Understanding Your Electric Bill

Understanding Your Electric Bill

The Simple Way to Read Your Electric Bill

Understanding Your Electric Bill

Do you ever feel like your utility doesn’t want you to understand the charges on your electric bill?  After all, you have no choice but to pay it every month, so why even bother telling you what you’re paying for, right?

Maybe not.  Recent studies by Accenture show utilities all over the world falling into ever poorer favor with their customers, mostly because of bad listening skills.  Gone are the days when electricity consumers just feel lucky to be able to see in the dark.  These days, customers want to know what they are paying for, and we don’t blame them.  So, at long last, here is a breakdown of the many cryptic charges that appear on your electricity bill.

Your utility bill is broken into two main sections: supplier services and delivery services.  They sound like they could be the same thing, but there is a difference.  Electricity supply is the actual energy that is consumed when you turn on a light, a toaster or a TV.  Every electric appliance uses an amount of energy measured in Watts.  If you use 1,000 watts for one hour, you have used 1 kiloWatt Hour (kWH) of electricity.  Delivery refers to the process of transporting that power to its end destination – your outlets.  But there are way more than just two charges on your electric bill.  What gives?

Here’s what gives: distributing power is complicated. Nobody has figured out how to store large amounts of electricity yet, so every time you flip a switch, a power station somewhere has to adjust its output.  On top of that, it’s a pretty difficult task to figure out where to send all that new electricity once it is generated.  If this sounds a bit daunting, don’t worry.  All you need to know is that many of the delivery servicescharges you see on your bill help pay for future system improvements, and maintaining system reliability.  (By the way, we have one of the most reliable electricity distribution systems in the world!)

But let’s get down to the nitty-gritty.  Below are many of the charges that you’ll find on your electricity bill and a description of what they really are.

Delivery Services – Delivery charges are determined through negotiations between your utility and the Department of Public Utilities, usually once a year.  The charges are just enough for the utility to recover any expenditures, pay its workers, and provide value to investors.  As a consumer, there isn’t much you can do to lower these charges besides using less electricity.

  • Customer Charge – This charge covers costs associated with providing customer service lines, billing assistance and metering.  These are fixed costs and are not related to the amount of power you use in any given month.
  • Distribution Charge – This represents the costs of distributing electricity at low voltage across power lines from the distribution system to your home or business.  This is a variable cost expressed in $/kWh, so the charged amount depends on how much power you use.  Also, your utility may charge different rates for certain amounts.  For instance, the first 600 kWh of power you use may cost $0.03/kWh and after that you may be charged $0.04/kWh.  This is because of what we call congestion.  As more power goes over the power lines, the lines become less efficient and it is more expensive to make sure that power gets to where it is going.
  • Transition Charge – A charge that covers your utility’s costs of transitioning into the competitive market including losses incurred from past investments in generating stations or power contracts.  Basically, if your utility made investments in the past that became unprofitable due to deregulation, you are assisting in the recovery of those losses.  This is a variable charge, and depends on your monthly usage.
  • Transmission Charge – This is similar to the distribution charge, but it applies to a different set of power lines.  The transmission charge covers the cost of transporting the power at a high voltage from the generating station to the beginning of the utility’s distribution station.  This is another variable charge and will go up or down depending on how much electricity you use.
  • Renewable Energy Charge – This charge is used to help fund the development and installation of new renewable generation systems like solar arrays for your roof, and to ensure the retention of already constructed renewable generating stations.  Again, the renewable energy charge depends on your usage.
  • Energy Conservation/Efficiency Charge – This charge helps cover the cost of energy efficiency programs offered by your utility.  If you haven’t had an energy audit yet, you should.  They are offered at no cost to you, because you have already paid for them through this charge.  For more information about no-cost energy audits for your home or small business, check out Mass Save’s website.

Supplier Services – Supply charges are what you pay for the electricity you use when you turn on an appliance or flip a switch.  Unlike the delivery charges, you have a choice of who you buy your electricity from.  Your utility must purchase electricity supply for you twice a year, regardless of the going market rates.  Easy Energy’s purchasing practices are not state regulated, so we are free to establish our own methods of finding the lowest prices for you.  This is the advantage of the competitive supply market created by deregulation.

  • Generation/Electric Supply Charge – This charge covers the cost of the actual power that you use, and depends on your consumption.  When you choose Easy Energy for your electricity supply you will see our name, address, and phone number along with our lower electric rate in $/kWh under this charge on your bill.

Now that you know a little more about reading your electric bill, maybe it’s time for a change! Contact us today to see how we can help reduce your monthly utilities bill without any tricks or hassles. Easy Energy is here for you!

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