What does your electric bill include?
Is heating, AC, hot water, or the internet on your electric bill?
What are standing charges, delivery fees, kWh, and other terms and costs that are on electric bills?
And most important, what can you do in order to reduce the costs that get charged on your electricity bill?
I’m an electrical engineer and energy manager with more than a decade of experience, and I wrote this article in order to help you answer these questions and save money through being aware of how electricity companies charge you.
Without further ado, let’s begin!
5 Main Costs That The Electric Bill Includes
Here are the main five costs that are included in the electric bill:
This is the main and biggest part of your electricity bill, and it varies from month to month depending on how much electricity you consume every month, and it is usually referred to as “Supply Fees/Charges”.
What does electricity consumption include?
Everything that is connected to the main panel that is fed by the utility meter.
That means all the kitchen appliances, lighting units, air conditioners, electric space heaters, electric water heaters, electric boilers, water pumps, electronics, TV’s, computers, electric window shutters and curtains, …etc.
Even if you are using a gas or diesel boiler for heating water for space heating and sanitary water, the pumps that circulate the water are included in the electricity consumption.
The unit by which electric consumption is measured is called Kilowatt-Hour, and the price of a kilowatt-hour is usually fixed for the same company, but sometimes, it changes from one month to another if the price of the fuel that is used for the generation changes significantly.
And this is the part of the electric bill that you can control the most, since it is the one that affects your bill the most.
There are many reasons why we should conserve energy, and one of them is in order to lower this part of the electric bill and save money to spend elsewhere.
You can start doing so by learning about the loads and systems that cost the most on electricity bill and start using them in a more efficient and economic way.
Note: In the last section of this article, I will tell you how you can get rid of this part of your electric bill almost entirely.
Operational Costs & Fees
These are usually fixed charges on your electric bill that don’t change from month to month.
Sometimes, they are called “Delivery Charges”, as they are usually related to operating and maintaining the transmission lines and substations that transmit electric energy from the generation plant to your electric meter, in addition to costs related to reading the meter and issuing the bill.
Sometimes these charges are called distribution charges, or standing charges, but they all mean the same thing, only the name differs from one utility company to another.
And although usually this is usually a fixed fee, but sometimes, it has different values divided into tiers that are related to how much you consume.
For example, it could be something like:
- $15 For consumers who withdraw between 0-200 kWh in a month.
- $20 For consumers who withdraw between 200-400 kWh in a month.
- $30 For consumers who withdraw more than 400 kWh a month.
The structure and the value of these fees might differ from one electricity supplier to another.
These are charges that might be charged by the state as a fee to regulate the electricity generation, transmission and distribution system.
These might not be applicable in every country or state.
Miscellaneous Fees & Taxes
There are many charges that might be included in the electric bill for different reasons and purposes, which differ from one state or country to another, such as:
- Taxes such as the sales tax, and this might be a percentage of the total electricity consumption charge.
- Energy conservation fees that might be applied in order to encourage consumers to adopt efficient use of energy practices.
- Renewable energy charges that some governments might charge in order to fund projects aimed for building green energy power plants.
- Charges related to losses in transmission lines, which usually apply to industrial consumers who withdraw reactive power that increases the losses in transmission lines and all components of the electrical grid, or as a compensation for power distribution companies who supply electricity to consumers in rural areas, which is usually associated with higher costs and losses compared to supplying consumers in high-density areas.
Peak Hour Fees
These are becoming more prevalent as the time goes as many energy companies started charging customers varying rates based on the Time-Of-Use tariff system.
This means that you might get charged a certain high rate for every kWh you consume during certain time slot, usually the peak demand hours, and then the normal rate during the rest of the day.
The aim of this fee is to encourage consumers to redistribute their consumption of electricity around the day in order to be able to supply all the consumers’ needs of energy with the same existing infrastructure, instead of having to upgrade the lines and other components of the system just to meet the high demands of the peak hours.
This is one of the main reasons why electric companies want to install smart meters that can read and record your consumption on hourly basis.
And the structure and rates of this TOU tariffing system might be different from one company to another and from one state or country to another.
But in many cases, these fees represent a high percentage of your electric bill if you were not conscious of your energy consumption pattern, and might be the main reason why your electric bill fluctuates from one month to the next.
Frequently Asked Questions on What Is in Your Electric Bill
Is Gas Included in Electric Bill?
No, gas is not included in your electric bill as it is measured through a different meter from the electricity meter, and usually, provided by a different company than the power company.
Is Heat Included in Electric Bill?
No, heating is not included in your electric bill if you get the heating from a district heating system, or if you use a gas or a diesel boiler to power a central heating system.
However, in these cases, electricity would be used not create the heating energy, but to run water pumps that circulate water in the pipes to supply the underfloor heating pipes or the radiators.
But in case that your central heating system using an electric boiler to heat water and then circulate that water through electric pumps, then your heating would actually be on your electric bill.
Or, if you use the air conditioner in the heating mode, or if you use electric space heaters like IR space heaters, then your heating would be included in your electric bill.
Is AC Included in Electric Bill?
Yes, the AC is included in your electric bill, and if you use your AC during both, winter and summer, on both modes of heating and cooling, then both; heating and cooling would be on your electric bill.
Is Hot Water Included in Electric Bill?
If the hot water is provided using an electric boiler, electric water heater with a tank, or tankless electric water heater, then yes, the energy used for the hot water would be included in your electric bill, but the amount of water itself would be included in the water bill.
However, if you are using solar water heaters, a diesel or a gas boiler, or if you get the hot water through some district hot water system, then the cost of energy used for hot water won’t be in your electric bill, but the water pumps that are used to circulate the hot water in the pipes consume energy that is included in your electricity bill.
Is Internet Included in Electric Bill?
No, internet is not included in your electric bill, but it is charged separately by the internet service provider through either a monthly or an annual bill.
Is Water Included in Gas and Electric Bill?
No, water is charged separately in the water bill.
However, if there are any electric water pumps that are used in order to circulate water in the pipes, then the cost of running the pumps is in the electric bill.
What Is kWh in Electricity Bill?
kWh (Kilowatt-Hour) is the unit that is used to measure the electric energy consumption, just like cubic-meter is used to measure water consumption.
You get charged on your electricity consumption based on how much kWh’s per month you withdraw from the utility meter.
What Is kVAh in Electricity Bill?
kVAh (Kilo-Volt-Ampere-Hour) is the unit that is used to measure something called “Apparent Power”, which is the total of energy supplied to a consumer that combine both: Active Power (that is measured in kWh), and Reactive Power (measured in kVARh).
Normally, for most of the consumers, the electric bill will only include the active power (kWh), as the amount of reactive power the normal residential and commercial consumers withdraw is very little.
Now this unit is getting adopted in some countries like India, and mainly to charge industrial consumers for both; active and reactive power, as these consumers withdraw a good amount of reactive power that causes losses in the grid.
What Is PCRF on Electric Bill?
PCRF (Power Cost Recovery Factor) is a factor that is used on the electric bill in order to justify the cost of the consumed electricity based on the continuous changes in fuel prices, which makes the PCRF value vary from one month to the other.
Why Do Energy Companies Charge a Standing Charge?
Electricity companies have a standing charge in order to cover the fixed costs that are associated to supplying you with electricity, such as costs related to maintaining power lines and different components of the grid, maintaining and reading the meter, issuing the bill, and different administration costs.
Usually, this is a fixed fee that is not related to how much electricity you consumer during the month, but with some companies, it might be a tiered value.
Conclusion – Save Money by Knowing What’s in Your Bill
As you saw, some of the costs and charges included in your electric bill are fixed and you have no control over them, but the biggest part of your bill is under you control, and you can reduce it by using the different devices that can lower your electric bill, or by adopting the different ways to reduce your electricity bill in winter and in summer, such as: running your AC economically, using water heater timers that can save money, ..etc.
Also, shifting your electricity consumption away from the peak hours to the off-peak hours can help you save money by paying less for the same amount of energy.
This is why knowing what is included in your electric bill is important.
And even after managing your electric energy consumption, you can still reduce your this part of your electric bill or even eliminate it entirely, if you decide to go green and generate your own electricity through a solar power system that generates electricity and gives the excess to the grid during the day, so that you take your need at night, and the meter would read energy in both directions.
You would still get a bill after installing solar panels, but the cost would be much lower as it would include the fixed fees like the delivery fee that is used to maintain the grid components in order to take energy from your system during the day and give you your needs at night.
And if you are worried about the cost of installing the solar power system, then here’s the good news …
How 1,000’s of US Homeowners Did it with $0 Down Payment
Many companies now offer financing solutions to help families and businesses install a solar power plant that would cover their energy consumption without having to pay the full cost in advance, but rather, on monthly installments.
And SunPower, the leading solar company, helps US homeowners and business owners to find the possible solutions to fund their solar panel systems with $0 down.
If you are interested, you can visit SunPower’s website, fill in your location’s zip code, and complete a 1-minute survey about your place, and they will call you to arrange for a free appointment to discuss the available funding solutions.
This is how you might be able to eliminate the biggest part of what is included in your electric bill.
I hope that this article was helpful and insightful for you.
If you need help, or still have any question about what is in your electric bill, then please, feel free to ask me in the comments’ section below, and I will do my best to help you out 🙂