How to Read My Electric Bill

Electric Bill Explained If your like most business owners, you receive a monthly electric bill, look at the total amount,

Electric Bill Explained

If your like most business owners, you receive a monthly electric bill, look at the total amount, maybe wonder why its as high as it is or how you can lower it, you might quickly glance at the line items but not fully understand them, look at the total again – pay it – and getting on with the rest of your day until next month.

Well, you’re not the only one. A recent survey done showed that 79 percent of energy consumers in America don’t understand their electric bill. 

Let’s compare an electric bill to some other bills you pay. A grocery store receipt, a restaurant check, the checkout page of Amazon and so on. It’s completely normal to be able to review what you just purchased, each item and it’s price. Why should an electric bill be any different?

The Next Time Your Receive Your Electric Bill

The next time you receive your electric bill, take a moment to read through it. You will see individual line items, each with it’s own charge amount, all adding up to the total bill. Here are a few simple tips on understanding your bill:

KWh

Your bill shows units of electricity you use in kilowatt-hours (KWh). This is simply the amount of power (watts) something uses if left on for an hour, divided by 1000. On your bill, you pay some amount of “cents” for each KWh you use. 

For example, let’s say your rate is $.010 for each KWh. The average central air conditioner uses about 3,500 watts per hour. If that air conditioner runs for 12 hours a day, it will use 42,000 watts or rather, 42 KWhs and will cost you $4.20 a day or about $125 a month.

Understanding KWh can help you determine how to better control your usage.

Delivery vs Supply

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

Delivery

Delivery rates are fixed rates set by your local utility company. These rates cover the transportation of the electricity from where ever its generated to your business. Payments for delivery also help maintain power lines, natural gas pipelines, transformers and other physical infrastructure aspects of making electricity available. 

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Delivery Charges 101

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

In the above bill you can see the delivery part of an electric bill. I’m guessing the first thing you did was look at the total. But since we’re going to help you better understand your bill, let’s also take a look at each individual charge or line item and see what it refers to:

  • 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. Demand charges can comprise between 30-70% of a company’s electric bill.

Supply Charges

Supply charges refers to how much electricity you use and the rate each KWh costs. 

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

The rate for each KWh being $.093400 X the total amount of KWh used that month (27680) made up the total supply charge of $2,746.89.

 

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In many states, you do not have an option as to where your power supply comes from, or what company supplies your energy and so you pay whatever rate is set by your utility company. 

In states where a deregulated energy market exists, businesses and also home owners can choose what supplier they get their energy from, opening the door to competitive energy prices and being able to reduce how much each KWh costs and so reduce the supply portion of your electric bill.

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. 

How To Lower Your Bill

/contact-usThere are many ways to lower your electric bill and many solutions that offer energy efficiency. Energy Professionals is offering a free energy bill review. We’ll take yo through each line item of your energy bill, answer any questions and show you a few options to help you reduce the overall amount. Contact us today.

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