Solar Basics for Homeowners

Understanding Your Utility Bill

Welcome to the "Understanding Your Utility Bill" module. Before diving into the world of solar energy, it's crucial to understand your current electricity bill. This module will break down the key components of your electricity bill, empowering you to make informed decisions about your energy consumption and future solar investment. While the specific layout and names of some charges might vary slightly between utilities, the fundamental information, including how to calculate your actual cost per kilowatt-hour, remains consistent.

Why Understanding Your Bill Matters

Your utility bill isn't just a bill; it's a detailed record of your energy usage and the associated costs. Understanding it allows you to:

• Track your energy consumption: Identify trends in your energy use, pinpoint high-usage periods, and discover opportunities for conservation.
• Calculate potential solar savings: Knowing your current electricity costs is essential for estimating the potential return on investment (ROI) of a solar system.
• Compare electricity rates: Understand the different rate structures and how they impact your bill.
• Make informed decisions about energy efficiency: Identify areas where you can reduce energy waste and lower your bills.

Deconstructing Your Bill: Common Elements

Let's dissect the typical components you'll find on your utility bill. Keep in mind that the exact names and order might differ slightly depending on your specific utility and billing format.

1. Account Information:

• Account Number: Your unique identifier with the utility company. Keep this handy when contacting customer service.
• Billing Period: The timeframe for which you are being charged.
• Service Address: The address where the electricity is being supplied.
• Bill Date: The date the bill was generated.
• Due Date: The date your payment is due. Paying on time avoids late fees.

2. Summary of Charges:

This section provides a high-level overview of your current charges. It typically includes:

• Total Current Charges: The total amount you owe for the billing period.
• Previous Balance: Any outstanding amount from previous bills.
• Payments Received: Payments credited to your account during the billing period.
• Adjustments: Any credits or charges applied to your account (e.g., one-time fees, rebates).

3. Detailed Charges (The Heart of Your Bill):

This is where you'll find the breakdown of your electricity costs. This section is crucial for understanding how your energy usage translates into dollars.

• Electricity Usage (kWh): This is measured in kilowatt-hours (kWh), the standard unit of electricity consumption. One kWh represents the amount of energy used by a 1,000-watt appliance for one hour. Your bill will show your total kWh usage for the billing period.
• Rate Schedule: Your utility company assigns you a rate schedule based on factors like your location, the type of service (residential), and your usage patterns. Different rate schedules have different pricing structures. Common rate structures include:
  • Tiered Rates (Increasing Block Rates): You are charged different rates per kWh based on your usage levels. The more electricity you use, the higher the rate you pay per kWh. These tiers are often called "baseline" and "above-baseline" usage. Understanding your baseline allowance is essential for managing your costs.
  • Time-of-Use (TOU) Rates: The price of electricity varies depending on the time of day and the day of the week. Electricity is typically more expensive during peak demand periods (e.g., late afternoons and evenings) and cheaper during off-peak periods (e.g., overnight). Understanding your TOU periods is crucial for shifting your energy usage to off-peak times and saving money.
  • Flat Rates: A single rate is charged for all kWh consumed, regardless of the time of day or usage level. This is less common now.
• Generation Charges: The cost of generating the electricity you use.
• Transmission Charges: The cost of transmitting electricity from power plants to your local distribution network.
• Distribution Charges: The cost of delivering electricity from the local distribution network to your home.
• Public Programs/Other Charges: These can include charges for public programs (e.g., energy efficiency programs), regulatory fees, and other miscellaneous charges. These are often small but can add up.
• Customer Charge/Basic Service Charge: A fixed monthly fee for maintaining your connection to the grid, regardless of your electricity usage.

4. Usage History:

This section often provides a historical view of your electricity consumption, usually in the form of a graph or table. This allows you to track your usage patterns over time, identify seasonal variations, and compare your current usage to previous periods. This information is invaluable for understanding your energy footprint and identifying opportunities for conservation.

5. Other Information:

• Messages from Your Utility: The utility company may include important messages about rate changes, planned outages, or energy efficiency programs. Read these carefully.
• Contact Information: Contact details for customer service, billing inquiries, and reporting outages.
• Payment Options: Information about the various ways you can pay your bill (e.g., online, by mail, by phone, in person).

Calculating Your Actual Cost Per Kilowatt-Hour (kWh)

Your bill might show different rates for different tiers or time-of-use periods. To understand your actual cost per kWh, you need to calculate a weighted average that considers all charges related to your electricity service, not just the per-kWh charges. This is especially important with tiered or TOU rates. This comprehensive cost per kWh is what you'll use to evaluate potential solar savings.

1. Identify all charges related to electricity service: This includes generation, transmission, distribution, public programs/other charges, and even the fixed Customer/Basic Service Charge. While the Customer/Basic Service Charge isn't directly tied to kWh consumption, it's part of your overall cost of having electricity service and therefore needs to be considered when evaluating the financial impact of going solar.
2. Sum these charges: Add up all the costs identified in step 1. This is your total electricity bill.
3. Divide the total cost by your total kWh usage: This will give you your actual, all-inclusive cost per kWh.

Example (Tiered Rates):

Let's say your bill shows:

• 200 kWh at $0.20/kWh = $40 (Generation)
• 300 kWh at $0.25/kWh = $75 (Generation)
• Transmission Charges = $20
• Distribution Charges = $30
• Public Programs/Other Charges = $5
• Customer/Basic Service Charge = $15

Total electricity cost = $40 + $75 + $20 + $30 + $5 + $15 = $185 Total kWh usage = 200 + 300 = 500 kWh

Actual cost per kWh = $185 / 500 kWh = $0.37/kWh

Example (Time-of-Use):

The same principle applies to TOU rates. Calculate the cost for each time period, sum them along with transmission, distribution, public programs, and the customer charge, and then divide by the total kWh used.

The Impact of Solar on Your Cost Per Kilowatt-Hour (kWh)

One of the most significant benefits of going solar is that it dramatically reduces your reliance on grid electricity. When you generate your own power, you reduce or eliminate several charges on your bill:

• Generation Charges: You'll no longer be purchasing as many kWh from the utility, thus significantly reducing or eliminating this charge.
• Transmission Charges: Since you're generating electricity locally, you'll use the transmission network less, resulting in lower transmission charges.
• Distribution Charges: While you'll still likely be connected to the grid, your usage will be significantly reduced, impacting your distribution charges.
• Public Programs/Other Charges: These are often tied to overall electricity consumption, so they should also decrease.

The Customer/Basic Service Charge will likely remain, as it's a fixed cost for grid connection. However, by significantly reducing or eliminating the other charges, your overall cost per kWh will decrease substantially. This is a major financial driver for homeowners considering solar. By calculating your current, all-inclusive cost per kWh, you have a clear benchmark to compare against the potential cost of solar and understand the long-term savings.

Next Lesson: Navigating Financing Options