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Home Energy Savings - Published:
February 3, 2021 - Updated:
November 2, 2022
Understanding Your Electricity & Natural Gas Bills
Understanding your electric bill or natural gas bill each month is an important part of managing your energy budget. When reading your electricity bill or natural gas bill, you might wonder what electricity or natural gas supply charges are, what the units mean and how they’re calculated.
If you have problems understanding your energy bills, Constellation can help. Here, we’ll make sense of your statements and explain how your power usage affects costs.
Electric Bill Breakdown: Charges, Fees & How They’re Calculated
The key to understanding your electric bill is understanding your energy costs and the line items that are shown on your bill. First, you need to identify who provides your electricity, if you don’t already know. If you do, grab a copy of your electricity bill, or find a sample electric bill, or monthly statement, from the supplier you will be using. Your bill may come from your utility instead. That’s because in some states, you can choose your energy provider, which may be different from your utility.
Each bill is typically broken down into several home energy charges, which might vary slightly, depending on the supplier or utility. The total you owe will be the sum of the cost of the electricity you used, the cost of the services involved in getting it into your home and any applicable taxes. Understanding your electric bill will come through increased familiarity with those specific costs.
What Are the Charges and Fees on My Electricity Bill?
So, how is electricity billed? If you glance at your statement, you’ll see some line items that add up to your total. Electricity bills vary in format, but you’ll probably see some version of the following:
- Energy/supply charges: On your electric bill, you will see a listing of the amount of electricity your home used for the month, listed in kilowatt-hours, or kWh. You have the most control over this portion of your bill, either by reducing your usage or with your choice of energy plans.
- TDU surcharges approved by PUC/electricity delivery charge on electric bills: As you’re reading your electric bill, you may wonder, “What is the delivery charge on my electric bill? And what is a transmission charge on my electric bill?” These are common questions about electricity billing. The electricity delivery charge, or utility distribution charge, on your electric bill is your portion of line maintenance and upkeep to ensure consistent power is delivered. Your bill might list it as “[Your Transmission and Distribution Utility’s Name] Surcharges Approved by PUC,” where “PUC” stands for “public utility commission,” but the impact on your electricity bill remains the same.
- Usage charge/credit: This is money credited back to a customer on their electricity bill if the energy they use is less than or equal to the amount specified per billing period.
- Sales tax and assessments: This line item reflects the taxes levied by your state or locality, along with any regulated assessment fees and charges. These costs are a part of most any electric bill breakdown.
How Are Electricity Bills Calculated?
You need to understand how to read your electric bill in order to take control of your electricity costs. You can affect that cost in two ways: reducing usage and what energy plan you choose. The first part requires finding out how you’re using electricity by examining the supply charges. Learning how to calculate the supply charge will help you decode your electricity bill.
When reading your electric bill, you’ll see the total cost of energy usage that month. Understanding your electric bill means knowing where that number comes from. Your electricity is measured by the kilowatt-hour (kWh), which is 1,000 watts used in 1 hour. The electric company reads your meter, which tracks your usage, and subtracts the new usage from the old number to find out how many kilowatt-hours you’ve used. Then, that number is multiplied by the rate you pay per kWh to get the supply charge for the month. So, knowing about kilowatt-hours can help you take control of your energy costs.
The other aspect of energy savings is picking the right plan for you or your business. Many choose to lock in a price when rates are lowest and keep it fixed for a year or two. Some choose to pay a variable rate from month to month. And some businesses choose combinations of fixed and unfixed rates as part of their energy procurement strategy.
What costs the most on your electric bill?
After you pinpoint your usage as part of your electric bill breakdown, the next step in taking control of your energy budget is finding places to cut. Every home and business is different, but if your energy bill is higher than usual, there are some common power-hungry systems and appliances to check first:
- HVAC systems. Heating and cooling always takes a lot of energy.
- Lighting. Running lights indoors and outdoors eats a lot of electricity, especially for businesses.
- Major appliances. Refrigerators, freezers, dishwashers, ovens and other large appliances use a lot of electricity in homes. And their industrial counterparts use even more.
- Computers and other electronics. From desktops to gaming systems to TVs, electronic devices tend to use a significant amount of electricity.
Homeowners and small businesses can trim their electricity bills by finding ways to use electricity more efficiently, such as automating appliances that use the most electricity.
If you’re a business owner facing high capacity costs, you won’t get much input on how that rate is assessed, but you can do your part to help lower these costs for all users by using major appliances and machinery during off-peak times and reducing your energy consumption during peak hours. Peak hours vary by location and season, so contact your electricity provider for information about how to avoid peak usage times in your area.
Your Natural Gas Bill Explained
Understanding your energy costs doesn’t end with understanding your electricity bill. Your natural gas bill can be a big part of your home energy charges. And depending on where you live and your supplier, there might be several terms you need to become familiar with to understand your natural gas bill.
Fixed-rate and variable-rate plans have some differences that will affect your natural gas bill. Understanding your natural gas bill becomes a little more complex when you’re billed a variable rate that may change monthly. Fixed-rate billing is less complex than variable rates and keeps the rate you pay for gas the same each month — the only thing that varies is your usage.
Common Natural Gas Bill Terms
As with your electricity bill, one of the keys to understanding your natural gas bill is defining common energy terms you’ll see on the page. Specific natural gas bill terms including the following:
- Ccf: Gas is measured by volume, with 1 Ccf equaling 100 cubic feet. Your monthly gas supply charges may be broken out into this unit of measurement.
- Btu: A British thermal unit, or Btu, is a measurement of energy that’s used to calculate the amount of energy needed to raise the temperature of a pound of water 1 degree Fahrenheit.
- Therm: A therm is the equivalent of 100,000 Btu. This is the unit typically used to calculate your monthly charge for natural gas. The price you pay per therm may vary due to time of year, supply and other cost factors if your rate isn’t fixed.
- Gas supply charges: This is the cost of the natural gas you used the previous month.
- Delivery charges: This is your share of the cost of getting the gas from the supplier to your home or business. It includes fees for distribution, transmission and transition.
- Taxes: A smaller part of your natural gas bill will be fees assessed by the state and/or local government.
- Customer service charges: Fees of this kind cover set costs like meter reading and the administrative cost of billing.
- Capacity fees: These cover the cost of maintaining the ability to deliver natural gas via interstate pipelines on the days of highest demand.
How are natural gas bills calculated?
Similarly to how electricity is billed, the total amount due on your natural gas statement will be the sum of your gas supply charge, other delivery and service fees, and taxes. The supply charge on your natural gas bill is the actual amount of energy used, either in volume of gas (like Ccf) or in energy (like Btu or therms). That figure multiplied by the rate you’re paying will yield the cost, or gas supply charge.
Knowing About Natural Gas and Electricity Bills Can Help You Save
The more informed you are about what’s on your bill, the more control you have over your usage, helping you find ways to conserve. Saving energy may help you save money while also reducing your impact on the environment. By following a few simple tips and making some small changes around your house, you could potentially see lower home energy charges.
