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  • Writer's pictureSarah Lozanova

How To Read Electricity Bills And Explain Them To Your Clients

One of the key motivations for going solar is utility bill savings. Deciphering utility bills 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 electricity bills to clients helps show that you are a clean energy expert.

Let’s examine how to read a utility bill to help correctly size your solar energy installations.

What’s On A Typical Electricity Bill?

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

Electricity Usage

Utility companies calculate this based on the electric meter readings, measured in kilowatt-hours (kWh). The average household in the United States consumes 10,632 kWh of electricity annually or 886 kWhs monthly.

Determining the total number of kWhs a home uses each year is critical for properly sizing the system. If the home uses a lot of electricity, you may want to recommend other energy efficient improvements. For example, they may have inefficient appliances or an electric resistance heating system. Upgrading these can often conserve a lot of electricity.

Historical Energy Usage

Some power bills provide information on the monthly electricity consumption 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.

Monthly Delivery Charges

Utility companies also charge a flat fee to customers for having service every billing cycle. 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.

Miscellaneous Fees And Taxes

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

Additional Information

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 15.64 cents per kWh, as of November 2022. However, electricity rates vary widely across the country, with some of the highest rates in Hawaii, Alaska, California, and Massachusetts. Meanwhile, Utah, Louisiana, Idaho, and Washington have some of the lowest power rates. But many utility companies are raising their power rates in 2023 due partially to an increase in the cost of natural gas and coal and inflation.

Explaining The Different Types Of Electricity Rates

Utility providers offer a variety of 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 14 cents per kWh for the first 600 kWh and then 18 cents for use over 600 kWh.

Also, some utility companies change the tiers or pricing depending on the season. Tiered pricing is designed to encourage customers to conserve electricity.

Time-Of-Use 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.

For example, Portland Gas and Electric offers TOU rates and has on-peak, midpeak, and off-peak rates at 22.2 cents, 16.9 cents, and 4.1 cents, respectively. In addition, the times of peak rates vary by the time of year, with one schedule from May through October and another from November through April.

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 the solar panels or battery when rates are highest and then recharge the 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.

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.

Fixed 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 Clients Have An Electricity Bill After They Install Solar?

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 bill.

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

What Clients Can Expect On Their Bill Once They Go Solar

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 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 that 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.

Electricity 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 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 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 system is an excellent hedge against electric rate hikes.

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