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How To Read An Electricity Bill

Updated: Dec 22, 2023

how to read an electricity bill

One of the key motivations for installing solar panels is utility bill savings. Deciphering electric charges is critical for understanding how much power a home consumes and what they pay each month. This is essential information for properly sizing the system, and estimating the solar energy savings and payback period. Being able to explain how to read an electricity bill is critical for solar energy contractors.

What’s On An Average Electricity Bill?

Although energy bills vary a bit by light companies, they all contain some of the same basic information.

Home Electricity Usage

Utility companies calculate this based on the electric meter readings, measured in kilowatt-hours (kWh). The average home in the United States consumes 10,791 kWh of electricity annually or 899 kWhs monthly, according to the U.S. Energy Information Administration.

Determining the total number of kWhs a household consumes each year is critical for properly sizing a solar panel system. If the home uses a lot of electricity, you may want to recommend other energy-efficiency improvements. For example, if they have inefficient appliances or an electric resistance heating system, upgrading these can reduce their electricity bills.

Historical Electricity Consumption

Some power bills provide information on the monthly electricity use for a year, average daily kilowatt-hours, and even average temperature.

With this information, a utility customer might realize that their summer power bills are much higher because of the air conditioner and devise other strategies for keeping their home cool. They may install window treatments that block the sun or start relying more on fans and natural ventilation.

Electricity Rates

Utility companies charge a rate per kWh, but this rate can vary. Many offer either tiered rates, time-of-use rates, or fixed rates per kWh.

Power rates have been increasing in many parts of the U.S. in 2023, especially in Arizona, California, Florida,  Missouri, Nevada, North Carolina, and Oregon. These electricity rate hikes are causing light bills to increase.

Electricity Delivery Charges

Electricity companies also charge a flat fee every billing cycle to customers for having service. This is sometimes called a transmission and distribution fee, but the verbiage varies between electric companies. This fee helps compensate the utility company for maintaining a working power grid. Unfortunately, even homes with rooftop solar systems still must pay a monthly delivery fee on their electricity bill.

Miscellaneous Fees And Taxes

Some utility companies charge additional fees and, of course, tax.

Additional Information on Power Bills

Power bills also state the account number, property address, and total customer charge. Some utility companies also provide water or gas, so there may be a separate water or gas bill.

What Is The Average Cost Of Electricity?

The average cost of electricity in the United States is 16.29 cents per kWh, as of September 2023. However, electricity rates vary widely across the country, with some of the highest rates in Hawaii, Alaska, California, Connecticut, and Massachusetts. Meanwhile, Utah, Louisiana, Idaho, and Washington have some of the lowest power rates. But many utility companies are planning to raise their electricity rates in 2024 due partially to inflation.

Explaining The Different Types Of Electricity Rates

Utility providers offer a variety of electricity rate plans that vary widely by location.

Tiered Rates

Some companies have a tiered-rate structure and charge a higher price for electricity over a certain amount of kWh. For example, they may charge 15 cents per kWh for the first 600 kWh and then 19 cents for use over 600 kWh.

Also, some utility companies, such as Pacific Gas & Electric (PG&E), change the tiers or pricing depending on the season. Tiered pricing is designed to encourage customers to conserve electricity.


This electric company serves Northern and Central California and offers tiered electricity rates. The first and lowest priced tier is called Baseline and takes the season and heating source into account. Tier 2 electricity rates from PG&E are higher, so customers have lower electricity bills if they can stay at Tier 1 prices.

Time-Of-Use Electricity Rates

Some utility companies also offer time-of-use (TOU) rates, which means the electricity rate varies by the time of day and even the season. During times of peak energy demand, often in the late afternoon and early evening during the summer, rates are higher. In the middle of the night and during the winter, rates are usually the lowest.

In some areas, customers can select if they want TOU rates, while they are mandatory in other areas. This electricity rate structure was created to encourage customers to conserve power during times of peak demand, which is often caused partially by the use of air conditioning on hot days. In California, TOU rates are especially common and available to most utility customers.

Nevada Energy

Nevada Energy allows residential and commercial consumers to opt into the TOU electricity rate plans. Peak electricity rates are only during the summer from 3 to 9 pm, and there are off-peak electricity rates from 9 pm to 3 pm and during non-summer months.

TOU Electricity Rates & Solar Batteries

Solar homeowners with batteries that have TOU rates can save even more on their bills through the strategic use of the battery. For example, they can power their home with solar panels or batteries when electricity rates are highest and then recharge the solar battery from the power grid when rates are lowest. Therefore, it is crucial to consider this when installing the battery to optimize the solar energy saving available to your clients.

Fixed Electricity Rates

These plans offer the same rate for the length of the contract period. This is different from a variable rate plan, where the electricity rate can vary each month. Fixed rates are helpful because they allow homeowners to more easily budget for their power bills.

Will Homeowners Have An Electricity Bill After Installing Solar Panels?

Yes, your customers will still have an electric bill if the home is connected to the power grid. However, it is possible for the solar system to completely offset all the supply charges for the billing period, which is usually the lion’s share of the electricity bill.

In this case, solar homeowners will only have to pay the monthly service fee for electricity, which is often around $10 or $15 a month. One exception is off-grid solar homes, because they are not connected to the utility grid.

What Homeowners Can Expect On Their Electricity Bills After Installing a Solar System

If your customer lives in an area with net metering, also known as net energy billing, they can be compensated for surplus solar power at the retail rate. That means if the home produces an extra 5 kWh of solar power during the day and pulls 5 kWh from the power grid at night, it zeros out.

If the solar-powered home generates more electricity during the billing cycle than it consumes, the utility company will bank the surplus solar energy credits. The customer can then draw down these credits as needed, but they often expire after a year. However, some utility companies will pay a lower rate than the retail price for surplus solar energy credits at the end of the year.

Solar batteries can be helpful to homeowners who live in areas without net metering and other programs. The battery allows the customer to use solar power even at night when the solar panels have stopped generating renewable energy.

Light Bills Can Provide Vital Information For Solar Installers

Viewing historical energy bills is a useful first step in assessing a home for solar power. It will inform you of how much electricity the home typically uses. Viewing an entire year of light bills is critical, as energy consumption often varies by the season due to HVAC equipment and household activities. However, if the homeowner plans to get an electric vehicle and start charging from home, it is wise to factor this into your calculations for sizing the solar system.

Many solar installation companies provide estimated cost savings from the PV system, so the electricity bills will help in these calculations. As electricity rates increase, so will the utility savings possible from installing a solar energy system. In fact, a solar array is an excellent hedge against electric rate hikes.

Don’t let solar permitting and engineering slow you down once you have solar a project – sign up for free to shop the GreenLancer network of solar permit services and solar plan sets. Complete the form below to learn more about how to get started.

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