How to Read an Electric Bill
Most homeowners don't know everything that's included in their electric bill.
The average utility customer doesn’t think much about the details of their electricity bills — except to lament how high they might be climbing. However, utility statements actually provide a treasure trove of valuable information to facilitate the solar installation process and help homeowners maximize their financial and environmental savings.
For solar professionals, these bills are an easy way to quickly understand how much energy a customer uses, which is a key factor in determining what size PV system will meet their needs. These bills also show how the local utility company calculates a customer’s electricity charges, which can have important solar design implications.
For homeowners or businesses considering solar, having a deeper understanding of the information contained in their electricity bills can offer insights into whether installing solar makes sense, as well as whether switching to another billing plan may increase savings.
In this article, we explain the terms, sections, and calculations in an electric bill — and how these variables change when a customer installs solar on their home or business.
Example of a typical electrical bill
Walking through the electric bill is an opportunity to educate.
Rate plans
An electricity bill is a charge for the grid power a home or business consumes. This consumption is measured in kilowatt-hours (kWh), and customers are charged a per-kWh rate. These rates differ across utility markets and are calculated differently depending on the customer’s “rate plan.” Rate plans specify the rules for how customers’ bills are calculated, with utilities typically offering multiple tiers and types.
Common rate plans include: fixed rates, time-of-use (TOU) rates, and tiered rates.
While a fixed-rate plan charges the same amount for every kWh consumed, under TOU rates and tiered rates, the price per kWh changes depending on the time of day (peak vs. off-peak) or the total amount of energy consumed, respectively.
A customer’s rate plan will determine what is displayed in the different sections of their utility bill. It also impacts how much that user pays to their power provider every month, and by extension how much they can actually save by going solar. Depending on their energy consumption patterns, customers may pay more or less for the same amount of electricity under different utility rate plans.
Utility bill sections
An electricity bill is broken down into several different sections, each of which provides important information. While the names and contents often differ depending on the utility, we explain some of the most common sections below.
Account Summary
The Account Summary generally appears on the front and center of the bill. This section provides an overview of the account status, including:
- The customer’s previous account balance
- Any payments made on the previous balance
- The new amount owed for the current billing period
If the customer gets electricity and gas from the same utility, the Account Summary will include charges for both of these services.
Usage Profile
Many utilities provide usage profiles that show a customer’s total monthly consumption over the previous 12 months. This gives a good visual representation of how much energy they consume annually.
Some usage profiles even include other information and comparisons. For example, it might show how much electricity the customer used during the same period the previous year, so customers can track their consumption habits over longer time frames.
Current Charges Breakdown
This section shows the breakdown of a customer's bill. It generally breaks the charge into two groups: the cost of supply and the cost of delivery. Supply is how much the customer is paying for the actual electricity, while the delivery is what the customer pays to get the electricity to their house.
This is a great place to point out that delivery charges are often as much, or more than supply charges. Using an analogy everyone can relate to, this is like buying a $15 pizza, and then paying $15 to have it delivered.
Electricity Charges Details
Deeper in the bill, the per-kWh rate shown in the “Bill Details” section is broken up into many smaller charges. In addition to covering the cost of the energy consumed, some of these charges are used to maintain and upgrade the electric grid and to fund other state-sponsored energy initiatives. The names and amounts of these electricity charges vary by utility market, but generally include:
- Generation Charge: This charge supports the cost of producing the electricity used.
- Transmission Charge: This charge supports the cost of transmitting electricity from power plants, over high-voltage lines and towers, to distribution systems.
- Distribution Charge: This charge supports lower-voltage system costs stemming from the power lines, poles, substations, and transformers that connect to homes and businesses.
If you are interested in your utility’s additional electricity charges, visit their website for further information.
How electricity bills change with solar
When a homeowner or business in the U.S. installs solar panels, they typically become a net metering customer. Net metering is a policy that credits solar customers for the excess solar energy they feed into the electricity grid.
During the day, customers send unused solar power into the utility grid — generating credits that they can use to offset future electricity statements.
When their PV panels stop producing power (at night, when it’s cloudy, etc.) those customers buy power from the grid.
With net metering, each solar customer ultimately owes their power provider the monetary difference in grid electricity bought and sold. But with enough PV capacity installed, it becomes possible for a solar customer to eliminate their utility bills entirely — or even be owed electricity or credits from their power provider.
This explains why participating in net metering programs often changes the way these customers’ bills are calculated. After installing a PV system on their home or business, a customer’s utility statement may include:
Minimum Delivery Charge This is a charge that some utilities require solar customers to pay to support the cost of electricity grid upkeep. Utilities say this charge ensures that enough funds are available to maintain and upgrade the grid in situations where solar customers produce enough energy to pay nothing for electricity.
Net Usage This represents the total electricity consumption minus the total amount of electricity sent back to the grid by the solar installation. Net usage may be represented differently for customers on a Time-of-Use (TOU) rate plan. This is because the utility separates the day into “peak” and “off peak” hours, and charges different rates for energy used during each time period. In this case, net usage may be split into “Net Peak Usage” and “Net Off-Peak Usage.”
The timing of bills may also change after installing solar, depending on the utility. Some utilities bill solar customers every month, while others bill on an annual basis. This yearly statement is sometimes referred to as a “true-up” and it reconciles the customer’s energy production and consumption in a single statement at the end of a 12-month period.
Understanding the nuances of electricity bills can be a helpful when navigating other aspects of the solar design and sales process — like how to size a PV system. Whether as an installer or a utility customer, understanding electricity bills allows you to quickly identify potential savings and determine whether installing solar makes financial sense.
