Reforming Texas’ TDU Ratemaking Process
FOR IMMEDIATE RELEASEApril 9, 2026Contact:Sandie HaverlahPresident, TCA Mobile (512) 423-0913AUSTIN — Oncor’s recent rate case settlement (Higher power bills likely as Oncor, North Texas cities reach rate settlement) highlights all the reasons the regulatory framework for transmission and distribution utilities (TDUs) in Texas needs to be reformed.
The settlement forces Oncor customers to pay higher delivery rates that, while allowed by current state law and Public Utility Commission rules, aren’t justified in the real world. This isn’t unique to Oncor. It applies to all TDUs in Texas.
In this specific case, Oncor originally proposed rates that would have cost a “typical” customer about $7 a month more. The settlement reduces that to about $4.64 a month, or $55 per year for every Oncor customer.
That appears to be a big win for consumers – almost 60 percent less than the proposed amount. It’s a mirage. Oncor asked for billions and settled for… billions. And they can still raise their customers’ rates twice a year with almost no review process.
First, there is no “typical” customer. Each is unique in how and how much power Oncor delivers to them. Second, it’s not just the $4 a month this case will cost. This gets complicated, but to keep it simple, here are key factors that add up to big dollars for the consumer:
• Resiliency plans required by the legislature.
• New transmission lines required by the legislature to primarily serve the rapid electrification of the oil and gas industry in East and West Texas. Every bill-paying Texan will fork over several dollars a month to pay for these new lines to be built – not just Oncor’s customers.
• Twice annual distribution rate hikes (known in regulatory parlance as DCRF), allowed by the legislature, that allows a TDU to increase their delivery charge twice a year instead of just once.
• Oncor’s regulated rate of return is 9.7 percent. This is very high given that Texas TDUs are guaranteed this profit with no bad-debt risk. But, Texas law and PUC regulations allow it.
TDUs claim they are simply following the law. They are exactly right. They are using the system to the benefit of their owners and shareholders.
It’s no wonder Texans feel financially pinched by their electric bill. The cost to have their electricity delivered to them is 30-50 percent of their bill – and growing! Yes, that means some Texans are now paying more every month for poles and wires than they are for the actual electricity they use.
Under the current system, TDUs have every reason to spend and build as much as they can. And with massive transmission buildout on the way that will cost tens of billions of dollars, it’s critical to reform the TDU ratemaking process now.
The legislature changed the system to allow competition for electric service in 1999. Now it’s time to modernize how regulated TDUs have their rates set today.
While we expect to see numerous detailed policy proposals to reform the TDU ratemaking system over the coming months, Texas Consumer Association has developed four critical goals we believe must be included:
1. Competitive bidding for transmission lines
2. Modernize rate design
3. Smooth storm cost recovery
4. Simplify/consolidate delivery charges
Otherwise, Texans can expect their electricity bills to become increasingly unaffordable. TCA will share specific legislative ideas in future posts.
Stay tuned!