Why Your Electric Bill is Actually Worth Reading!

We all see our electric bill sticking out of our mailbox each month, and we tend to pay attention only to that final number at the bottom — the dollar price. That’s because, of course, it is the one that impacts your wallet the most. However, there are other things to keep an eye on too. Your actual 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 provide guidance on whether solar is a smart option for your household.

There are Several Types of Bills

The first thing to consider when reading an energy bill properly is whether it’s 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, rather than spiking through the high-usage months during the winter and summer.

Focus on Your Electricity Cost

On every electric bill, you will see the amount of electricity that the household has used for the billing cycle, most commonly on a monthly basis. It will most likely be listed in kWh or kilowatt-hours. (Simply put, a unit of energy multiplied by the time in hours.)

For context purposes, the average price per kWh across the United States is 12 cents, with wide ranges from 8 cents in Idaho to 33 cents (!) in Hawaii. Considering the average usage per household is around 900 kWh, 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 electric cost is the biggest area of savings you will see on your utility bill. Another benefit will be protection from the inevitable rate increases your utility will impose year after year.

Look Out for the Capacity Charge

While more often billed to commercial users rather 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. The reason it exists is 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 area served.

Solar energy and battery storage can be effective alternatives to combat high demand charges. In addition to helping maintain power to your home 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.

Expect Transmission  and Distribution Fees

Distribution, connection fees, and taxes, unfortunately, are not something a residential user has control over. Costs such as building, maintaining, and operating the electrical grid are passed down to each user household. Even if solar panels generate enough electricity to cover the household’s needs, you will still receive a monthly utility bill because of those distribution and transmission fees.

Calculating Your Solar Benefits

Photo courtesy of Buffalo Solar Solutions, Inc.

Now that you have a holistic view of your electric bill, seeing your energy usage and calculating your price per kWh can help you determine if solar is the right choice for your household. Not only does going solar shrink the absolute amount of energy consumption needed from your utility but there are also several incentives, rebates and tax incentives that make the economics even better. Utility programs like ‘net-metering’, where utility operators pay solar system owners for the electricity contributed to the grid, enable you to get credit for your solar power because you are not drawing from the grid. Again, state regulations and utility policies do vary, so reach out to your local solar installer if you are interested in more details. When you go solar, you should expect to reduce both your energy bill and carbon footprint!

About the Author

Nicholas Lee is a Solar Finance Specialist from the Sungage Financial Oakland office. When not at work, Nick can be found planting trees, playing soccer, and enjoying Popeyes’ fried chicken.

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“U.S. Energy Information Administration – EIA – Independent Statistics and Analysis.” How Much Electricity Does an American Home Use? – FAQ – U.S. Energy Information Administration (EIA), Oct. 2019, www.eia.gov/tools/faqs/faq.php?id=97&%3Bt=3.

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