How To Read Your Utility Bill

Understand Your Bill with Energy Measurement Software

Utility bills are often long, technical, and include a number of rates and charges depending on several factors, such as how much electricity you use. Additionally, many utilities are required by states to charge time-of-use rates that can significantly increase your bill. Unfortunately, utility bills never inform you of the exact time that you reached your demand peak or over what periods of time you consumed more electricity than others.

For example are most of your charges the result of an energy peak at 7:30AM, or did your peak come at 2:00PM? On what day did the peak occur – Tuesday, Thursday, or even Saturday? How much energy am I using on the weekend relative to operating times during the week? If you’re asking these questions, you’re not alone.

To better understand technical energy terms often found on your bill, we’ve put together a list of commonly used terms[1][2][3] to help you know what you’re being charged for and why.

Demand (kW)

The maximum amount of electricity capacity usage, expressed in kilowatts, which is drawn by customers at a given point in time, averaged over a 15 or 30 minute interval. One can think of demand like internet bandwidth and being billed for your maximum mbps (megabits per second) during your billing period or a speedometer on a car and being billed for your maximum speed. Learn how to quickly reduce your demand charge.[4]

Consumption (kWh or Therms):
The use of energy as a source of heat or power. A kWh is the unit of electricity for which most customers are charged on their monthly bill (in cents per kilowatt-hour). One kilowatt-hour equals one hour of using electricity at a rate of 1,000 watts. Three-and-a-half kilowatt-hours will provide enough power to keep a 150-watt light bulb on for an entire day. The average household consumes about 900 kWhs of electricity per month. One can think of consumption like being billed for total MB (megabits) downloaded from the internet over a billing period or like the odometer on a card and being billed for total miles or kilometers traveled.

Gas consumption is expressed in Therm(s) which represents one hundred thousand British thermal units (100,000 BTUs).

Power Factor (kVar)
A low power factor reveals inefficiency, and is therefore more expensive. Utilities will often set a lower minimum threshold limit for power factor, often 0.90, at which point if customers fall below, they are charged an additional fee for low power factor. For more information, click here.[5]
Delivery (Transmission) Charge (per kWh)

The process of transporting high-voltage electricity from the points of generation to distribution facilities, which deliver the electricity at low-voltage to end users.

Generation (Supply) Charge (per kWh)

The amount of electric energy produced, usually expressed in watt-hours (Wh), kilowatt-hours (kWh), or megawatthours (MWh).

On & Off PK (Peak)

Many utilities offer billing structures that establish different charges for customer usage based on time-of-day electricity use. For utilities that utilize this structure, on-peak charges are higher than off-peak charges. Special meter equipment is usually required.

Rate-Base or Cost-of-Service

Traditional energy utility regulation under which a utility is allowed to charge rates based on the cost of providing service to customers and the opportunity to earn a reasonable profit as determined by the state regulatory authority.

Facility Charge

Many utilities charge facility fees which are often a reflection of administrative costs that the organizations occur. Additionally, these fees can be used to pay for the maintenance and improvement of the electrical line system. Typically, this fee is around $15, but can be significantly more if you are a co-op customer instead of an investor owned utility.

Smart Meter Charge

Utilities undergoing meter upgrade projects from traditional to ‘smart’ meters, also known as interval data recorders, will often charge customers a fee for the new meter. This may include a one-time setup or installation fee and month-to-month service charge. However, many utilities offer opt-out policies if customers notify the utility that they do not want a smart meter.

If your utility or co-op is upgrading customer meters from traditional meters, which require individual, manual monthly readings and do not offer interval data, to smart meters which can be read remotely and offer interval data and other diagnostic and energy usage information, you may incur a smart meter or similar type of fee.

Environmental Charge

Utilities are often required to comply with environmental regulations imposed by local, state, or federal law. Since these are non-avoidable costs, utilities will often ask their public utility commission (PUC) to allow for a customer rate increase or new environmental charge in order to recover the required costs to comply with environmental regulations.

Energy Efficiency Charge

Refers to activities that are aimed at reducing the electricity and natural gas used at customer’s facilities by providing rebates to substitute more energy efficient equipment, typically without affecting the customer’s operations services provided. Examples include high-efficiency appliances, efficient lighting programs, high-efficiency heating, ventilating and air conditioning (HVAC) systems or control modifications, efficient building design, advanced electric motor drives, and heat recovery systems.

Renewable Energy Charge
Renewable energy fees are often the result of state mandated renewable portfolio standards which require utilities to supply a percentage of their electricity from renewable sources. Since utilities must build new renewable generation, they are often allowed to pass along these costs to customers. Additionally, customers can choose to opt into renewable energy programs, at an additional cost, if they elect to have a percentage of their electricity supplied by a renewable source, typically wind or solar.

It’s important to note that all regulated utilities, most often not including cooperative electric associations, have rates and charges approved, regulated, and supervised by each state’s Public Utility Commission (PUC) that is comprised of elected officials.