When our electric bill pops into our mailbox or inbox each month, we tend to pay attention only to that number at the bottom — the dollar price. That’s because it’s the number that impacts our wallet the most. However, there are other things to keep an eye on. Your bill is broken down into parts such as usage, energy costs, and ancillary charges. Focusing on these factors can help you lower your bill and guide you on whether solar is a smart option for your household.
The first thing to consider when reading your bill is whether you have a monthly usage or budget billing plan. While the former is based on the amount of electricity the household uses, the latter takes the rate of household consumption from the last year, assumes similar figures, and generates a monthly average for the bill. This spreads out energy costs throughout the year instead of letting them spike through high-usage winter and summer months.
Every electric bill will show you the amount of electricity your household used during that billing cycle, most commonly on a monthly basis. This will likely be listed in kWh, or kilowatt-hours. (Simply put, a unit of energy multiplied by the time in hours.)
For context, the average price per kWh across the United States is 17 cents, but the cost varies greatly based on location — from 13 cents in St. Louis to 48 cents (!) in San Diego. Considering the average usage per household is around 900 kWh per month, charges can quickly rack up. You can control your electricity usage by doing simple things like adding insulation, moderating heating and cooling usage, or updating appliances. These efficiency measures can play a significant part in reducing your electric costs.
When a homeowner goes solar, the biggest savings they’ll see on their utility bill is electric cost. Going solar also protects you from the inevitable rate increases your utility will impose year after year.
While more often billed to commercial users than residential ones, capacity costs do sometimes appear on home utility bills. In essence, a capacity charge (or demand charge) is the fee a utility charges to make sure that the electricity will be there if needed. This exists to ensure the utility knows how much energy to generate and provide at all times. You’ll generally see this line item on a bill in deregulated energy markets such as New York and Texas. Similar to surge pricing, the utility will charge different electric rates based on a consumer’s PLC, or peak load contribution. The calculation for PLC differs from company to company, and it takes area into account.
Solar energy and battery storage can be effective alternatives to combat some of these higher costs. In addition to helping maintain your home electricity during storms and power outages, battery storage can alleviate capacity costs and demand charges, storing the sun’s energy for you to use in the evenings when demand is high.
Distribution fees, connection fees, and taxes are unfortunately not under your control as a residential user. The costs of building, maintaining, and operating the electrical grid are passed down to each household. Even if solar panels generate enough electricity to cover your household’s needs, you will still receive a monthly utility bill because of those distribution and transmission fees.
Now that you have a holistic view of your electric bill, you can assess your energy usage and calculate your price per kWh to help determine if solar is the right choice for your household. Not only does going solar shrink the absolute amount of energy consumption you need from your utility, but there are also several rebates, tax incentives, and other perks that can improve your economics. For example, net metering is a program where utility operators pay solar system owners for the electricity their household contributes to the grid, enabling you to get credit for your solar power. Again, state regulations and utility policies do vary, so reach out to your local solar installer if you’re interested in more details. When you go solar, you should expect to reduce both your energy bill and carbon footprint!
Sungage does not provide tax or financial advice. This material has been prepared for informational purposes only, is not intended to provide, and should not be relied on for tax or financial advice. We encourage you to consult with your own tax or financial advisors about the tax or financial implications of going solar to identify a plan that works best for your particular situation.
U.S. Bureau of Labor Statistics. “Average energy prices for the United States, regions, census divisions, and selected metropolitan areas.” Accessed: 2024, February 6. Midwest Information Office. www.bls.gov/regions/midwest/data/averageenergyprices_selectedareas_table.htm
Walker, E. “The simple way to read your electric bill.” 2023, December 6. EnergySage. news.energysage.com/whats-the-right-way-to-read-your-electric-bill/
Energy Information Administration. “How much electricity does an American home use?” 2024, January 8. U.S. Independent Statistics and Analysis FAQ. www.eia.gov/tools/faqs/faq.php?id=97&%3Bt=3
Gallizzi, B. “Utility bills – How to understand them.” 2024, January 5. USwitch. www.uswitch.com/gas-electricity/guides/utility-bills/#step6
Electric Choice. “What Are Capacity Charges?” 2017. www.electricchoice.com/blog/what-are-capacity-charges/