A tariff is a legal framework that determines how a utility service provider may recover the costs of serving a customer. It sets the rates, charges, and service terms that apply based on the customer’s electricity use, service requirements, and impact on the wider power system.
Tariff Charge Type explains what a charge pays for. Its billing basis is the quantity used to calculate the bill. How the Charge Is Assessed explains how that quantity affects the forecast cost.
Tariff Charge Type
| Tariff Charge Type | What it pays for |
|---|---|
| Supply | Electricity supply, including purchases of generation capacity to meet peak demand. |
| Transmission | Use of the high-voltage network. |
| Distribution | Local delivery, customer service, and metering. |
| Generation | Generation costs recovered through a utility tariff. |
| Rider | Separate recovery charges, credits, taxes, and program costs. |
| Stability | Ancillary services that support reliable grid operation. |
Billing basis and timing
Demand is power measured in MW. Energy is the amount used over time, measured in MWh. A tariff can base a charge on:
- Electricity consumed or imported over a billing period.
- The customer’s peak demand during specified hours.
- The customer’s demand when the power system reaches its peak.
- Contracted capacity or the site’s grid-connection capacity.
- Service provided for a billing period, such as customer service or metering.
The tariff sets when demand is measured and how it is billed. A minimum sets the lowest billed demand. A demand ratchet carries part of an earlier peak into a later bill.
Four coincident peaks (4CP) measure customer demand at four selected system peaks. Twelve coincident peaks (12CP) use twelve events. The utility page states which year’s peaks are used.
How the Charge Is Assessed
Grid imports are the power drawn from the grid. The assessment describes how a change in those imports changes the charge.
| Assessment | Forecast calculation |
|---|---|
| Fixed | An amount set for the billing period. It may be a service fee or a rate applied to agreed capacity. Changing grid imports does not change that period’s charge. |
| Energy | Imported energy in MWh multiplied by the applicable rate in $/MWh. The rate may apply throughout the period or only during selected system peaks. |
| Capacity (demand-based) | Highest grid import in MW during the specified hours multiplied by the rate in $/MW for the billing period. |
The word capacity has three uses in these pages:
- Connection capacity: the maximum power a site can draw from the grid, measured in MW.
- Capacity (demand-based) assessment: a charge calculated from the site’s highest grid import during specified hours.
- Capacity supply: payment for generation capacity available to meet peak demand.
A supply or network charge can use a demand-based assessment. A charge based on agreed connection capacity is Fixed when that quantity is set before the operating schedule is calculated.
For each interval, imported MW is multiplied by the interval length in hours and the rate in $/MWh. These interval costs are added to give the energy cost.
Peak-demand cost is calculated by multiplying the peak imported MW in the billing window by the period rate in $/MW.
Purpose, billing basis, and forecast assessment
| Example | Tariff Charge Type | Billing basis | Forecast assessment |
|---|---|---|---|
| Oncor customer service | Distribution | Customer service for each billing month. | Fixed monthly amount. |
| Oncor 4CP transmission | Transmission | Average customer demand at four system peaks. | Energy assessed at four forecast peak intervals after initial service. The forecast uses current-year peaks; invoices use prior-year demand. |
| Ameren Illinois capacity supply | Supply | Generation capacity purchased to serve the customer. | Monthly peak imports multiplied by adjustments for grid losses and reserves multiplied by the capacity price. This forecast assumes constant imports. |
| Dominion transmission forecast | Transmission | Contract demand, represented by site grid-import capacity. | Fixed charge based on 85% of grid-import capacity. The Dominion page explains the tariff minimums simplified by this assumption. |
Forecasting rates
Filed rates are the starting point. Wholesale prices can pass through directly. Network rates can follow forecast costs divided by billing demand. Other charges can rise with inflation, stay fixed in nominal dollars, or end on a specified date. Each utility page states the assumptions used.
Nominal dollars are dollars in the year charged. Real dollars express amounts at the purchasing power of a stated base year. SPP forecasts use real 2026 dollars; ERCOT, PJM, and MISO forecasts use real 2025 dollars. Convert nominal rates to the region’s base year, and use a common base year when comparing regions.
Combine charges once
Total tariff cost is the sum of the included line-item costs.
The charge tables show the amounts included in the bill. Where several charges are combined into a subtotal, its calculation lists what is included.