Oncor breaks the nickel barrier per each kWh, costing consumers more on electric bills

Some observant citizens of my Watchdog Nation picked up on a significant change on their electric bills: the so-called “Oncor rate” jumped. How high? For the first time in memory the Oncor charge has jumped through the nickel barrier.

It’s like breaking the 4-minute mile in running, except this broken barrier is going to cost you a lot of money.

Add about a nickel to each kilowatt hour (kWh) you use. So if you use 1,000 kWh a month, then you multiply a thousand times 5 cents and your bill jumps up to $50. Use 2,000 kWh and you pay $100. The previous rate was 0.038 or 3.8 cents.

This per kilowatt hour charge is in addition to a separate monthly Oncor charge, fixed, on customer bills: $4.23, another $50 a year.

The Watchdog wants to understand how this works, so I put my questions to Kerri Dunn, a spokesperson for Oncor. This interview has been edited and condensed for clarity.

Watchdog: Help me understand this rate.

Oncor doesn’t generate power or bill retail customers directly. We bill customers’ retail electric providers (REP) for transmission and distribution delivery rates, which the REP then bundles into their price they charge customers. This can vary based on the length of the contract, renewable content or other reasons.

Watchdog: Does everyone in Oncor’s massive service area pay the same rate?

Yes, all customers within the same rate class pay the same delivery rate. Oncor has eight different rate classes based on the type of customer (such as residential versus commercial versus industrial) and what voltage level they receive service from.

Watchdog. What is the actual name of the Oncor charge, and what purpose does it have?

Oncor’s charges are broadly referred to as “delivery,” “wires,” or “transmission and distribution” charges. These rates generally recover the costs of Oncor building and reliably operating our transmission and distribution grid that delivers power to customers.

Watchdog: Anything else?

There is also a portion of the rate that recovers costs related to the requirement that we fund energy efficiency incentives, and some other relatively small amounts we are required to collect for others (such as funds related to nuclear power plant decommissioning, for example).

Watchdog: So we just multiply the Oncor charge by the number of kWh used that month, right?

Oncor charges basically have two components: first, a fixed monthly charge, which is $4.23 per month for a residential customer. Second, a charge per kilowatt hour (kWh), which is approximately 5 cents per kWh. That is applied to the customer’s power consumption for the month.

Watchdog: Could you show me the math?

Oncor: For example, a customer using 1,000 kWh, would see a charge of around $54.23 ($4.23 + $0.5 times 1,000). This is related to Oncor’s grid costs along with the other charges from their REP.

Watchdog: People are confused about this increase. It changed Sept. 1, and people have been sending me the percentage increase and everyone comes up with a different number.

The component that is charged per kWh increased by about 1.2 cents per kWh on Sept. 1. The fixed monthly charge did not change. The combined rate was up about 28% versus August rates. The August rate had actually dropped from earlier in the year due to how the Transmission Cost Recovery Factor (TCRF) works. Compared to last September, the total combined rate increased about 17%.

Here are the numbers. The old rate was 0.038498. The new rate is 0.050446. The increase is 0.011948.

Watchdog: What’s the reason for the increase?

We are continuing to see historic levels of growth and new customers on our system at a time of significant inflation. The cost of the equipment needed to build and maintain a reliable transmission and distribution grid is going up. Part of our rates collect costs for other utilities’ transmission facilities across the state. Those costs have generally been going up due to inflation and the need to connect new customers and new generation sources.

It is typical to see an increase in September and a decrease in March, which is when the rate will change again. The Sept. 1 rate change accounted for the over $1.1 billion in new distribution facilities such as lines, poles and substations that Oncor built during 2022 to serve new and existing customers in our growing service territory.

Watchdog: How do you come up with the rates? Does the Public Utility Commission of Texas have to approve it?

All of our rates are approved by the PUCT in a public process that includes detailed cost information and review by the PUCT staff, the Office of Public Utility Counsel, lawyers representing the cities that we serve, industrial customers, retail electric providers and others. The rates, which are adjusted for issues identified by the aforementioned parties, are ultimately approved by the commissioners before final implementation.

Watchdog: This is the first time it’s over 5 cents that I can remember. Has it been this high before?

I believe you are correct that this is the first time our aggregate rate is over 5 cents per kWh. This is due in part to the reasons discussed above (growth and inflation). We recognize the impact of rising expenses for our customers and remain focused on making appropriate and necessary investments in an efficient and cost-effective manner, while continuing to provide safe and reliable service.

Watchdog: How does your increase compare to other similar utilities?

Oncor’s rates are currently the lowest of any investor-owned utility in Texas. The Sept. 1 rates for Oncor are the lowest among transmission and distribution. utilities.