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Understanding Your Utility Bill: What Do All Those Charges Mean?

July 6, 2018
by dmirza

Utility BillMost bills aren’t met with open arms and your utility bill is no exception. Bills can be confusing with all sorts of fees and surcharges tacked on. Do you ever just look at your “Amount Due”, pay it, and move on? It might be the quickest thing to do but when you understand what all those numbers mean, your utility bill can be less of a headache and can help you learn where to save energy and cut costs.

‘Utility bills vary from state to state and from company to company but these components will appear somewhere on most electricity bills:

Electricity Used

The total electricity used is based off of information obtained from your meter readings. The number will be listed in kilowatt-hours, or how much energy your home uses per hour. A kilowatt is equal to 1,000 watts. To give you some insight, a 100-watt bulb operated for 10 hours equals one kilowatt-hour (kWh).

Retail electric providers receive meter readings from the Transmission Distribution Utilities on a monthly basis. The Transmission Distribution Utility is the company that owns the poles and wires through which your electricity is delivered.

Electricity Charges

Retail electric providers will offer you a plan which may provide you a fixed or variable rate for the electricity that you consume. Fixed rate plans allow you to lock in your energy charge for a fixed term and variable rate plans mean that the energy rate will fluctuate. For example, with Source Power & Gas, you may be paying a fixed energy rate of 5.6 cents per kWh consumed. Based on this example, you would see:

Total kWh: 700

kWh charges: 700 kWh @ $0.056

Your utility bill starts to get confusing when you look at how the energy and delivery charges are presented. If you have “un-bundled” billing, you will see the charges for “energy,” as well as charges for “distribution” and/or “transmission” listed separately. The distribution and transmission charges are considered “pass through” charges because they are assessed by your local Transmission Distribution Utility and included on your bill by your Retail Electricity Provider. The distribution and transmission charges go to pay for carrying that electricity over high-voltage power lines to substations, and then from substations over the low-voltage distribution power lines that enter your home. If you have bundled billing, you will see a charge per kWh that will cover both the energy charge and the distribution and transmission charges.

Combined, the energy and distribution/transmission charges equal the total amount you pay for your electricity usage. Finally, your Retail Electricity Provider will also include taxes and a monthly fee, if applicable, to your plan. If you are confused about any part of your utility bill and want a line-by-line explanation, call your Retail Electricity Provider and they can help you.

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