Many people have questions about their electricity bill. This is completely normal, because electricity bills are very confusing. In this post, we are going to take you step by step in how to read and understand your electricity bill. This will help you understand how you use energy, how much you pay for your electricity, as well as identify ways you can lower your electricity bill.
In general, there are four components to any electricity bill. These components are: (1) a fixed, monthly connection charge; (2) a supply charge; (3) a delivery charge; and (4) miscellaneous taxes and fees. Let’s break down each of these components for a typical bill, so you can understand what each section of your bill means.
1. Fixed Monthly Connection Charge
The fixed monthly connection charge or “basic service charge” is what the utility charges you to have your home connected. (See an example of this section of your electricity bill below.)
As a fixed charge, this amount stays the same each month, regardless of how much electricity you use. Every few months or once per year, the utility may apply to a public regulator to increase this fee.
2. Supply Charge
Your “supply” is the energy itself. This is what is produced by a load generating asset like a natural gas -- or bought by the utility. The supply charge is variable and may change slightly month-to-month, based on a number of factors. For example, the weather and other demands for the fuel source, including where the raw material is traded. (See an example of the supply section of your bill below.)
The electricity your home or business consumes is measured in units called kilowatt-hours (kWh). One kWh is equal to 1,000 watts. Your electricity company charges you based on how much electricity you use per kWH. For example, a 100 watt light bulb uses .1 kilowatts per hour. This means it would take 10 hours for the light to consume 1 kWh of energy. If your company charges you a rate of .10 for each kWh, you would pay $0.10 to use a light every 10 hours.
There are a number of ways you can reduce your supply charges on the supply portion of your bill. For example, you could reduce the kWh you use by always remembering to turn off your lights when you leave home. You can also update old appliances so they are Energy Star efficient, hang clothes on the line versus using your dryer, or opt to use a fan instead of air conditioning. By reducing the electricity you consume, you don’t just save money, you also prevent carbon emissions and help the environment.
You can also reduce your supply charges by substituting the dirty energy supply from your utility with clean energy. For example, you can install solar panels on your roof. However, for many, the up-front costs for installations can be too costly. Additionally, many homes do not have roofs that meet the solar panel regulations.
Perhaps the most accessible way for businesses, homeowners, or renters to reduce their electricity bills and reduce their carbon footprint is through community solar programs. Today, virtually anyone can subscribe to a portion of a solar farm located in their city or county through platforms like Common Energy and connect a clean energy supply directly to their utility.
Because a number of U.S. states are encouraging people to sign-up for these programs, each subscriber receives energy credits on their existing utility account, which lowers your energy cost by a guaranteed 10% each month. Below is a sample bill from someone who signed up for a community solar. As you can see, when the “Community Net Metering” adjustment is applied to their bill, they save a substantial amount of money.
3. Delivery Service Charge
The delivery service charge section of your bill is a summary of what the utility charges to provide electricity through the electrical grid, so it gets to you. You’ll often see a number of different line items in this section of your bill. (See below.)
For example, there’s a line item that reflects the utility’s grid maintenance responsibilities, including wires, substations and other electrical equipment. The utility also charges basic service fees related to the utility’s responsibilities with metering, billing, and customer services.
You’ll also see a transmission rate line item. Your utility must pay a rate to cover the cost of delivering electricity over high-voltage lines, so the energy gets from the power-generating facilities to the distribution center. These rates are governed by The Federal Energy Regulatory Commission, not the utility.
Other surcharges and administrative fees also appear in this section of your bill.
4. Miscellaneous Taxes and Fees
This taxes and fees portion of your NYSEG bill lists any additional adjustments to your bill, including taxes or credits. (See the example below.)
On some bills, this may appear in a "Miscellaneous" section, along with any credits you may receive. For example, if you subscribed to a portion of a solar farm through Common Energy. (See example below.)
As you can see, your electricity bill is one of the most confusing bills you are likely to receive. We hope that this breakdown helped you better understand how you use energy and how much you pay for your electricity. We also hoped it helped you identify ways you can lower your electricity bill.