Decode Your Energy Bill

Understanding Your Electric Bill

Your energy bill is a monthly snapshot of how much electricity you used in the prior month, along with how much you must pay to keep the lights on for the next month.

Beyond that, if you know where to look, it can contain some useful information regarding your energy usage and energy rates. While it varies location by location, most electricity bills are broken down into two parts.

  1. Distribution or Delivery Charges
  2. Supply Charges

Distribution/Delivery Charges

The first part of the energy bill is the distribution or delivery charge. This is the cost that you pay to the utility for maintaining the poles, wires and transmission stations to get the electricity to you.

In addition, this section will include any additional fees or taxes you might incur as well. On the example below, this is the first section. It is your usage multiplied by the total fees.

Supply Charges

The second part of your energy bill is the supply charge portion. That portion is what you pay for the electricity itself. This can also be called the generation charge, and is determined by the price per kilowatt hour x monthly number of kilowatt hours.

[Learn More: What’s a Kilowatt Hour?]

For example, say you use 600 kWh in the last month and your electricity rate is 12 c/kWh or $.12..

That means you’re paying $72 for the electricity itself.

How to Save Money on Your Energy Bill

By knowing the parts of your utility bill and the math behind it, there a few things you can do to save money. First, by using less electricity, you’ll end up paying less.

[Learn more: Energy Hacks For Renters]

The second way is by choosing a cheaper electricity rate. If you live in a deregulated state, you may have the option to switch your energy supplier, and pay considerably less for your electricity.

While it depends on the state and local utility, switching to a different supplier can mean big savings.

Sample energy bill
Sample Energy Bill. Notice the difference between the “Supply” and “Delivery” charges.