Understanding the charges that make up your electricity bill is the first step toward decreasing your business’s utility costs. To properly assess this expense, we like to sit down with a physical copy of a bill and walk through each of the sections. Unfortunately, all electricity bills are not made equal and bring unique difficulties in understanding your charges. We will use a sample from one of our partner providers, Hudson Energy Services. They are gracious enough to provide a downloadable sample of their bill so the customer can see their estimated charges and we are proud to partner with suppliers that provide this level of transparency.
At first look, the electricity bill may seem overwhelming but you will find that it is much simpler than you may think. Your billing expenses are divided into three main categories: usage charges, TDU charges, and additional taxes.
The usage charges are exactly as they sound, the charges incurred based on how much electricity you used during the billing period. Your bill may state the ‘rate’ in the billing statement area while also including an ‘average price’ below the billing area. The key difference here is that the stand-alone electricity rate is purely the rate you are paying for electricity per kilowatt-hour without any other charges. The average price is the price you actually pay per kilowatt-hour including all additional taxes and fees.
To calculate the stand-alone usage charge, take the number of kilowatt-hours of electricity you used multiplied by the rate you pay for these kilowatt-hours. Most Americans pay anywhere from 5-15 cents per kWh. Based on this bill, the quantity of kWh’s used is 1,501 and the rate is 0.06080, and when multiplied equal $91.26.
1,501 Kilowatt-hours x $0.0608 /kWh = $91.26 Electric Energy Charge
To calculate the average price per kilowatt-hour, you will need to take the total balance you pay and divide by the quantity of Kilowatt-hours used. For this Hudson Energy customer, they previously paid $208.96 for their bill and assuming they used roughly the same amount of electricity (1,501 kWh) you would use these two numbers to calculate the average price.
$208.96 Previous Balance ÷ 1,501 Kilowatt-hours = $.14/kWh
Here is a billing details section from another one of our partners, Green Mountain Energy. In this section, you will find another example of the discrepancy between the average price paid for electricity and the actual contract price that can often confuse customers. The actual kilowatt-hour price that this customer is set at is $.042945 /kWh when their average price is actually $.083 /kWh when including all fees.
Discount Power Broker’s specialty is working here to help you receive the best electricity rate possible. Each supplier of electricity is given access to different rates per kilowatt-hour and we survey the market to procure the most cost-effective options for your business.
The next component of your expenses are comprised of the TDU (or Transmission and Distribution Utility) charges that the utility must receive for regular maintenance and the other fees surrounding the process of getting electricity to your business. These are not simply hidden fees or costs that should be interpreted as unknown markups. Transmission charges are required to transport electricity from the generation facilities through the high voltage wire to the distribution transformers. The distribution charges are then required to move the electricity from these transformers to the local and lower voltage electricity lines meeting directly with your property’s meter. You will notice below that Engie Energy Services displays the rate at which you are charged for these transmission and distribution expenses. Fortunately, if you are looking to transfer electricity suppliers while remaining in the same zip code, you will not usually find any changes due to the electricity utility remaining the same.
Lastly, the additional taxes associated with your bill are based on a few different factors determined by the state you are in and other laws determined by your municipality. These charges should also remain relatively unchanged while residing in your current zip code during a change in electricity suppliers.
The additional information found on your electricity bill will contain details about your account and contact information for your supplier with additional notes. We know that it is important to know where your money is going and our team hopes that this resource will decrease stress and encourage that call to your supplier or your local energy broker. Any of our team members at Discount Power Broker will be happy to walk through the process of understanding your electricity bill with you to show you that you are not alone in the energy market. Using our resources, we will ensure that you find savings.