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What’s the right way to read your electric bill?

Reading your electric bill might not seem complicated, but if you’re like most Americans, you may be making several mistakes. The complexity of your bill will vary based on your location and utility, but there are several common components that everyone should understand. If you’re looking for bill help, here are the top five things to know about reading and understanding your electric bill correctly, with examples from my electric bill.

Key takeaways

  1. Your bill may just include electricity, or it might also include other municipal bills like gas or water.

  2. Electric bills typically include two main charges: supply and distribution/transmission.

  3. If you have a tiered bill structure or have demand charges or time-of-use rates, it will be a bit more difficult for you to read your electric bill.

  4. You can better understand how your electricity consumption is impacting your bill by dividing the cost of your bill by your total consumption.

  5. Lower your electricity bill by going solar – sign up on the EnergySage Marketplace to receive free quotes today!

1. Identify the bill you’re reading and your billing system

Depending on where you live in the country, your electricity bill can be bundled with other municipal bills – so it’s important to know what you’re looking at! Electricity consumption is measured in kilowatt-hours (kWh), while water usage is measured in gallons, and gas usage is measured in British Thermal Units (BTUs). These units of measurement should serve as an easy indicator of where your electricity bill ends and where your water or gas bill begins.

I live in Massachusetts and receive two separate bills each month from my utility company, Eversource: one for electricity and one for gas. Each bill is clearly labeled on the first page so I can tell them apart.

Example electric bill

Example gas bill

On the other hand, my friend in California receives one combined electric and gas bill from her utility company, PG&E.

Example combined electric and gas bill

2. Know your monthly billing plan

This step is crucial: are you on a budget billing plan? Or, are you being charged for your monthly usage? If you’re on a monthly budget billing plan, your utility takes the number of kWh you consumed last year, assumes that you’ll use around the same this year, and creates a monthly average for you to pay. This allows your utility to spread out the total costs you pay for power over the course of the year. As a result, if you live in a hot part of the country and use electricity to run your air conditioner, in the summer months, you’ll see a lower bill than your neighbors who are on a monthly usage billing cycle. But on the other hand, in the winter months, you should expect a higher bill than your neighbors.

If you’re charged monthly for your usage, it’s a little more straightforward. You’ll receive a bill every cycle charging you for the number of kWh your household used that month at the prevailing rate. I’m charged for my monthly usage, so my electric bill fluctuates monthly based on my usage (I owed $81.18 for electricity in February 2022).

Monthly billing charges

3. Understand your breakdown of charges

There are several charges that go into your energy bill. Your payment is not only for the electricity you consume, but also for helping the utility maintain the grid and pay the salaries of its workers. Overall, there are two main components of your electric bill: a supply (or generation) charge and a transmission and distribution (or delivery) charge. The supply charge includes the cost of generating the electricity whereas the transmission and distribution charges cover the costs of delivering you the electricity.

Also look out for miscellaneous charges related to taxes, fees, renewable energy and energy efficiency. If you live in an area with a deregulated energy market, you may be able to shop around for another supplier that can provide you with the power you need at a more competitive price.

As you can see, there are a number of charges that encompass my electric bill, most of which are based on my monthly consumption. However, I also owe a flat customer charge to my utility each month.

Breakdown of bill charges

It’s also possible that you live in an area with demand charges or time-of-uses rates; if this is the case, you’re charged more for electricity when it’s in higher demand or during certain times of the day. For example, my Californian friend is on a time-of-use rate plan in which peak pricing is from 4-9 p.m. every day.

Breakdown of delivery charges with peak pricing

Breakdown of generation charges with peak pricing

4. Know your monthly electricity consumption

It’s also important to ensure you’re correctly calculating the amount of electricity you use each month: many bills will break out your daily use, or show you how your monthly usage changes over the course of the year. Make sure that you’re measuring and assessing your usage for your current billing cycle – for most consumers, this will be monthly. Don’t confuse a daily rate with a monthly rate!

Eversource includes my monthly consumption in many areas throughout my bill (I consumed 311 kWh in 2022). It also provides my monthly consumption and average daily consumption over the past 13 months, as well as insights into how my electricity usage compares year-to-year.

Monthly consumption

Average daily consumption

While my bill is pretty straightforward for understanding electricity consumption and using that to calculate costs, sometimes it’s a bit more complicated. Some utilities charge consumers with a tiered billing structure. For example, your first 500 kWh may be one price but your 501st kWh would be at a different price. If your utility uses a tiered billing structure, the number of hours that you use in each tier should be shown on your bill; you can then add together the number of hours used in each tier for the total hours used in the entire month.

While my friend in California doesn’t haven’t tiered pricing for the electricity component of her bill, she does have it for the gas component, giving you an idea of how it would appear.

Tiered gas bill

What do electric bills look like with solar?

First and foremost, if you have solar installed on your property, your consumption will be a lot lower on your electric bill – meaning you’ll also owe significantly less (or nothing!) to your utility company. Your bill will show how much electricity you pulled from the grid, as well as any net metering credits or other incentives available to you. To better understand what your electric bill could look like with solar, read about Spencer’s (another EnergySage employee!) experience after two years with solar.

5. Calculate your monthly electricity cost

When you’re trying to understand how much you pay for electricity, it’s important to break down your bill so you can easily compare your consumption to its cost. The easiest way to do this is to measure your consumption rate in the same way that your utility measures it: as explained above, this is generally done on a monthly usage basis unless you’re on a budget billing plan.

You should be able to take your total bill for electricity and divide it by the total number of the kWh you used in that month. For example, my $81.18 bill divided by the 311 kWh of electricity I consumed amounts to $0.26/kWh. This calculation will tell you how expensive your electricity really is!

See what electricity costs near you

The more expensive your electricity is per kWh, the higher your electricity bill will be each month. Curious how much electricity costs near you? Click on your state to learn more:

Frequently asked questions about electric bills

Why is my electric bill so high?

Your electric bill is probably high because you’ve increased your electricity consumption. If you don’t think this is the case, it’s also possible that you have an appliance that’s no longer running efficiently and may need to be replaced.

What is a kWh?

You’ll see kWh across your electric bill – a kilowatt (kW) amounts to 1,000 watts of power. A kWh is used to describe energy usage: it defines the amount of work performed (or energy used) in one hour of time. Using a one kW microwave for one hour would use one kWh of energy.

What’s the average cost of electricity?

According to the Energy Information Administration (EIA), as of November 2021, the average cost of electricity in the United States was 14.12 cents per kWh.

Lower your electricity bill by going solar!

Think you’re paying too much for electricity? The best way to lower your bill is to install a solar system on your property. On the EnergySage Marketplace, you’ll receive custom quotes from local installers which you can compare to find the best system for you. If you’re a renter or you’re unable to install solar on your property, check out our Community Solar Marketplace – with community solar, you can still expect to save between 5 and 15 percent annually on electric bills!


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