Do you know the difference between a supply charge and a delivery charge? Do you know what kWh stands for? No? Well have we got a blog post for you!
Your energy bill is more than just a statement of how much you owe; it’s a roadmap to understanding your energy usage and costs. So it’s high time you got familiar with the lingo of your energy bill and what it all means for your bottom line.
In this guide, we’ll break down each major section of your electric bill and what you need to know to get in control of your business’s energy spend.
- Identify your billing plan
Most energy companies will have you assigned to a type of billing plan that defines how you are charged for your energy usage. There are typically two main types:
- Budget average billing: With this plan you pay a fixed amount each month, usually based on your past energy usage. This helps in budgeting, as your bills remain consistent throughout the year, regardless of seasonal fluctuations.
- Monthly usage billing: Here your bill is based on your actual energy consumption for the month. This means your bill may vary from month to month depending on how much energy your business uses—for instance, you may see spikes during cold months when you pay for the most heat.
- Identify your supply charge
The supply charge on your electric bill refers to the cost associated with the amount of energy (measured in kilowatt-hours, kWh) your business uses and is based on the rate you pay for each kWh.
What’s a kWh? A kWh is a unit of measurement that quantifies your electricity consumption, representing specifically the kilowatts of power your business uses for one hour. Electric companies use kWh as a measurement for calculating your electricity usage and subsequent charges for your energy bill.
To locate the rate for kWh on your electric bill, look for the section that details your energy usage and charges. This may be labeled as “Supply Charges” or “Electricity Usage.” The rate per kWh should be clearly listed, typically expressed in cents per kWh.
Your supply charge is determined by multiplying your rate per kWh by the total number of kWhs you consumed during the billing period. So let’s say your electric bill states that the rate for each kWh is $0.10, and during the billing period your business consumed 2,500 kWh.
Supply Charge = Rate per kWh * Total kWh Consumed
Supply Charge = $0.10/kWh * 2,500 kWh
Supply Charge = $250
In this example, your supply charge for the billing period would be $250.
- Identify your delivery charge
The delivery charge on your electric bill, also called transmission and distribution, represents the fee you pay to have the utility company transport electricity from its source to your business. It includes expenses related to maintaining power lines, natural gas pipelines, transformers, and other infrastructure necessary for delivery. Additionally, delivery charges can include costs to store and generate electricity, as well as fees for meter reading, billing, and administration.
Here are some of the items you might see in your breakdown:
- Transmission charge: This represents the cost of delivering electricity from power-generating facilities (such as natural gas, coal, or nuclear power plants) to the utility’s electric substations.
- Distribution energy charge: This covers the cost of delivering generated power from its source to your business. It includes the transportation of electricity from the utility’s electrical substation and through power lines. This charge may be tiered based on your electricity consumption.
- Customer charge: This is a fixed cost designed to help recover costs associated with serving a customer and includes expenses for meter reading, billing, and administration.
- Transition charge: This is a fee enabling the utility company to recover costs associated with meeting legal requirements regarding the divestiture of its power-generating facilities.
- Renewable energy charge: Although labeled as a renewable energy charge, this charge doesn't necessarily mean you’re using renewable energy. This helps fund large-scale renewable energy generation projects undertaken by utility companies.
- Energy conservation charge: This charge funds state and utility energy efficiency measures, supporting programs like MassSave aimed at promoting energy conservation.
- Distribution demand charge: This charge is applicable to commercial and industrial entities with time-of-use rates or specific bill sizes. It’s based on the highest 15-minute average usage recorded via the utility meter within a billing period. Learn more about demand charges here.
- Calculating your bottom line
After identifying and understanding each component of your electric bill, you should see the total amount you owe at the bottom. This final figure represents the sum of your supply charge, delivery charge, and any additional fees or taxes included on your bill.
But now you can calculate the total amount you owe on your own with these steps:
- Calculate your supply charge. Multiply the rate per kWh by the total number of kWhs you consumed during the billing period to determine your supply charge.
- Calculate your delivery charge. Add up the various components of the delivery charge.
- Total the charges. Add the supply charge and delivery charge together to get the total cost of your electricity usage for the billing period.
- Add any additional fees and taxes. Include any additional fees or taxes listed on your bill, such as service fees, taxes, or surcharges.
- Get your total. Sum up all charges and fees to find your bottom line—the total amount you owe for your business’s electricity usage during the billing period.
Lower Your Energy Bills Today
You might be reading this because you got sticker shock while looking at your latest energy bill and you want to know why you’re paying so much. The reality is that energy use can be complicated and could be affected by any number of factors, including the age of your equipment, your operational efficiency, or even the quality of the electricity you receive.
Luckily you can get insight into your electricity usage using what’s called a smart meter. Smart meters, like Electripure’s CleanPQ system, provide you with comprehensive energy data that lets you determine factors like power quality and equipment downtime, helping you decide where to start to lower your energy costs.
Ready to get insight into your facility's energy usage and see what’s happening behind the scenes of your power bill? Contact us today and we’ll come out for free to inspect your facility and set you on the path to saving money each month on your power bill.