how to read your electric bill

What’s the right way to read your electric bill?

Reading Time: 4 minutes

You probably think you already know how to read your electric bill, but if you’re like most Americans, you may actually be making several mistakes as you go through the document. If you’re looking for bill help, here are the top five things you need to know about reading your bill correctly.

1. Understand what monthly billing plan you’re on

This step is crucial: are you being charged for your monthly usage? Or are you on a budget billing plan? If you’re charged monthly for your useage, you’ll receive a bill every cycle charging you for the number of kilowatt hours your household used that month at the prevailing rate. If you’re on a monthly budget billing plan, your utility takes the number of kilowatt hours you consumed last year, assumes that you’ll use around the same this year, and creates a monthly average for you to pay. This allows your utility to spread out the total costs you pay for power over the course of the year. As a result, if you live in a hot part of the country and use electricity to run your air conditioner, in the summer months you’ll see a lower bill than your neighbors who are on a monthly usage billing cycle. But on the other hand, in the winter months you should expect a higher bill than your neighbors.

Example of a budget bill from KCP&L
Example of a budget bill from KCP&L

2. Know what bill you’re looking at and know your billing system

Depending on where you live in the country, your electricity bill can come bundled in amongst a lot of other municipal bills. Make sure you know what you’re looking at! Electricity is measured in kilowatt hours (kWh), while a water bill is measured in gallons. Gas usage is measured in BTUs, or British Thermal Units. These units of measurement should serve as an easy indicator of where your electricity bill ends, and where your water or gas bill begins.

Remember to take note of what’s actually in your bill; this bill includes both gas and electricity.
Remember to take note of what’s actually in your bill; this bill includes both gas and electricity.

3. Know what charges make up your final price

There are several charges that go into your energy bill. Your payment is not only for the electricity you consume, but also for helping the utility maintain the grid and pay the salaries of its workers. Look for charges related to supply, delivery, taxes and fees on your bills to make sure your understand exactly how much you’re paying for each line item. If you live in an area with a deregulated energy market, you may be able to shop around for another supplier that can provide you with the power you need at a more competitive price.

An example of all the charges that go into a power bill from PG&E.
An example of all the charges that go into a power bill from PG&E.

4. Know how many hours of electricity you use per month

Ensure you’re correctly calculating the amount of power you use in a given month. Many bills will break out your daily use, or simply show you how your monthly usage changes over the course of the year. Make sure that you’re measuring and assessing your usage on the same periodicity that you’re billed on: for most consumers, this will be monthly. Don’t confuse a daily rate with a monthly rate!

Example from a Duke Energy monthly bill.
Example from a Duke Energy monthly bill.

Sometimes figuring out how many hours you’ve used in a given month is more complicated than simply dividing your total bill by the rate your utility charges for power. Some utilities charge consumers with a tiered billing structure; your first 500 kilowatt hours may be one price but your 501st hour would be a different price. If your utility uses a tiered billing structure, the number of hours that you use in each tier should be shown on your bill. If you add together the number of hours used in each tier that will sum up to be the total hours used in the entire month.  

Example from a PG&E bill.
Example from a PG&E bill.

Even if your utility bill tells you how much electricity you used every day, you probably won’t be able to pinpoint the specific habits that cause you to overuse electricity. Knowing your hourly electricity usage can further help you reduce your energy use. If you want to get more insight into your household’s day-to-day electricity use than your electric bill will give you, using a home energy monitor like the Neurio W1-HEM Home Energy Monitor or the CURB Home Energy Monitoring System is a great place to start.

5. Calculate your total cost for electricity in a month

When you’re trying to understand how much you pay for electricity, it’s important to break down your bill to a metric where you can compare your consumption to its cost. The easiest way to do this is to measure your consumption rate in the same way that your utility measures it. This is generally done on a monthly usage basis, unless you’re on a budget billing plan (see point #1). You should be able to take your total bill for electricity and divide it by the total number of the kilowatt hours you used in that month. For example, a $180 dollar bill divided by 1500 KWH equals $0.12 cents per kilowatt for electricity. This calculation will tell you how expensive your power really is!

Now that you know how to read your electricity bill, you can compare the amount you pay with other energy alternatives in your area. According to the U.S. Energy Information Administration, the majority of Americans pay between 10 and 20 cents per kilowatt hour for electricity. How much do you pay?

2 thoughts on “What’s the right way to read your electric bill?

  1. Carlos

    Does hot water have an imapct on you electricity bill?
    Water was included in my rent, but my bathtub leaks alot of water and its hot. Does that make my electricty bill go up? Because it has been over 200. For more that i try to save by disconecting things when im not home the bill is still high.


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