Energy 101-Your Electric Bill

Whether you’re way beyond the 101 level of understanding or not, if you own or manage a business, then you use electricity—and you should be paying the lowest amount possible for that service. My goal is to help you achieve that objective.

Read on for a simplifed look at electric billing. If you’re interested in taking a deep dive into the subject, or have questions, please let me know. I’d be happy to help in any way possible.

I’m sure you recognize the watthour meter. It’s at the delivery point for electricity service to your home or business. Energy flowing through the meter is measured, and you get billed based mostly on that usage.

Wires delivering the power to your business’ watthour meter belong to the service provider. Generally, your business owns the wires and everything on the other side of the meter. Yes, you even own the electric energy that flows through the meter. You can use it for lighting, to run your HVAC, or to run your factory or computer system. You’re paying for it, so it’s yours to use or not.

Your electric bill will look something like the one below.

I used a residential service bill for this example. It shows that the rate is for “Residential Service”, or RS. Your business bills will have different rates and will depend on your location and the service provider, the approved tariff under which the provider operates, the typical amount used, and the voltage at which the service is connected.

I know, I know. It’s already too complicated. Okay, I promised to make this a fun read, so let’s boil this down a bit.

Basically, the provider will determine your rate class—and you get what they say you get.

So your obvious question will be: what’s the deal with “choice?” If my business has no say with rate class, then what do I get to choose?

I’ll get to that in a minute. Let’s break down the bill so it’s easier to understand.

First, your electric energy usage or consumption is measured in kilowatt-hours, or kWh. Kilo means 1,000, therefore a “kilowatt” is 1,000 watts. If you used 10 lamps, each with a 100 watt bulb, and had them on for exactly one hour, you would have used 1,000 watts in that hour, or 1 killowatt-hour, also known as 1 kWh.

The amount of energy used is clearly indicated on your bill as shown below.

Also shown on your bill is your delivery charge. Some providers call this a “distribution” charge. Regardless of what it’s called, this is the amount you pay for the connection to the provider. Even if you used no energy in a given month, you would pay something for being connected, and staying connected. In other words, there’s a fixed charge and a variable charge.

The delivery charge is paid to the company whose wires are conneted to your meter. If your business is in Pennsylvania’s Penelec service territory, for example, and Penelec wires are connected to your meter, you will always pay the delivery charge to Penelec.

You can see in the example below, the “Monthly service charge” for delivery. Business accounts will have higher service charges than residential accounts based on the rate class. The amounts circled in yellow are based on usage or kWh. There may also be additional fees paid for commercial class delivery. It all depends on the type of service you have.

Now we’ll finally get to the part where you get to choose. If your business is in a deregulated state, you may choose your electricity supplier. Your energy will still flow through the same wires and the same meter, but the supplier you select will be paid for the energy you consume.

Suppliers are competitors. They try to get your business by offering the best rates. Some may even offer additional incentives.

Below you can see the supply charges based on the supplier’s rate and the amount of energy used.

In this example, the XYZ123 company is the supplier, and they are also the company whose wires are connected to the meter. All the charges are on the same bill. Convenient, right? That won’t change even if you switch suppliers. The different supplier will be identified, but the bill will still be consolidated.

To keep it clear, think of it this way: you pay the delivery charges to the “wires” guys, and you pay the supply charges to the “energy” guys.

Can you save money by switching to a different supplier?

You could do your own research and due diligence and make a decision on that basis. But would that be the best resource utilization for your company?

Or you could contact me, and I will initiate a rate analysis—for free—and present the best options to you. You get to make informed decisions based on that expert analysis. Zero obligation and minimal time commitment on your part.

Why use Power ON Consulting? My partnership with Broker Online Exchange (BOX) will avail you of their sophisticated research tools and connections with over 90 suppliers to find the best possible rates. There is no charge for this service. You will have the best industry resources working for you, with specific focus on the task. The process is fast, efficient, and accurate.

Go to the Contact page and get in touch with me. I can’t wait to help you save money on your energy bills.