How to Read My Electric Bill

How to Read My Electric Bill: Your Electric Bill… Explained! How many times have you tried to read your electric

How to Read My Electric Bill: Your Electric Bill... Explained!

How to read my electric bill

How many times have you tried to read your electric bill and given up? 

All the charges, symbols, and rates, all written in small print, can make reading your electric bill pretty confusing.  

But have no fear, you’ve found the right article! 

While every electric bill will look and read a little different, depending on the utility, all electric bills have the same basic elements. 

In this article, I am going to answer the question “how to read my electric bill?”, by explaining two or three fundamentals that apply to every electric bill.

By understanding these few basic parts, your electric bill suddenly becomes a whole lot easier to read and understand. So, here we go! 

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If you don't understand your electric bill, you are not alone

"60% of consumers still don't understand energy bills."

If you’ve had trouble reading your electric bill, you’re not the only one. 

A recent survey done by a company called U Switch, found that 60 percent of energy consumers in America don’t really understand their electric bills. That same survey found that utility bills in general are the most complicated bills to try and read.

So, no, you’re not stupid. The thing is, most people have a hard time reading this electric bill. 

I used to wonder if electricity companies purposely made electric bills hard to read. Part of me still considers this possibility, but that’s not really the case. 

Utilities track a lot of moving parts. They have a big job to do and provide electricity to millions of homes and offices. It’s not easy and, unfortunately, their bills reflect that. These intricacies have made electric bills hard to read. 

But soon, you’ll be able to read your electric bill so just keep reading. 

Don't just pay it, read your electric bill!

For most people who have a hard time reading their electric bill, an electric bill has become something that they just pay.  And, if you don’t pay your electric bill, you don’t have lights so…

If you’re like most home or business owners, this sequence of events may sound familiar:

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  1. You receive your electric bill and immediately look at the total at the bottom of the bill. 
  2. Maybe you wonder why it’s so high, and maybe you wonder what you can do lower your electric bill. These thoughts get quickly swollowed by the million other things you need to do. 
  3. Still curious, you take a closer look at it to try and read your electric bill. Seeing the many charges, numbers,  and symbols, you somewhat understand it… but not totally. 
  4. At the end, you look at the total again and just pay it, telling yourself that next month you’ll dedicate more time to better understand how and why your bill is as high as it is. 

Unable to read their electric bills, approximately two-thirds of U.S. consumers put their electricity bill on auto-pay, amounting to trillions of dollars that automatically get paid to utilities. 

To put this into perspective, let’s take a second to compare an electric bill to some of the other bills you commonly pay. A grocery store receipt, a restaurant check, the checkout page of Amazon, and so on. 

It’s completely normal to review what you just purchased, read each item and its price, and add up the total cost of your purchase. It’s also normal to verify you haven’t been overcharged. Most people do this daily, with pretty much every bill. 

Why should your electric bill be any different?

How can you read your electric bill, know exactly what you are paying for, and verify that the charges are correct?

Why is my electric bill so complicated?

reading an electric bill

Great question.

Here’s the thing, it should be pretty simple. You use electricity and you pay for what you use. Right?! Well… not totally. For electricity companies, it’s not so simple. 

The production, distribution, and sale of electricity is a highly regulated market. Probably one of the most regulated markets that exist. Electric utilities are required to follow every regulation down to a T, and state regulatory committees exist to make sure utilities and electric providers do so.

In order to comply with these regulations, electric companies must track a ton of moving pieces. And not ever consumer is the same. At the end of the day, your electric bill serves as a legal document that shows these regulations are being adhered to.

In a way, the details in your electric bill work in your favor. Should there ever be a dispute, your electric bill will contain all the details needed for discussion.

Your electric bill contains a lot of information. For example, it shows what electric category you are part of (residential, small business, large business, or non-profit organization), it shows what rate you pay for your electricity, usually listed in fractions of a cent per kilowatt-hour, and it shows what taxes, fees, and transmission charges you pay.

But let’s not get too complex, because by knowing just a few simple basics, you will be able to read your electric bill. So let’s get into it! it shou

"Reducing your electric bill starts with understanding it."

How to read your electric bill: What to do the next time you receive your electric bill

The next time you receive your electric bill, take a moment to read through it. You will see many individual charges, each with their own numbers and rates, all adding up to the bill’s total. 

To help you read your electric bill, I am going to explain three principle components:

  • Kilowatt-Hours (KWh)
  • Delivery or transmission charges
  • Electric supply charges

How to read my electric bill: What is a kilowatt-hour (KWh)?

KWHYour electric meter records how much electricity you use. The measurement used to record this is called a kilowatt-hour, KWh. 

If you look at your meter you will see this notated just above or below the moving numbers. 

Each month, the reading on your electric meter is noted and will show on your electric bill. In other words, your electric bill will show the amount of electricity you used in kilowatt-hours (KWh). 

A KWh is the amount of power (watts) something uses if left on for an hour, divided by 1000 (kilo). 

Your utility or electric provider charges you an “electric rate”. You pay a few cents for every KWh that you use. An average house uses about 900 KWh each month. To help make this eaiser to understand, let’s take an average air conditioner into consideration. 

Let’s say you are paying a rate of 10 cents for each KWh. The average central air conditioner uses about 48,000 watts or rather 48 KWhs if it runs for 12 hours in a day. If each KWh costs 10 cents, your air conditioner will cost $4.80 every day, or about $144 a month. 

The average residential air conditioner uses about 48 KWh a day; as you can see your A/C is one of your home’s biggest energy consumers.

Understanding what a kilowatt-hour is can help you better control your energy usage and reduce your electric bills. If you want to understand more about KWh, I have written a separate blog and made a video that goes covers it in more detail: What is a Kilowatt-Hour, a Very Simple Explanation

Here you can see a sample electrtic bill that shows how many KWh were used and the electric rate. Your electric bill will vary depending on how many kilowatt-hours you use and the rate you pay, but that’s not the only thing that makes up your electric bill.

what is a kilowatt hour?

How to read my electric bill: Your electric bill is split into two parts

Delivery and supply

Most electric bills are split into two main types of charges: delivery and supply.

If you’ve ever ordered food through an app, consider the delivery part of your electric bill as the fees you pay to have your dinner delivered by the app, while the supply portion of your bill is what you pay for the actual meal (the electricity you use).

Delivery charges on your electric bill

Delivery or transmission rates are fixed rates set by your local utility company. These rates cover the transportation of the electricity from wherever it’s generated to your home or business. Included here are also any costs your utility pays to store electricity and generate new electricity. Delivery charges can also include costs to maintain power lines, natural gas pipelines, transformers, and the physical infrastructure aspects of making electricity available.

Sometimes you may see a “renewable energy” charge on your bill. This doesn’t mean you’re using renewable energy. Renewable energy charges on your electric bill help to pay for large-scale renewable energy generation. As utilities invest millions of dollars into building renewable energy farms, they put a small charge on your bill to help cover those costs.

Below you can see a sample electric bill that shows the two types of charges:

Supply charges on your electric bill

The supply portion of your electric bill covers the electricity you use (measured in KWh) and the rate you pay for that electricity.

While I’ll cover both delivery and supply in more detail, it’s important to know two things:

First, that every utility changes its electric rates throughout the year. Some utilities change their rates twice a year, some change them quarterly, and some change them monthly. You can always find your electric rate on your electric bill and can see future rate changes on your utility’s website.

Utilities base their rates on many factors but mainly on supply and demand, you’ll note that in high demand periods such as summer and winter your electric bill is higher.

The costs of producing actual electricity are also critical factors that determine electric pricing. For example, more than 40% of our electricity currently comes from burning natural gas. If the price of natural gas does up, electricity rates will also increase because it costs more to produce electricity.

Second, many states offer a program called “energy choice” or “energy deregulation”. The energy choice program allows you to compare energy rates from different energy providers, you don’t have to get your electric supply from your local utility.

Similar to shopping for a phone plan, energy choice allows you to find lower energy rates and better plans that lead to significant savings.

Sample PECO Bill

How to read my electric bill: Delivery charges 101

Your normal electric bill is split into two parts: delivery and supply. 

Above, you can see the delivery part of an electric bill. I know, it’s kind of overhwleming but let’s pick this apart and make it easy to read and understand.

  • Customer Charge: a fixed cost to help recover utility fixed costs of serving a customer, including meter reading, billing and administration costs.
  • Distribution Energy Charge: the cost of delivering generated power from its source to the place it is consumed. Think of this as the charge for delivering electricity from the utility’s electrical substation, through power lines, to your home. This charge is tiered, based on how much electricity is consumed at one meter. In the above example, the bill owner was charged three separate rates for the distribution of electricity consumed.
  • Transition Charge: a charge that enables the utility to recover costs associated with meeting the state’s legal requirements regarding the divesture of its power-generating facilities.
  • Transmission Charge: the cost to deliver electricity from power-generating facilities (natural gas, coal or nuclear power plants) to the utility’s electric substations, and to the beginning of the utility’s distribution system.
  • Energy Conservation Charge: a state program charge to help fund state and utility energy efficiency measures. MassSave is one of the main programs that is funded through this charge.
  • Renewable Energy Charge: a state program charge to help fund state renewable energy measures. (Side note: this is the fraction of the bill that the Utilities are inaccurately characterizing as excessive to ratepayers- which totals, on average, less than $1 per month on your electricity bill).
  • Distribution Demand Charge: this charge only applies to commercial and industrial entities that pay time-of-use rates or have certain bill sizes. It is based on the highest 15-minute average usage recorded via the utility meter within a billing period. The more electricity you request during peak periods, the higher your demand charge can be. 

A very important note on demand charges

A lot of people have a misconception that an electric bill is determined by how much electricity they use. You hear this a lot when people talk about energy efficiency, energy-star appliances, and so on. To a degree that is the case. However it’s super important to know that demand charges can comprise between 30-70% of an electric bill.

While reducing your energy use can also help reduce demand charges, if you see that your demand charges start getting too costly I strongly suggest scheduling a call with one of our professional energy consultants who can help figure out a way to reduce them. In some states, demand programs exist that will pay you to reduce your demand charges. 

How to read my electric bill: Electricity supply charges

Supply charges refer to how much electricity you use and the electric rate you pay for each KWh.

In the bill shown here, you can see the calculation of the supply portion of an electric bill: 

The rate for each KWh is $.093400 multiplied by the total amount of KWh used that month (27,680), which makes
up the total supply charge of $2,746.89.

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In many states, your electric rate is set by your utility and you have no choice over it. You simply need to pay whatever rate your utility charges per KWh. 

However in some states, where energy choice or energy deregulated exists, home and business owners can choose what supplier they get their energy from, opening the door to competitive energy prices and plans. 

Being able to reduce how much each KWh costs was one of the quickest and easiest ways to reduce your electric bill. Together, the delivery and supply portion of your electric bill make up the total cost. After adding it all up, those cents and even fractions of a cent can add up to a lot. 

If you are not sure that your state offers energy choice check out this blog I wrote: Which States Offer Energy Choice

How can I tell if I'm using green energy or not?

Today, more and more utilities are investing in renewable energy production as a way to stabilize their electricity supply and lower costs.

However, installing large solar farms, wind turbines, and other forms of renewable energy production costs a lot of money. To cover those costs, utilities have started to add a small “renewable energy charge” to your electric bill.

In a way, by paying this charge you are contributing to renewable energy. However, it does not mean the energy you use is sourced from renewable energy and it doesn’t mean your home or business is “green”.

If you are interested in going green or sourcing your electricity from renewable energy sources there are several ways you can do this:

  1. Buy renewable energy certificates
  2. Procure green electric rates
  3. Enroll in community solar
  4. Install solar panels

If you are interested or have been considering going green, here are a few videos I have created to explain the first three options and to help you see which option is best for you:

Renewable Energy Certificates

Green Energy Rates

Community Solar

How to lower my electric bill?

"In a single year, public utility companies have over-billed their customers $19 BILLION dollars!"

Probably the biggest advantage to being able to read your electric bill is energy savings.

Trying to keep track of so many different regulations, charges, and pieces, utility companies can make mistakes that result in overcharges. Unfortunately, it happens more than we think.

The U.S. House of Representatives estimated that in a single year, utilities overcharge customers to the tune of 19 billion dollars.

Case in point, last year we found that a supermarket was being charged for the wrong rate-class. By getting this fixed, we helped reduce their electric bill by 25% and got them a $40,000 refund from the utility as they had been overcharged for close to eight years.

Making sure you are not being overcharged is a great way to save money and you may qualify for a refund or rebate where applicable.

If you live in a state that qualifies for energy choice, finding a lower energy rate is another very simple way to save money. Energy efficiency can also help a lot, especially if you live in a state that doesn’t offer energy choice. For example, by simply changing your lights to LEDs, you can reduce lighting costs by up to 75%. Also watch: How to Make The Most Out of LED Lighting

Finding the best way to lower your electric bill can be time-consuming. To help you, Energy Professionals is offering an obligation-free energy bill review. Our free energy bill analysis includes:

  1. An energy price comparison to make sure you are paying the most competitive energy rate possible.
  2. An analysis of your electric bill to detect any billing errors, overcharges, and unnecessary fees.
  3. Green energy options should you be interested in going green.
  4. A one-on-one consultation with an experienced Energy Consultant who can help answer any questions you have and suggest any additional energy saving opportunities.

In closing, I hope that you have found this blog helpful and that I have provided some useful information about how to read your electric bill. Here’s to understanding your next bill and opening the door to energy savings! 

James Lightning

James Lightning
Senior Editor, Energy Professionals
(844) 674-5465

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