summer system peak intervals.
- Riders: separate tariff items such as transmission cost recovery, distribution cost recovery, energy-efficiency recovery, securitization/restoration charges, franchise items, or other PUCT-approved adjustments.
Oncor delivery and demand charge process
How Oncor separates small and demand-billed business accounts
Oncor publishes its retail delivery service tariff and rate schedules and an easy-to-read Delivery Charges 101 page. Oncor explains that charges depend on the PUCT-approved rate schedule, and that common business schedules include Secondary Service less than or equal to 10 kW and Secondary Service greater than 10 kW.
How Oncor generally calculates demand
For small secondary service, several delivery items are usage-based and billed per kWh. For Secondary Service greater than 10 kW, the bill can include demand-based components such as Distribution System Charge by Billing kW, certain rider items by Billing kW, and transmission-related components by NCP kW or 4CP kW depending on the tariff item.
Oncor states that kW demand is recorded as the highest demand over a 15-minute period during the billing month. It also explains that, in many cases, Billing kW is the higher of current NCP kW or 80% of the highest monthly NCP kW established in the prior 11 months. That ratchet is why one high-demand event can affect multiple future bills.
Practical takeaway: an Oncor business with rooftop HVAC, kitchen equipment, compressors, or refrigeration should avoid starting large loads together. Lowering the energy supply price helps, but preventing a large 15-minute spike may also lower the total bill.
These are retail supply-rate shopping options for customers in this delivery territory. They are separate from regulated TDU delivery and demand charges.
CenterPoint delivery and demand charge process
How CenterPoint separates small and demand-billed business accounts
CenterPoint Energy Houston Electric posts its current tariff for retail delivery service, which contains delivery charges payable by the competitive retailer. In the CenterPoint tariff, non-residential secondary service is generally separated between less than or equal to 10 kVA and greater than 10 kVA.
How CenterPoint generally calculates demand
For Secondary Service less than or equal to 10 kVA, CenterPoint uses the small non-residential schedule when the customer’s peak demand is 10 kVA or less and has not exceeded that threshold in the previous 11 months. If the monthly peak goes over 10 kVA, the account can be moved to Secondary Service greater than 10 kVA for at least 12 months under the tariff.
For demand-billed CenterPoint accounts, NCP kVA is generally the kVA supplied during the 15-minute period of maximum use in the billing month. For Secondary Service greater than 10 kVA, the Distribution System Charge billing kVA is the current month’s NCP kVA. For Primary Service, CenterPoint’s tariff can use the higher of current NCP kVA or an 80% ratchet for certain larger loads. Transmission-voltage or IDR-metered charges may use 4CP kVA where applicable.
Practical takeaway: CenterPoint business customers should monitor both kWh and the highest 15-minute kVA interval. A short equipment spike can move the account into a demand-billed class or increase the delivery portion of the bill.
These are retail supply-rate shopping options for customers in this delivery territory. They are separate from regulated TDU delivery and demand charges.
AEP Texas Central delivery and demand charge process
How AEP Texas Central separates business rate classes
AEP Texas publishes electric rate schedules for transmission and distribution service. For AEP Texas Central customers, the important business dividing line is often Secondary Voltage Service less than or equal to 10 kW versus Secondary Voltage Service greater than 10 kW, with additional classes for primary and transmission service.
How AEP Texas Central generally calculates demand
For Secondary Voltage Service greater than 10 kW, AEP’s tariff identifies service for non-residential delivery at secondary voltage with demand above 10 kW through one meter. The monthly delivery calculation can include customer and metering charges, distribution system demand billing, transmission-related demand billing, and applicable riders.
AEP’s tariff explains that 4CP billing demand for transmission system charges is based on the customer’s integrated 15-minute demands at the time of ERCOT’s monthly system 15-minute peak demand for June, July, August, and September of the prior year. For distribution system charges, the NCP kW billing demand is the kW supplied during the 15-minute period of maximum use, and the billing demand can be the higher of current NCP or an 80% ratchet depending on the schedule.
Practical takeaway: AEP Texas Central customers should review interval data in the summer and avoid controllable peaks during hot afternoon conditions, especially if the account is large enough to have 4CP exposure.
These are retail supply-rate shopping options for customers in this delivery territory. They are separate from regulated TDU delivery and demand charges.
AEP Texas North delivery and demand charge process
How AEP Texas North uses the AEP Texas tariff structure
AEP Texas North customers are also served under AEP Texas delivery tariff structures and rate schedules. Even when the customer changes retail electric providers, the AEP delivery tariff tied to the ESI ID controls the delivery pass-through charges.
How AEP Texas North generally calculates demand
The process is generally the same concept as AEP Texas Central: determine the correct service class, measure the account’s demand, apply the tariff’s customer, metering, kWh, demand, transmission, and rider components, and pass those charges through on the retail bill.
For demand-billed accounts, the customer’s 15-minute peak can drive NCP demand. Larger accounts may also need to understand 4CP because ERCOT’s summer peak intervals can affect transmission-related charges under the applicable tariff rules.
Practical takeaway: in AEP Texas North, a lower supply rate is only one part of the savings plan. Load scheduling, HVAC staging, and reviewing demand history can be just as important as shopping for the lowest business electricity rate.
These are retail supply-rate shopping options for customers in this delivery territory. They are separate from regulated TDU delivery and demand charges.
TNMP delivery and demand charge process
How TNMP separates business rate classes
Texas-New Mexico Power publishes its retail delivery service tariff for the TNMP service territory. TNMP uses a smaller-business breakpoint of Secondary Service less than or equal to 5 kW, with larger Secondary Service greater than 5 kW and separate primary and transmission classes.
How TNMP generally calculates demand
For TNMP’s larger secondary service, tariff items can distinguish Non-IDR metered charges by NCP kW and IDR-metered charges by 4CP kW. TNMP’s tariff also states that billing kW for the Distribution System Charge is generally the higher of the current month’s NCP kW or 80% of the highest monthly NCP kW in the prior 11 months, with exceptions for certain seasonal, low-load-factor, or lower-demand accounts.
Practical takeaway: TNMP customers should know whether the account is IDR-metered or non-IDR-metered. That can change whether a demand component is tied to monthly NCP demand or 4CP-style billing determinants.
These are retail supply-rate shopping options for customers in this delivery territory. They are separate from regulated TDU delivery and demand charges.
Lubbock Power & Light delivery and demand charge process
How LP&L separates business rate classes
Lubbock Power & Light provides LP&L document resources and its FY 2025-2026 System Delivery Tariff. LP&L’s tariff separates Secondary Service less than or equal to 10 kW from Secondary Service greater than 10 kW, plus primary distribution, primary substation, and transmission-voltage delivery classes.
How LP&L generally calculates demand
For Secondary Service less than or equal to 10 kW, LP&L states that it evaluates demand once per year in October, and if the customer’s demand exceeds 10 kW during that year, the premise is assigned to Secondary Service greater than 10 kW until the next evaluation. For service above 10 kW, LP&L includes a delivery system demand charge per kW under the tariff.
LP&L also states that it furnishes metering equipment to measure the customer’s kW demand of greatest use during the month for applicable demand-billed classes. Primary and transmission classes can also include power-factor and loss-adjustment provisions, so larger facilities should review the tariff and their interval data closely.
Practical takeaway: in LP&L territory, a business that crosses the 10 kW threshold can see a different delivery billing structure. Avoiding preventable peak demand can matter as much as comparing the retail supply rate.
These are retail supply-rate shopping options for customers in this delivery territory. They are separate from regulated TDU delivery and demand charges.
How businesses can lower the total electricity bill
You usually cannot shop away regulated delivery charges, but you can reduce the behavior that causes high demand charges and you can shop the competitive supply portion of the bill.
- Compare the retail supply rate: Use the ZIP search above to compare business electricity plans in the correct delivery territory.
- Stagger large loads: Avoid starting HVAC units, refrigeration, compressors, pumps, ovens, and machinery at the same time.
- Review interval data: Look for the 15-minute period that set the month’s demand peak.
- Check the ESI ID rate class: Confirm whether the meter is secondary, primary, transmission, IDR, non-IDR, or a special class.
- Ask about 4CP exposure: Larger customers should review ERCOT summer peaks and understand whether 4CP affects the account.
- Read pass-through language: A commercial contract may pass through TDU tariff changes separately from the retail energy price.
Need the lowest total business electricity cost?
A cheap cents-per-kWh supply rate is important, but it is not the whole bill. The best business electricity plan matches your delivery utility, usage profile, term, load factor, and demand pattern.
Enter your ZIP code above to compare business electricity options, or use your recent bill to request a custom commercial quote.
Common questions Texas businesses ask about delivery and demand charges
Why are my business delivery charges so high in Texas?
Business delivery charges can be high because commercial accounts often have demand-based delivery billing, higher service classifications, or larger peak usage than residential customers. These charges are set by the local delivery utility, also called the TDU or TDSP, and are passed through on the electricity bill.
Can I shop away TDU delivery charges?
No. TDU delivery charges are regulated utility charges and cannot be avoided by switching Retail Electric Providers. However, you can shop the competitive supply portion of your electricity bill, including the energy rate, contract term, base charges, and other plan terms.
What is a demand charge on a business electricity bill?
A demand charge is based on the highest amount of electricity your business uses during a short peak period, often measured in kilowatts. This is different from total monthly energy usage, which is measured in kilowatt-hours. A business can have modest monthly usage but still see high demand charges if it has one large usage spike.
Why is my demand charge high even when my kWh usage is low?
Demand charges are based on your peak demand, not your total monthly kWh usage. Equipment such as HVAC units, refrigeration, compressors, ovens, pumps, or machinery starting at the same time can create a short demand spike that affects the bill for the entire billing cycle.
Which Texas utilities charge business demand charges?
Commercial customers served by utilities such as Oncor, CenterPoint, AEP Texas, TNMP, and LP&L may see delivery and demand-related charges depending on the account type, meter type, service class, and tariff. The exact calculation depends on the local delivery utility that serves the business location.
How does Oncor calculate business delivery and demand charges?
Oncor commercial delivery charges are based on the applicable tariff for the business account, which may include customer charges, metering charges, usage-based delivery charges, and demand-based charges. The demand portion is typically tied to the customer’s measured peak demand for the billing period.
How does CenterPoint calculate business delivery and demand charges?
CenterPoint business delivery charges are based on the customer’s rate class and tariff schedule. Commercial accounts may include fixed monthly charges, energy-based delivery charges, and demand-based delivery charges depending on how the account is classified and metered.
Can switching electricity providers lower my business electric bill?
Yes. Switching providers can lower the competitive supply portion of your bill if you find a lower energy rate or better contract structure. It will not remove regulated delivery charges, but a better supply rate can still reduce the total bill, especially for businesses with steady monthly usage.
How can a business reduce demand charges?
A business can reduce demand charges by lowering peak usage, staggering equipment start times, improving HVAC scheduling, using energy management controls, upgrading inefficient equipment, and avoiding multiple large loads running at the same time. The goal is to reduce the highest short interval of demand during the billing cycle.
Are the lowest business electricity rates always the best choice?
Not always. The lowest advertised rate may not be the best choice if the plan has unfavorable contract terms, usage assumptions, pass-through charges, or fees. Businesses should compare the full contract structure, including energy charges, delivery pass-throughs, term length, early termination fees, and how the plan fits the business’s usage profile.
Why do business electricity rates vary by delivery company?
Business electricity rates can vary by delivery company because each area has different utility tariffs, delivery charges, loss factors, congestion costs, and market conditions. A business in Oncor may see different pricing than a similar business in CenterPoint, AEP Texas, TNMP, or LP&L territory.
What should I compare before choosing a Texas business electricity plan?
Before choosing a plan, compare the energy rate, contract term, early termination fee, base charge, pass-through language, billing method, renewable content, and how the plan handles delivery charges. Businesses should also review whether pricing is fixed, indexed, or custom-quoted based on usage history.
Resources used
- PUCT Transmission and Distribution Utility Rates
- PUCT Rate Cases at the PUCT
- PUCT Substantive Rule 25.214
- ERCOT About
- ERCOT Four Coincident Peak calculations
- Oncor Tariffs and Rate Schedules
- Oncor Delivery Charges 101
- CenterPoint Houston Electric Rates and Tariffs
- CenterPoint Retail Delivery Service Tariff PDF
- AEP Texas Electric Rates
- TNMP Tariffs
- LP&L Docs and Resources
- LP&L FY 2025-2026 System Delivery Tariff
Related The Power Choice guides
Delivery charges are only one part of the bill. Also review Texas power outage and TDSP contact information, electric deposits, and early termination fees before choosing a new business electricity contract.