Understanding Your Electricity Bill – A Guide for Consumers

Your power bill can have a lot of information on it. It includes a summary of charges, your electricity consumption (with a handy bar graph!), and other rate plans available from electric company Dallas.

You can work to cut home energy charges by lowering your usage, or you can switch to a different rate plan. This guide will help you understand how your bill is calculated, including how kWh rates and demand charges are charged.

What Is A kWh?

When looking at your energy bill, a kilowatt-hour (kWh) measures your electricity usage. While kW measures power, kWh measures the power used over time.

Your electric meter will record the kWhs you use each month, passed on to your energy company for billing. Your energy supplier will subtract your last month’s meter reading from this month’s to determine your monthly kWh usage. When comparing energy plans, it’s important to know your rates in terms of kWh. 

What Is A kWh Rate?

When reading your electric bill, it’s important to understand the different billing units that make up the total invoice. The consumption section will display your previous and current meter readings and how much you consumed that month in kilowatt-hours (kWh).

A kWh rate is the cost of the electricity you consume each month. It’s calculated based on your energy tariff and any additional utility charges.

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For example, some plans may include a standing charge, the daily non-energy consumption charge meant to help recover utility fixed costs like meter reading, billing, and maintenance of lines connecting your home or small business to the grid. Other plans may offer a zero-standing charge, which is more transparent and easier to understand. You might also pay a demand or time-of-use rate, which can increase during high energy use periods, such as summer and winter.

What Is A Time-Of-Use Rate?

Several charges make up your electricity bill. In addition to the cost of generating electricity, there are also charges for transmission and distribution.

One of the most important charges is your time-of-use rate, which can greatly impact your energy spending. Time-of-use rates are designed to encourage consumers to reduce their demand for electricity by charging different rates for usage at different times of the day.

For example, during peak hours (usually from 4–9 pm), your utility may charge a higher rate for electricity. This incentive to shift your electricity use to off-peak hours can help you save money on your monthly energy bills. Time-of-use rates are just one of the many innovative ways that utility companies are working to align electricity costs with the actual cost of generating that electricity.

What Is A Demand Charge?

There are a lot of lines on an electric bill that need to be clarified. Fortunately, the bill breaks down into several home energy charges to make it easier to understand what you are paying for.

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The first part of the bill is a customer charge to help recover utility fixed costs such as meter reading, billing, and administration. The second part of the bill is the Distribution Energy Charge, which covers the cost of delivering electricity from the power plant to your meter via the electric transmission and distribution system.

The third part of the bill is the Demand Charge. The demand charge is based on the highest amount of energy used over a 15 – 30 minute billing period, known as a peak. The demand charge helps offset the high costs of generating and transmitting electricity during these rare peak demand periods when most customers use a large amount of energy simultaneously (like a hot day when everyone turns on their air conditioners). The higher the peak demand, the greater the demand charges.

What Is A Peak Charge?

A peak charge is the amount of money your electricity company charges you for using too much energy during a certain period. This is a common feature of Time of Use pricing plans. Electricity is cheaper late at night and early in the morning, so by strategically running your energy-hungry appliances during off-peak times, you can save some money on your utility bill.

The exact periods that your utility considers peak hours can vary depending on the region and the season. However, in the summer, peak hours are typically between 1 pm and 7 pm on weekdays as people turn on air conditioning. During these periods, it is important to understand how this billing structure works and try to reduce the demand on the power grid whenever possible. This will save you money and help take the strain off your local utility grid.

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What Is A Supply Charge?

A supply charge is your energy provider’s rate for the electricity purchased to serve you. It reflects the cost of production from the generators, including fuel and infrastructure maintenance. It can vary between different energy providers, and it also varies by season. (The price of natural gas has risen this winter, driving up prices at many power plants.)

This is why it’s important to know what the terms kW and kWh mean and how they are used. When you understand these concepts, you can take control of your energy usage and your energy bill.

If you’re looking to lower your energy bill, there are many things you can do – like shopping for cheaper supply rates in the EnergySage Marketplace. You can also reduce your electricity consumption using less energy – especially during peak times. Together, these two factors can dramatically reduce your electric bill.

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