How much does my electricity cost??

We’re half way through the first month of 2016, which means it’s time to move from general thoughts and New Year’s Resolutions to specific topics. Very specific ones, in fact – like paying utility bills!

Although utility usage patterns at work are somewhat more consistent and generally only partially under my control, I was just looking at my residential electricity bill. As you may notice if you look at yours, they are not the easiest documents in the world to understand – so I thought I would pull one apart, and look at the components.

But first, a caveat: Utilities are all different, and have different rate structures approved by their particular regulatory authority. Weather and other factors such as occupancy or the number of hours with sun and clouds are variables which you can’t control – so if you are trying to understand your energy use, focus on the variables you can control while remembering the ones which have an effect no matter what you do. Both are important as you compare the natural gas you used last November to what you used this November! Worldwide, there are also large differences in average energy prices – from Denmark at 41 cents / kWh (above) to China and India at 8 cents; the US rate of 12 cents can make us feel rather fortunate!

If we look at regions in the US, there are also significant differences (see below), and if we REALLY wanted to confuse ourselves we would look at more specific data from the Energy Information Administration (EIA) which breaks out residential, commercial, industrial, and transportation costs. ( For now, however, we’re going to concentrate on residential rates:


We in New Mexico enjoy one of the lower costs in the “Mountain” region at 9.78 cents / kWh, while Hawaii’s residential rate of 32.92 cents / kWh is included in the “Pacific” group.  (Now I know why that hotel room on Oahu was so expensive!).  You might also have noticed in this table that the actual prices (through 2015) have increased every year on average, and that the projections for 2016 and 2017 (in italics) follow that same trend.

And that brings us back to the original question – “How much does my electricity cost?”

Let’s look at an example of a residential electricity bill, which we’ll assume for the moment is yours:


If you were to calculate the total cost of your electricity for this month, you would simply divide the “Total Current Electric Charges” of $39.15 by the number of kWh used, or 397.  That would give you a price per kWh of 9.86 cents – which is actually what your electricity costs, because it includes all charges you are obligated to pay.

Looking at the bar chart, you will notice that you also used less this month than either this month last year, or last month.  You may remember some of the reasons for the decrease – You were more careful about turning your lights off, the weather was perfect and you decided to open the windows to reduce heating and cooling, the kids were away for a week – or you may recall that the decrease was due to variables outside your control.  Either way, the chart is an indication to think about what you did to reduce costs (so you can do it more often!) or to increase them (so you can avoid doing it again!)

If you look at the bill more closely, you will see your “rate class” of ER01, and if you were to examine your utility’s rate schedule on their website, you would probably find more detail than you ever wanted to have.  You will also notice the meter readings, from which actual usage is derived.  That might inspire you to go watch your meter sometime, when everyone is home with lights and appliances running, to see how fast the indicators turn!

kilowatthoursThe bill is then divided into “usage” and “charges”. (One side note: All of these are proposed by the utility to the regulators who must approve rates, charges, and programs (such as refrigerator buy-back or insulation rebates); only once approval has been granted will the rate schedule under which you are charged come into effect.)

For this bill, then, total usage is 397 kWh, at two different rates – 197 kWh at 8.2 cents, and 200 kWh at 6.67 cents; many utilities will have such a tiered system.

A variety of fees and rebates can be included under “charges”, and in this case 2 of the charges (the Fuel & Purchased Power Adjustment and the Synergy Savings Credit) are based on usage; the remaining charges (except for the Gross Receipts Tax) are per customer, and total $4.27 or 11% of the bill.

household-energyAnd what do we use that electricity for?  Again, it differs by location, but the EIA residential study shows that across the US the greatest proportion of total energy use from electricity, natural gas, and other sources is 41% for space heating.  In the “Mountain” region and in Arizona, the highest usage, 40 – 43%, is for appliances, electronics, and lighting – and air conditioning is significantly higher than the national average.

What does your electricity do for you?  Could you use it more wisely?