How Do I Read My Electric Bill?

how-do-electric-rates-work

Confused about your electric bill? Don’t worry, we’re here to help. Understanding your power bill is simple. Allow us to break it down for you, line by line…

Firstly, your total electric bill has two major components: utility delivery and electricity supply. The electricity supply portion of your bill makes up about 70% of your total power bill, and the remaining 30% of your bill comes from utility delivery charges.

Allow us to show you a break down of the charges below…

Delivery (30%) – Electric Bill Utility Charges

The local utility collects money to deliver electricity to your home or business. About 30% of your total electric bill goes to the local utility company. They maintain the local power lines, handle billing, and make sure your lights stay on.

Electricity (35%) – Electric Bill Supply Charges

This is the cost to generate the electricity commodity at a power plant, solar farm, wind farm, etc. The electricity commodity makes up approximately 50% of your total electricity supply rate.

Capacity (15%) – Supply Charges

Electricity generators collect a capacity fee for their commitment to produce electricity at a given time in the future. Part of your power supply rate is a capacity charge that helps make the electric grid more reliable. A great explanation of these charges is here.

Transmission (7%) – Supply Charges

Electricity costs money to move from the power plant to your local utility company. You pay a transmission charge in your electricity supply rate to move power from the generator to your local utility. A great explanation of these charges is here.

Green Energy (5%) – Supply Charges

As mandated by many states, energy suppliers must purchase some power from green sources. You pay for these renewable electricity supply sources as part of your electricity rate.

Reserves (5%) – Supply Charges

Electricity generators make money for being on “stand by”, ready to generate electricity in case of a black out. Part of your electricity rate goes to these reserve generators.

Line Losses (3%) – Supply Charges

Electricity disappears when traveling over long distances. Line losses represent these losses in power and you pay for this power in your rate.

What’s the Point?

In summary, the first step towards reducing your utility costs is to understand the different charges that make up your total electric bill. Are you interested in learning more about your electric bill? We would be happy to do an analysis for you to show you where there might be a savings to be had. Please contact us by clicking here.

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