ERCOT's System Administration Fee Adjustment: Impact on Texans' Electricity Costs

ERCOT, the grid operator in Texas, is set to increase its System Administration Fee from $0.555 per megawatt-hour (MWh) to $0.63 per MWh. This change amounts to an increase of $0.075 per MWh or $0.000075 per kilowatt-hour (kWh) and is scheduled to be effective from January 1, 2024.

• This marks the first raise in the fee since 2016, as shown in the image below.
• Typically, this fee is integrated into end users' supply rates and may be consolidated within the rate itself or detailed as a distinct entry on your billing statement.

Source: ERCOT

Starting January 1, 2024, ERCOT plans to hike its System Administration Fee to bolster the grid operator's capacity in managing overall operations, critical for ensuring stability and reliability. This fee, often unnoticed by consumers, gets imposed based on the megawatt-hour (MWh) usage within the ERCOT grid, contributing essential funds for maintaining and enhancing Texas' electric grid infrastructure.

The adjustment entails an increase from $0.555/MWh to $0.63/MWh in January, marking a 7.5 cent/MWh rise (or $0.000075/kWh). This decision to hike the fee, the first since 2016, responds primarily to the impacts of Winter Storm Uri in 2021. Legislators mandated ERCOT to implement substantial improvements focused on fortifying grid stability and resilience in the aftermath of the crisis.

Texans should expect a slight shift in their electric bills due to this fee hike. Typically, suppliers might embed this fee within the overall supply rate or itemize it separately on the invoice. Depending on the terms of your supply agreement, your overall supply rate could see adjustments to accommodate the increased fee, starting from the first bill of 2024.

ERCOT estimates that the average residential customer might witness a minor increase of less than 20 cents per month. However, larger power consumers are likely to experience more noticeable impacts.