Understanding your electric bill

understanding your electric bill
Understanding your electric bill

How much do you actually pay for electricity?  Clever marketing and creative writing on your electric bills have created a myth of electric rates such as 9 or 10 cents per unit of electricity. “I pay just 9 cents per kWh for electricity.” Are you a happy camper thinking you have a great deal from your electric company?  You might actually be paying far more than that. Get the low down on “Understanding your electric bill”.

Your electric bill has two elements; Delivery and Supply. Some companies show them as Supply and Generation.  The 9 cents price of electricity usually refers to the amount you pay for Supply or Generation. The electric utility companies conveniently forget to mention that you also have to pay for Delivery of electricity. The delivery charge adds another 5 to 12 cents to the bill.  Different markets have different pricing structures. New Jersey home owners pay between 15 and 22 cents per KWH of electricity and not 9 cents as many would have you believe. The average rates of electricity in different states in the US are shown in the map below. The only consistent way to reduce your electric bill is to go solar. Read how much do solar panels save on electricity? to find out how much you can save. The solar panel output calculator will also be a useful tool.

Understanding my electric bill - rates

Another industry secret – your electric utility prices change from month to month. You will notice that you get your highest bills during summer when you use your Air Conditioning a lot. Similarly all electric homes which heat using electricity get very high bills in the peak of winter.  Customers have become used to these high bills as they co-relate high usage to high bills. However, what you don’t know is that utility companies tend to charge you higher rates during those peak months of summer and winter. Not only are you using more power, but you are also paying more.

How to read your electric bill kWh?

Lets look at the electric bill in a little more detail. This bill below shows a usage of 718KWH for the month at a cost of $139.45 ( look at the two items in blue circles).  The actual electric rate charged for this month was 139.45 / 718 =  19.4 cents.  This is quite normal in New Jersey. The items circled in red show you the two components of your electric bill: Delivery and Generation. The charges for delivery and generation added up to $139.45.

how to read electric bill kWh
Understanding your electric bill : Supply Delivery

Understanding your electric bill 1

understanding my electric bill
Understanding your electric bill : Third Party

Some electric companies show the same thing as Delivery and Supply. Lets look at the bill below. The blue circles show the utility billed the customer for 489 kWh of electricity for the month. The total amount payable was $88.74.  Hence the effective electric rate was $88.74 / 489 kWh = 18.4 cents per kwh.


Understanding your electric bill 2

Third Party Electric Suppliers add another layer of complexity to your electric bill. Look at the green arrows in the two bills shown above. Utility companies allow you to choose a third party for your Supply/Generation service.  You can either have your utility company provide both Delivery and Supply/Generation or you could choose a third party like Viridian Energy or BGS Energy as you can see in the two bills shown above.

BUYER BEWARE : Third party suppliers gives you short term savings but they usually tend to charge more after the initial honeymoon period.  Keep a close watch on what the third party is charging you.  If you are not careful, you might end up paying more than what the utility charges for supply. In my opinion it is best to stay away from third party suppliers of electricity.

Another term you might see in a bill is called Demand. Demand chargers are normally associated with commercial accounts. They don’t normally show up in a residential bill. They are fixed charges which the utility determines based on peak usage of power by the commercial user. These charges are notoriously difficult to reduce.

understanding your electric bill 2
understanding your electric bill – switch to solar

If you are looking to reduce your electric bill ; the best option is switching to solar power. You can read more about it on the “How much do solar panels save on electricity bills?” article as well as the sdffd article.

Switching to solar eliminates both the Delivery and the Supply/Generation charges from your utility company. A properly designed solar system will reduce your electric bill to an average of $5 or less per month in total. See the example on the left. A caveat, demand charges are not affected by solar and will continue to appear on your electric bill even after switching to solar power.

Understanding my electric bill

Now that you have a good understanding your electric bill, you might like to check out this “solar panel savings calculator” as well. If you are tired of understanding your electric bill, and of kWh and demand and supply and generation perhaps you would like to be entertained by these great looking portable solar chargers.

Portable solar chargers : value for money and great for the environment

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Understanding your electric bill

Now, lets look at what else is possible with solar. Check out these articles. Thank you for visiting MySolarHome.us.

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Last update on 2019-03-25 at 14:22 / Affiliate links / Images from Amazon Product Advertising API