How to Read Your Energy Bill

Reading time: 8 minutes

8 minutes read

Category: Home Utilities
Posted on: 01/20/2019
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For many people, energy bills are something that comes in the mail (or email) once per month and it’s a chore to pay them. Some people might notice the fluctuations higher and lower based on power use but not give it much thought. Others simply have their bills automatically paid and they never actually check it out. No matter which side you’re on, you could be missing on some really important insights by not knowing how to read your energy bill.

Utility companies actually do a great job in breaking down your costs into the unique charges, explaining what may have caused a change from one month to the next and empowering customers to take their energy use and electricity costs into their own hands. However, if you don’t know how to read your energy bill, you’re missing out on this crucial information. Fortunately, learning the ins and outs of your energy bill is much simpler than you might think.

Account Summary

The first part of an energy bill is likely the one with which you’re most familiar with: the account summary. This section will detail the amount you owe in total for that month, the total account balance, time due by date and other standard billing processes. If you only look at this section, you’ll know how much to pay, how to pay it and when to pay it. If that’s all you care about then you need not look further. However, if you want to know more about your energy supplier bill, you’ll keep reading.

Generation Charge and Rate Structures

The next part of learning how to read your energy bill is the detailed breakdown of your energy generation charges. The first part you’ll see is whether you’re being charged a simple fixed rate, if the cost of electricity use increases the more you use it in a tiered system or some other payment structure.

If you’re on a simple fixed rate, you’ll be charged a constant amount for each kilowatt/hour (kWh) of power you use, regardless of when that power is used or how much is used in total. This structure is the simplest to understand as a customer and is somewhat common, but utilities might enact a more complicated structure.

In tiered rate systems, customers are charged different amounts per kWh based on the threshold of energy used that month. For example, utilities might charge one rate for the first 1,000 kWh used in a month, then a different rate used for any power use after that. Some utilities enact this structure to encourage customers to minimize their energy use, as excessive users will end up paying even more.

Additionally, some utility companies implement time of use (TOU) or demand rate (DR) charges in an effort to ensure the peak time of use doesn’t exceed an energy provider’s capabilities. The idea here is that there are certain times of the day where customers use the most energy in aggregate, typically the early evening hours when people return from work and use high energy appliances like washing machines, ovens, or electric vehicle chargers.

Utilities might charge higher rates during these times to incentivize customers to shift their heavy electricity use to other times. Doing so prevents power companies from needing to build out new power plants or even risk rolling blackouts.

No matter the rate structure you have, your energy bill will outline the relevant details of the power used, the time that power was used (if relevant), and the associated rates and final charges for said energy use.

Additional Charges and Fees

On top of the rate charges, most electricity bills will also include additional charges. These charges aren’t directly to pay for the power generation, but for other aspects of the energy supplier’s business or regulatory requirements. For example, delivery fees are tacked on to pay for the transmission and distribution infrastructure, billing fees are added for the clerical part of an energy supplier’s business and debt retirement will be added in to manage a utility’s financial obligations (especially in municipally-owned utilities and other set ups that are tightly regulated). Each of these charges are typically applied on a per kWh basis, just like the standard energy rates.

Energy Use Trends

The most useful and interesting part of your energy bill is likely to be the energy use trends your utility is likely to include. This section will compare your monthly energy use with previous months so you can assess if your energy consumption is rising or falling, using tables and/or graphs to convey this information.

You should be able to compare your current month power use with the same month last year to ensure the weather is theoretically similar (some utility bills will even include average temperature of each month to allow you to see if a particular cold month is why your power use increased).

Empowered with an understanding of these detailed parts of your energy bill will make you a more informed customer. With that information, it’s up to you to determine if you have room to reduce your energy use and/or minimize your monthly energy bill.

Finance Guru

Finance Guru