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Understanding Your Electricity Bill - Insider Tips From Industry Experts

Your electricity bill can be confusing, with many vague fees and terms stacked on top of each other. Generally, it will break down your home energy charges into two main categories: generation and delivery. The key to optimizing a plant's energy efficiency is learning to read your power bills and comprehend why your utility levies various prices. Your utility bills may be lengthy and comprehensive or brief, with only a few totals provided, depending on your business. New charges can arise each month with no apparent justification for how they were determined.

Understanding how to read your bill will help you make better choices for your energy needs. For example, switching your supplier can open up more affordable rates and benefits. Electricity is produced, distributed, and sold in a heavily regulated market. State regulatory committees are in place to ensure that utilities and electric providers adhere to all regulations to the letter. Electric utilities are mandated to do so. 

What is a kWh?

A kilowatt-hour (kWh) measures how much electricity your appliances consume. In perspective, if you were using a 100-watt TV for five hours, it would take 10 kWh to power it.

A typical electric bill will display your total kWh energy usage in the "Electric Usage" section. This is why it's essential to be mindful of your energy usage habits, like turning off appliances after use or unplugging chargers when not in use.

Some energy providers, like an electric company in Killeen, Texas, may also have a tiered billing structure, so your energy rate per kWh could vary. This is why understanding your rates is essential for reducing energy costs.

What is a Demand Charge?

Demand charges are based on the peak power requirement, measured in kW, that you demand at one point during a billing period. Since demand charges are separate from energy consumption, they may make up a large portion of your total bill.

For most commercial enterprises, using major appliances and machinery during off-peak hours is the best way to lower your demand charges. This reduces your maximum hourly power demand and thereby lowers your electricity rate. Your utility may offer flat or tier-based demand rates. Most states have switched to tier-based rates. These are generally aligned to coincide with the utility's system peak usage times. This means that your energy costs will be more variable monthly.

What is a Time-of-Use Rate?

A time-of-use rate lets you control electricity costs by shifting energy use away from peak times. This means avoiding appliances like your air conditioner and doing laundry or charging your EV during off-peak hours.

You'll also pay transmission rates, which cover the cost of delivering electricity over high-voltage lines to your home or business. You'll also see miscellaneous taxes and fees, such as fuel charges, city dividends, and varying adjustments between providers.

These items can add up to big differences in your electric bill. Be sure to review them carefully! Some of them may be tax-deductible. Contact your local government for details.

What is a Supply Charge?

The supply charge covers the cost of supplying electricity to your home. This includes fees for metering, billing, and customer service. It also pays for the transmission system, which brings energy from power plants to your local distribution system. The Federal Energy Regulatory Commission regulates this fee.

Your demand - and therefore your supply - charges vary monthly. However, you can lower these costs by using less electricity and avoiding peak usage times. Generally speaking, these costs are driven by the cost of natural gas and capacity prices charged to power plants. Both have been rising lately due to this freezing winter.

What is a Customer Charge?

A customer charge covers a portion of the fixed costs of providing electricity to each meter location. This includes billing, accounting, customer service, and transmission costs associated with moving energy over high-voltage lines to your site.

Some bills include a line item for a transmission service charge and a kilowatt-hour-based volumetric fee for transporting electricity over high-voltage lines from power plants to your facility. This charge is often passed on to large commercial and industrial facilities by your energy provider. Smaller businesses and residential customers typically do not pay for this cost. Also, this section may contain miscellaneous charges like taxes and city dividends.

What is a Meter Information Slip?

Many apartment, condominium, and mobile home park residents have their power meters read for them by the complex or park management rather than a power company. This arrangement is known as central system or non-submetered master metering.

Electric meters record total energy consumption in billing units such as kilowatt hours. They are read at periodic intervals.

Your meter has a series of round dials with ten numbers (0 through 9) and a pointer that advances as electricity flows through the meter. To read your meter, stand directly before it and look at the dials. The pointer will be between two numbers, such as 75,245 and 688.

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