Do you live in the USA or elsewhere?

Where you live will matter, so if you live outside the USA, you can still read this, and get some useful information from it. However, today I will focus on the USA.

What is electricity measured in?

In the USA is often the case that your electricity bill is part of your municipal bills. Electricity is always measured in kilowatt hours (kWh), whilst gas usage is measured in British Thermal Units (BTU’s). Water bills by the way are measured in gallons.

If you want to, go and find your bills now, and see if you can detect your electricity bill by looking only for the kWh numbers. e.g. 345 kWh or 12345 kWh.

Remember a kWh is a an amount, like how much water you have in a bucket. Don’t read into it anything else. The amount of electricity you have ‘used’ is the amount of electrical energy you have used.

What makes up the final price?

There are different parts to the bill: we can broadly call these consumption and separate charges.

What you Consume depends on the price rate

The payments you make are usually calculated by multiplying a fixed rate of cents per kWh. For example, if you used 1000 kWh at 6 c/kWh then your price would be 1000 x $0.06 = $60. However, this is only what you consume.

Separate Charges

Supply, delivery, taxes and fees are separate to this charge. Some of these charges are used by the electricity company to maintain the ‘grid’ (sometimes called the ‘national grid’ or ‘State grid’ etc) and pay its workers.  If you live in a deregulated energy market, you can shop around for another suppliers that can provide you with an alternative price. This is of course only if you live in those areas.

Break down of Usage

Many energy companies and advice bodies, particulary government sponsored ones, or companies that have their own agenda will give you some odd advice. It goes like this: compare your energy month by month to see if you are using more or less and try to fix it. Alternatively they might want you to consider looking at daily use. This usually is part of a plot to get you to buy and energy monitor. (e.g. Neurio W1-HEM Home Energy Monitor or CURB Home Energy Monitoring System.) I’ve got nothing against either of these methods, but energy used over short period of time is largely meaningless to those really interested in cutting their bills. That’s because the ‘why’ you are using it is disconnected from the figures. Let me re-connect them for you.

Always compare like with like

Firstly, before you do any comparisons, you must make sure you are comparing like with like. A duck cannot be compared with a swan no matter how much you try. They might be both birds, but they are clearly different. It is the same with energy. You have to make sure you have one metric and the same period of time. The standard way is to use the kWh figure on your bill each month.

Go Historical

Now we need to compare not the previous month, but 12 months ago, i.e. what you used this year in say October, needs to be compared with the October bill last year. You can either go back further over 5 years if you like. That’s also a valid method. Just make sure you stick to the kWh for that particular month.

Add up 3 month periods

The great thing about kWh is that you can add them up because like we said they are an amount. For example, let’s say that in 2018 you used 1000 kWh in September, 1200 kWh in October and 1250 kWh in November. Then you can add these up to work out that you used 3450 kWh from September to November 2018. If you used 900 kWh in September 2017, 1100 kWh in October 2017 and 1200 kWh in November 2017, then this adds up to 3200 kWh. That means you used 250 kWh in 2018 than in 2017. Now you have a valid comparison.

Now you have to find out what is causing this extra use? What machine do you have this year that you didn’t have last year? Is there an extra occupant? And so on….

Reverse Calculations

Of course, there’s another issue. Prices tend to rise over the long-term. You might then wish to find out how these are affecting your bills whether or not you are using more or less than previous years. To understand more about your electricity bill you can take your monthly bill e.g. $170 and divided it by the amount of energy you used that month e.g. 1400 kWh. In this example that would equal $0.12 or 12 cents per kWh. Do this for each month and perhaps even plot it on a graph for each month over the entire year. If your energy use is stable and your price rates are rising, you need to know if you can switch suppliers which depends on whether you live in a deregulated area.

Some electricity companies charge customers using a tiered billing structure. For example they might charge you one rate for the first 500 kWh used, then change this to another rate. This should be shown on your electricity bill. Just add the number of hours in each tier that will provide you with the total hours used each month.

What’s the average? How do I compare?

Now you understand how your bill works, you can work out how much you pay compared to the average American.

There are a number of websites that do this including Choose Energy.com

Why do I need to know all this?

Your economic future will be largely limited by how much you earn and how much you spend. If you spend a lot on energy, then you are missing out on using that money for other things that will make your life easier, perhaps even happier. Think of your own household budget like a businessman thinks of his profit and loss. Reduces the expenditures, increases the profits. Why spend lots on buying energy when you could swtich your supplier (assuming you are in a deregulated area) or invest your money in long-term ways to reduce your bills e.g. renewable energy systems. Learning about the latter will help you to make an informed choice, rather than one foisted on you by renewable energy salesmen (who tend to provide very weak metrics that are unconvincing or plainly wrong). That’s where we help you. We give you the knowledge to understand what some people wish to keep secret. We tell you how to assess whether or not micro-renewable energy will cut your electricity bills.
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