Understanding Your Utility Bills: Part II – How to Read Your Utility Bill

In our last feature, we unpacked why utility bills are on the rise. In Part II of our two-part feature, we take a dive into utility bills. Specifically, how to read them, what customers are paying for, and why these aspects of a bill are important to understand.

Chances are that most residents pay their utility bills each month without taking a close look at each charge. Even if they were to, it would be difficult to understand exactly what each charge entails and why they’re necessary.

Having a good understanding of your utility bill can be advantageous for several reasons. It can help to reduce unnecessary costs and assist in evaluating whether alternative energy systems may be in your best interest.

The Basics:

• kWh Used: This box reflects the kWh used in the past month.
  • A kWh is a measurement of how much energy a household is using. Put simply, one kWh equals the amount of energy it would take to keep a 1,000-watt appliance running for one hour.

• Avg kWh Per Day: This charge is just as it sounds—it reflects the average use in a day over the span of the month.

Breaking down your charges:

• Energy Charge – Also known as the “base rate,” this charge is made up of energy usage and the costs associated with producing it. Believe it or not, the cost of generating your energy makes up only a portion of your base rate. The bill starts to add up when you factor in the associated costs. These costs can include:

• • General infrastructure repair
  • Construction
  • Power plants
  • Service trucks
  • Customer service
  • Utility poles
  • Electrical wiring

Utilities essentially use Energy Charge as a catch-all that covers their mounting costs to stay in operation.

• Storm Restoration Offset (Or Storm Securitization Cost Riders) – This line item represents amounts paid to the various corporations who oversee restoration costs associated with severe weather events.

• Fuel Adjustment (Or Fuel & Purchased Power Cost) – Fuel adjustment fees reflect the cost of electricity purchased and transported from third party power producers each month for customer use.
  • Fuel adjustment charges see spikes when utilities experience disruptions in their service, such as the failures at two existing power plants recently reported at Entergy.

• MISO Recovery Rider – Customers pay this fee for their utility company to be a part of MISO (Midcontinent Independent System Operator)— a service from which utilities can purchase electricity and transmit it to their customers.

• Federal Mandated EAC Rider (Or EERC Rider) – The EERC rider is a tariff imposed by utilities to recover energy efficiency program costs. Essentially, as federal standards of energy efficiency and cleanliness rise, so do the cost of operations for utilities.

• Municipal Franchise Fee – Franchise fees are charges collected by governments to fund local operations of utilities in a certain area. These operations include upkeep of electric lines and related infrastructure projects.

• Adjustments – Utility bills may often see various adjustments (for instance the N. O. Pwr Station Interim Adj.), which are temporary rate hikes mandated by a utility for the purpose of covering any various temporary costs. These adjustments can cover anything from repairs to investments in new equipment or infrastructure.

So why is my Energy Charge increasing?

The key to understanding your Energy Charge is that it includes not only the costs of generating the electricity, but also the associated costs. This is where your bill includes costs of transmission and distribution, which are rapidly increasing due to an inefficient and outdated energy infrastructure. Visit our prior article for more detail in why utility rates are increasing.

Where you’ll save with Solar

Installing a solar energy system can greatly lower your reliance on outdated utilities. Upon the installation of a solar energy system, you’ll see immediate drops in your Energy Charge, Fuel Adjustment Costs (Purchased Power), Federal Mandated EAC / EERC Rider tariffs, any mandated adjustments, as well as the corresponding taxes—substantially lowering your utility bills across the board.

Given the affordable nature of solar energy systems, energy freedom has never been more achievable. Generous government aid and financing options coupled with record setting efficiency have made solar a smart, accessible, and reliable mainstream investment.

Not only is the energy generated by solar panels free, but your overall costs of energy generation will become far more predictable as they are not subject to the same fluctuations as utility electricity. In addition to lowering your utility rates and dependence on the grid, going solar has a direct positive impact on the environment and communities affected by energy injustice.

Free yourself from the burden of growing utility costs with the installation of a solar energy system.

Ready to learn more about going solar?

Call today for a free, no-pressure consultation.