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How to Read Your Electricity Bill

Understanding your electricity bill doesn’t have to be a headache and can actually help you to identify ways to reduce your energy consumption and save money on your bills. The actual appearance of electric bills varies from utility-to-utility, but there are a few key specifics that are listed on every electric bill.

1.  Customer Account Number

This number is generally located at the top of the utility bill by your name and address. This number is used to identify your account when you call your utility. It is also used when switching retail electricity providers.

2.  Amount of Electricity Used

The amount of electricity that you use will be listed in kilowatt hours. A typical home may use between 300 and 1000 kWh per month. Here, there may also be a comparison amount, either from the past month or from the same month in the previous year. This helps you to determine when you’ve used the most electricity so that you can find ways to cut down on usage during certain months to reduce your bill.

3.  Electricity Supply Charges

Here, you will find the rate at which you are paying for your electricity, expressed in cents. The amount that you pay for supply charges is equal to the rate multiplied by the amount of electricity used. For example:

  • Supply Rate: 8.134 cents
  • Electricity Used: 500 kWh
  • Supply Charges = $0.08314 cents X 500 = $41.57

You may find that you have different rate charges depending on the amount of electricity you use. For example, sometimes your utility (or retail electricity provider) will charge a higher rate when you use more than a certain amount of electricity, such as more than 500 kWh. For example:

  • Supply Rate (Up to 500 Kwh): 8.134 cents
  • Supply Rate (In excess of 50 kWh): 8.876 cents
  • Electricity Used: 700 kWh
  • Supply Charges (Up to 500 kWh) = $0.08314 cents X 500 = $41.57
  • Supply Charges (In excess of 50 kWh) = $0.08876 cents X 200 = $17.75
  • Total Supply Charges = $41.57 + $17.75 = $59.32

If you live in a deregulated area, this is the portion of your bill that you are able to shop around for. Here you can learn more about comparing retail electricity providers.

4.  Electricity Distribution Charges

Generally, there are two charges for distribution. One charge is a flat customer fee, and this ranges from $8 to $15 depending on your utility. The other charge is calculated the same way as the supply charge rate, but will be much lower.

  • Distribution Rate: 2.23 cents
  • Electricity Used: 500 kWh
  • Distribution Charges = $0.0223 cents X 500 = $11.15

5.  Taxes and Miscellaneous Charges

Depending on your area, your utility may charge you both a sales tax and a state tax. Other miscellaneous charges may include processing fees and other distribution charges.

Identifying Where Your Electricity is Being Used

Now that you understand your bill, you can break your electricity usage down by its source in order to find out what is using the most electricity so that you can reduce consumption if possible. Below, you’ll see a graphic from the U.S. Energy Information Administration. It shows the percentage of electricity used by source for the average American home. Notice the difference from 1978: Air conditioning is much more common now, we use a lot more appliances and electronics, we use more energy for heating water, and we actually use less energy for heating since heating units have become more energy-efficient.


Use the breakdown to estimate the amount you pay for each:

Electricity Used: 500 kWh

  • Space Heating: 500 X 41% = 205 kWh
  • Appliances and Electronics: 500 X 31% = 155 kWh
  • Water Heating: 500 X 20% = 100 kWh
  • Air Conditioning = 500 X 8% = 40 kWh

You can determine the supply and distribution charges for each by multiplying the kWh by the supply rate and the distribution rate.

Reduce your consumption by unplugging electronics and appliances when they’re not in use, setting your thermostat to lower temperatures in the winter and higher temperatures in the summer, and by closing off vents in unoccupied rooms.