How to Read Your Electric Bill (and What the Numbers Actually Mean)

Your electric bill shows a lot of numbers, and the one most people look at is the one at the bottom. That number tells you what you owe. It does not tell you whether you are being charged fairly.

The figure that matters is your effective rate: what you actually paid per kilowatt-hour, all charges included. Almost no bill prints it.

Finding your effective rate

Take the total amount due for the period, and divide it by the kilowatt-hours you used in that period.

That is your real rate. It is almost always higher than the "energy charge" or "supply rate" printed on the bill, because it includes delivery, fees, and taxes. When a supplier advertises a rate, they are quoting the supply portion only, which is typically half to two thirds of what you actually pay.

Two things to be careful about:

• Use the amount due for this period, not the account balance. If a previous balance rolled forward, including it will overstate your rate.
• Use the usage for the same period. Some bills show a 13-month usage graph next to the current charges; take the current period only.

The parts of the bill

Nearly every electric bill splits into the same four groups, whatever your utility calls them:

Supply is the electricity itself. In deregulated states you can buy this from a competing supplier. In regulated states you cannot, and shopping around is not an option no matter what a mailer tells you.

Delivery is the wires: transmission and distribution. You pay this to your local utility regardless of who supplies your power. It is not negotiable.

Fees and surcharges are where bills differ most. Customer charges, meter charges, and various riders. A fixed monthly customer charge is normal. What is worth checking is whether you are paying for something you did not choose, such as a service plan or a rental on equipment you own.

Taxes are set by your state and municipality.

Estimated reads

Look for the word estimated near your meter reading. Utilities estimate when they cannot physically read the meter, and the estimate is based on your past usage rather than your actual usage.

An estimate is not a problem on its own. It becomes a problem when several estimated months are followed by a true-up, and you get one very large bill for consumption spread over a period you have already paid for. If you see estimates running two or more months, submitting a meter reading yourself will usually correct it before the true-up lands.

What to compare against

Once you have your effective rate, it means something only in context. The useful comparisons are:

• Your own history. Same month last year is more informative than last month, because it controls for the season.
• Your state average. The EIA publishes average residential prices by state and month. State averages vary enormously, from around 11 cents per kWh to over 40.
• Your usage per day, not per month. Billing periods are not all the same length. A 34-day period will look worse than a 28-day one for no real reason. Divide usage by days in the period before comparing.

That last one catches more people than anything else. A bill that looks 20 percent worse than last month is often the same daily usage over a longer period.