How to Read Your Electric Bill and Avoid Getting Overcharged

With cold weather approaching, we’re all about to start spending a lot more on utilities. Learn how to read your monthly electric bill to understand how much electricity you're using, as well as to catch occasional errors in charges.

Did you hear the one about the Connecticut homeowner who got an electric company refund of $10,500 after discovering she’d been paying to power two nearby streetlights for 25 years? True story, and even though it’s an extreme one, it’s a good reminder of the importance of understanding your electric bill.

With cold weather approaching, we’re all about to start spending a lot more on utilities. But that doesn’t mean you have to get comfortable with overpaying. Take your eye off the bill and you could wind up paying for mistakes, as well as being surprised when day-to-day usage ramps up. If you aren’t already, get reacquainted with the following elements of your monthly electric bill.

Electricity used

Your electricity bill will include a monthly meter reading listed in kilowatt-hours. This is the amount of energy used by your home per hour, and a kilowatt is equivalent to 1,000 watts of electricity used.

Electricity charges

Depending on the utility, and sometimes even the time of year, you likely receive a baseline allowance for energy use set at a lower rate, with overage charged at a higher rate. If this is the case where you live, your bill will include the total kilowatt-hours used, and a breakdown of usage at the baseline and surplus rates. Also be aware that since the deregulation of the early 1990s, utilities are able to charge separately for electricity supply and electricity distribution (or transmission), so these may also be delineated in your bill. Plus, there are likely other charges and administrative costs like maintaining your home’s electricity meter.

Average electricity use

A helpful development in utility billing is a graph or table that illustrates your monthly utility use over the past year. It’s a great tool for planning ahead for heavier utility use, as well as comparing and considering changes in usage for the same month year over year.

Though most put great effort into providing a useful, easy-to-read bill format, every utility has a slightly different approach to presenting the information. So, if you spot something unusual or just need help understanding particular charges, reach out to the utility’s customer service department and ask your questions. It’s worth your time and the energy you can save in the long run by better understanding how much electricity you’re using and paying for each month.