I've got several commercial clients in Texas seeing massive transmission cost increases in 2019. One client in Dallas went from $0.042/kWh total transmission and distribution to $0.067/kWh between March and May. That's a 60% increase! ERCOT's website mentions "transmission cost recovery factor" adjustments but the documentation is unclear. Anyone else seeing this pattern? My client with Reliant Energy is getting hammered - their monthly bill went up $2,400 just on transmission charges with no usage increase.
Texas ERCOT - Anyone else seeing transmission cost spikes in 2019?
Dave, I'm seeing the same thing across multiple clients served by different REPs. It's not supplier-specific - this is coming from ERCOT's transmission cost allocation. There were several major transmission projects that came online in 2019 and the costs are being socialized across all load. The "TCRR" (Transmission Cost Recovery Rate) went up significantly to pay for new lines in West Texas and the Houston area. Check your clients' Electricity Facts Labels - the transmission portion should show the increase.
This is exactly why I hate deregulated markets - too many moving pieces and customers get blindsided by costs they can't control. In Wisconsin we complain about regulated utility rates, but at least we know what we're paying and why. Texas customers think they're getting "choice" but then get hit with transmission charges, capacity charges, ancillary service fees, and who knows what else. How is a customer supposed to make an informed decision when half the costs aren't even known when they sign the contract?
Linda, I hear your frustration but it's not quite that simple. The transmission costs in Texas are actual infrastructure investments that benefit everyone - new wind generation, grid reliability improvements, interconnection with other regions. The cost allocation methodology is transparent through ERCOT's process, it's just complex. The real problem is REPs not doing a better job explaining these pass-through charges to customers upfront. Most customers focus only on the generation rate and ignore T&D costs.
Dave's right about transparency, but the timing of these increases is brutal for commercial customers trying to budget. I've got a manufacturing client in Austin whose electricity budget is blown for the year because of transmission cost increases they couldn't predict. California has issues but at least our transmission cost forecasts are published annually by the CAISO. Texas needs better forward-looking cost projections so businesses can plan accordingly. Anyone know if ERCOT publishes multi-year transmission investment forecasts?
Jennifer, ERCOT does publish a Regional Transmission Plan every few years but it doesn't break down cost allocation by customer class or geographic area. The problem is that transmission investment decisions are made by individual utilities (Oncor, CenterPoint, AEP Texas) and then costs get socialized after the fact. There's no central planning authority that coordinates investments and forecasts customer impacts like you have in California. It's a structural problem with the Texas market design.
This whole discussion reminds me why I specialize in Oklahoma - we have regulated utilities and transparent rate cases. But I do have one client with operations in both Oklahoma and Texas, and the Texas side is definitely more volatile from a cost perspective. The savings from competitive generation rates get eaten up by unpredictable transmission charges and other fees. Marcus is right that it's a market design issue. Maybe Texas needs to move toward more predictable cost recovery mechanisms.
Update on my Dallas client - I worked with their REP (Direct Energy) to get a detailed breakdown of the transmission cost increases. Turns out about 60% of the increase was due to CREZ (Competitive Renewable Energy Zone) line costs finally being allocated to load after years of construction. The other 40% was general transmission upgrades in the Dallas-Fort Worth area. Total impact is still brutal but at least we understand where it's coming from. Client is now factoring transmission cost volatility into their energy budgeting process.
Dave, thanks for sharing that breakdown - very helpful context. I'm curious if your Dallas client looked at switching REPs to see if transmission charges are consistent across suppliers? In other deregulated markets I've seen suppliers try to differentiate themselves by absorbing some pass-through costs, but I assume transmission charges in Texas are truly non-bypassable regardless of which REP you choose. Anyone seen REPs offering "transmission cost protection" or similar hedging products?
David, transmission charges are the same regardless of REP - they're set by ERCOT and the TDUs (transmission/distribution utilities) and passed through dollar-for-dollar. No REP can offer protection from those costs because they don't control them. Some larger commercial customers are exploring financial hedging products through energy commodity firms, but those are expensive and complex. For most businesses it's just a cost of doing business in Texas. The real opportunity is in generation rate hedging and demand management.
This is a great discussion highlighting the complexity of deregulated markets. As auditors, our job is to help clients understand all the cost components, not just the headline generation rate. I always tell clients in deregulated markets to budget for transmission cost volatility - typically 10-15% annual variation is normal, but major infrastructure buildouts like Texas CREZ can cause larger swings. The key is education and setting proper expectations upfront. Thanks for sharing the real-world data points, everyone.