Did you see a spike in your most recent electricity bill? Here's why.

Museum District resident Joe Fischer was shocked to receive his August electricity bill, which was $35 more than the previous month despite his fixed-rate contract and similar electricity usage.

When he dug into the details of his bill, Fischer discovered the culprit was a nearly 50% increase in the variable component of a little-known line item paid to CenterPoint Energy: the transmission and distribution service provider or TDSP delivery charge.

“When I calculated the percentage increase, I said, ‘You've got to be kidding me. That's just outrageous,’” Fischer said. 

This charge, also known as the transmission and distribution utility or TDU charge, is paid to companies like CenterPoint that manage the power lines, poles and meters that deliver electricity from generators to homes and businesses. 

That’s different from the retail electricity provider, companies like TXU Energy and Reliant that sell the electricity to consumers and ultimately send consumers their monthly electricity bills. While Texans can choose their retail electricity provider, consumers' transmission and distribution utility is based on where they’re located; in the Houston area, it's CenterPoint.

That gives consumers little leeway to avoid increases in the transmission and distribution charge other than to reduce electricity consumption, said David Kinchen, chief operating officer of Energy Ogre, a broker that helps consumers shop for electricity plans. To reduce the overall electricity bill, customers should consider changing to a plan with a lower fixed rate, Kinchen said.

What is the TDSP charge?

Transmission and distribution companies are allowed to collect 100% of their costs to maintain and build transmission and distribution lines, as well as earn a rate of return. This TDSP charge is passed on to consumers through their retail electricity providers.

The TDSP charge has two components: a fixed monthly charge and a charge per kilowatt-hour of electricity used.

CenterPoint, the Houston-area transmission and distribution provider, has maintained a fixed monthly charge of $4.39 since April 2020, according to data from ElectricityPlans, a site that provides information to consumers about electricity plans. 

But the per kilowatt-hour charge increased Sept. 1 to 5.46944 cents per kilowatt hour from 3.7332 cents per kilowatt-hour, a jump of 46.5%.

An increase of approximately 1.74 cents per kWh may not sound like much. But it means a home that uses 1,000 kWh of electricity per month would see an increase of around $17 in a monthly bill. 

Transmission and distribution utilities have increased the TDSP charge every September and decreased it every March since at least 2003. 

But CenterPoint’s Sept. 1 rate increase is the largest of all five transmission and distribution providers in Texas, as well as the largest March-to-September increase in at least the last five years. 

“It feels like a lot because it is,” said Kinchen of Energy Ogre.

Why is this September’s CenterPoint rate increase so high?

Transmission and distribution utilities calculate the TDSP charge by taking their total cost and dividing it by a forecast of how much energy consumption they think customers will use in the next half year, Kinchen said. Electricity consumption typically goes up in the summer as Texans rely on air-conditioning to stay cool, which is why the March charge decreases. 

But in the winter, electricity consumption is lower, especially in the Houston area which has a greater proportion of homes that use gas-powered heat than the rest of the state, Kinchen said. That’s one reason why CenterPoint’s TDSP increase from March to September may be higher than other transmission and distribution utilities in the state.

But even removing seasonal changes from the picture, there has been a half-cent per kWh increase from last September to this September.

Most of that September-to-September increase – about a third of a cent per kWh – is to pay for CenterPoint’s controversial new emergency generation program, Kinchen's analysis estimated. The program, approved by the state Public Utility Commission in March, allows CenterPoint to recoup the $200 million it spent to lease mobile generators that could provide emergency power during peak demand to prevent a repeat of the deadly blackouts in February 2021.

CenterPoint spokesperson Alejandra Diaz confirmed that this is the second time customers are getting billed for the company’s emergency generation program; the first was April 15. The increase is also to pay for capital investments in the company’s power lines. 

“We are committed to ensuring that our customers are well-informed about these changes and the rationale behind them,” Diaz said.

Why is the September rate increase applied to my August electricity use?

The Sept. 1 rate increase is applied based on the date that the customer’s meter is read, not based on when the electricity was consumed, Diaz said. August usage is not prorated, Diaz said.

Because August was so hot, many people used more electricity for air-conditioning. So when the September rate increase is applied to August usage for some customers, it can lead to even more sticker shock, Kinchen said. 

But on the plus side, that means customers’ February usage will be calculated using the lower March rate if they are billed in March, so it somewhat balances out, Kinchen said.

When was the September rate increase approved?

CenterPoint’s September TDSP rate increase was approved at various PUC meetings throughout July and August, Diaz said.

Fischer, the Houstonian concerned about the rate increase, said this is one of many rising costs he has to absorb while living on a fixed income. He wishes CenterPoint’s TDSP increase had been spread out over a longer period of time.

“I'm just shocked that anyone would approve that percentage increase on any kind of proposal,” Fischer said.

PUC spokesperson Ellie Breed said transmission and distribution utilities are by law entitled to recover reasonable and necessary costs for providing electricity and maintaining critical infrastructure. The commission determined that CenterPoint’s application to increase rates met the PUC’s rules approved by the Texas Legislature, Breed said.

“Significant reliability improvements and increasing demand on transmission infrastructure around the state are among the factors cited by TDSPs in their petitions for cost recovery rate increases,” Breed said.