Your energy bills can be confusing, especially if you aren’t familiar with the information they contain. This article helps break down the most important information on electric and gas bills so that you can understand what is affecting your costs.
Energy bills have been rising, but there are things you can do to help lower them. Learn about the major sections on your bill to help keep costs down.
Costs
In general, your energy bills should not be a source of frustration. You pay your rent or mortgage and then go about your daily life without much thought about the power running through your home. But when your energy bill goes up — or even doubles — you may feel frustrated and confused.
The biggest reason your utility bill has gone up is likely because of higher costs to produce the energy you use. That’s because of global factors including rising natural gas prices as well as rising electricity and utility-based fuels like coal and oil.
Another cause of your increased electric bill is because your utility has raised its “fixed charges.” This is the minimum charge each customer must pay before the meter starts spinning. Some utilities have tried to double this minimum fee, which can be a big hit to low-usage customers.
Your utility bill also includes a portion that covers the cost to deliver your energy to you. This usually involves distribution charges and state-mandated charges that fund energy efficiency, financial assistance and renewable energy programs.
Finally, your utility bill might include a “renewable energy” charge that’s not a fee for you as a consumer but rather a charge to support large-scale renewable energy projects. This is a great way to help reduce carbon emissions, which have caused more than $120 billion in global damage.
Time-of-Use Rates
Time of use rates are becoming more common, and most utility companies have a TOU option available. TOU plans charge you more for electricity during peak hours, when demand is highest – and less during off-peak hours. If you can shift your energy usage to these off-peak times, you can save money.
The way this works is simple: Your utility bills you per kilowatt-hour (kWh) of energy consumption. All month long, you use appliances like your dishwasher and dryer, electronics, water heaters, air conditioners and more, which add up to a total kWh of usage. Utility companies track your usage with smart meters, and you’re billed for each kWh pulled from the grid.
During the summer, electricity prices are higher during the afternoon “peak” hours, when demand is highest. Electricity prices are much lower during off-peak hours, when most people are sleeping or at work.
Some utilities have special TOU rates for customers with solar or EV chargers, or who can reduce their energy usage on certain days of the year. Be sure to check your utility’s website or contact their customer service to see what TOU options are available in your area. Also be sure to look at the “rate schedule” or “rate class” listed on your utility bill, typically found in the summary section. Most bills will have a link to more information about the electricity rate you are on, and will distinguish between peak and off-peak periods.
Demand Charges
The most confusing part of your electricity bill is typically the demand charges. These are added on top of the baseline energy or usage charge and are calculated based on your highest power consumption in a certain time frame. The higher the demand, the more expensive it is. It’s like watering your lawn with a standard garden hose versus a fire hose set to high pressure.
Utilities invest billions of dollars in ensuring enough power capacity is available to meet all customer demands at any given moment. These investment costs are recovered through a variety of charges, including variable rates on each kilowatt-hour (kWh) consumed. Proponents of demand charges argue that they provide a more transparent pricing signal, incentivize efficient behavior to reduce peak load and shift energy use to off-peak periods, and restore the cost-causation principle by making those who utilize power most intensively pay for capacity they impose on the grid.
It’s important for commercial enterprises of all sizes to understand the nuances of their demand charges, especially since they may make up a significant portion of total utility bills. By combining more efficient usage throughout the day, commercial solar to offset your organization’s usage and energy storage to balance your peaks, you can often reduce demand charges significantly. This can save your organization tens of thousands every year.
Meter Readings
Unless your household has a smart meter, it will still be necessary for you to read your own meter from time to time. This can help you avoid overpaying when the energy company has to use estimates based on being unable to access your meter for any reason (for example, severe weather or a locked gate).
You can also get an idea of how much electricity you are using by looking at the day and night numbers. One thousand watts of power used in an hour is called a kilowatt-hour (kWh), and your utility bills you by the kWh.
If your meter has dials, read the first 5 and ignore any red dials and dials marked 1/10. You can also use a digital display – simply read the numbers displayed left to right. If there is a decimal point, ignore it too, as it doesn’t really matter for your usage calculation.
The top of your electric bill will include the meter reading for the beginning and end of the billing period, as well as the date of the meter read. The bottom of your electric bill will then list the charges associated with that meter reading: customer charge, distribution energy charge and peak demand charges. The charges are calculated by multiplying your meter reading by the kWh rate, as well as any fixed fees.