What You Need To Know About Your Electric Bill
We are very familiar with the pain of paying the electricity bill every month, but how many of us realize what we are actually being billed for? What are all those itemized names and figures? This post aims to help you understand your electricity bill so you can make more informed decisions about your finances and your sustainability efforts.
How To Make Sense Of All Those Charges
Every electric bill includes certain charges:
● the cost of the energy you used
● the possibility of adjustments and riders
The electric company has to buy the energy at ever-changing prices, so the company’s costs are variable and they are legally bound to charge customers the same rate that they pay for it. If there are discrepancies in this fine balance, you will see an adjustment on your bill.
Riders are temporary charges to cover excess costs the energy company has had to shell out for whatever reason. If an unusual event causes the company to spend more money to acquire or deliver your energy, they will pass these charges onto you. It is good to know that all riders have to be approved by a higher power in your region before they can appear on your bill.
The cost of your electricity covers:
● generation (the company’s purchase of the energy)
● distribution (the physical means by which the energy arrived at your home or business)
● service (running the office that handles calls, billing, and more)
These costs may be broken down into several charges based on your electric company’s policies and your energy usage. A business, specifically one using a significant amount of energy, will likely see more charges detailed to account for their additional costs.
You may also see a demand charge in addition to your monthly energy usage. Not everyone will have one, for instance, it will probably not apply to homes with low energy consumption. The energy company is not simply concerned with how much energy you use in the space of a month, but the most that you use at one time. Since the system is not designed for energy to be stored, the electric company has to be equipped and ready to supply each home and business with the maximum energy that they will use at any given time. This requires that they maintain a certain amount of electricity and the physical system to supply the energy to you. So, for people using over a certain amount of peak energy, their bill will be figured based on both their monthly energy usage and the most energy that they use at one time. Sometimes, the demand charge is figured into your rate and does not show as a separate charge, because you are placed in a different rate range instead. The demand is still being billed, but not as a separate charge on your statement.
You can find detailed information that is specific to your electric company on their website. Here are two examples: