How to Read & Understand Your Electricity Bill

One quick glance at your electric bill may be enough to make you just as quickly want to look away. And not just because the cost of electricity keeps increasing. It’s because the bill can sometimes look like a cryptic code that would take a rocket scientist to understand.

The thing is, it’s really not. Once you grasp the basics of what your electric bill is all about, you’ll be able to better understand where the charges are coming from. Then you can take action to reduce those charges by using electricity in the most economical and efficient way.

This article will help you with all of the above. You’ll first get a rundown on reading on and understanding the typical electricity bill from a utility company, followed by savvy tips for reducing your monthly electricity costs on an ongoing basis.

Understand what your electric bill is trying to tell you

Electric bills generally contain two different sections. The first section outlines your account information, current charges and an overall summary of your bill. The second section is where you’ll find the nitty-gritty details, such as:

• Meter reading
• Prices and services breakdown
• Up-to-date electric usage

Since electricity usage is measured in kilowatt-hours (kWh), we also include a more detailed description of what they are.

Meter reading

A monthly meter reading is how the utility company determines how much electricity has been used. The breakdown of your meter reading on your bill generally includes:

• Date your meter was read
• Current meter reading
• Previous meter reading

The amount of electricity you used since the last meter reading is what you’ll be charged for. This is determined by subtracting the previous meter reading from your current meter reading.

As noted, the measurements will be in kWh. So if your current meter reading is 15,700 kWh and your previous meter reading was 15,000 kWh, your current month’s electricity usage would be 700 kWh.

Prices and services breakdown

The electricity you use is only part of the overall charges you’ll find on your bill. You may also see charges for things like:

Supply charges, which cover the cost your utility company incurs when it purchases your electricity from the wholesale market

Delivery charges, which cover costs that include:

• Transmission charges, which pay for the maintenance, building and operation of the transmission system. This system is made up of the poles, wires and other equipment required for bringing electricity from power generators to your local distribution system.
• Distribution charges, which are typically combined with operations and services charges. These charges are for the cost of delivering power to your house, paying employees for maintaining equipment, and the cost of customer service, sending out bills and other related costs.

Additional charges on some bills may include public policy charges, public service tax, county tax, sales tax and other fees associated with receiving electricity in specific regions or municipalities.

Up-to-date electric usage

Most bills have some type of comparison section. This section often provides your average daily use, along with a comparison of your current and past electricity usage. You may see numbers, graphs or charts that compare current usage with the previous month, the same month last year, or even for the past several months or the past year.

What is a kWh?

Electricity is measured in watts, but a single watt is a very small amount of power. It’s much easier to calculate electricity usage based on kilowatts, which is the equivalent of 1,000 watts.

• 1 kilowatt = 1,000 watts

A kilowatt-hour (kWh) is the unit used to describe the amount of kilowatts used in one hour.

• Kilowatt-hour = Amount of kilowatts used in one hour

You can use the Perch Energy Cost Calculators to determine the amount of kilowatt-hours specific appliances use on a monthly basis. A few examples include:

• 2880 kWh per month: Medium central air conditioner used 24 hours per day
• 36 kWh per month: Medium refrigerator used 24 hours per day
• 22 kWh per month: 17-inch laptop computer used 8 hours per day

Costs for an average monthly electricity bill

The cost of a monthly electricity bill in the U.S. can vary widely, depending on a variety of factors. These include the size of your dwelling, the number of people living there, the appliances and electronics you typically use, and the state in which you live.

When your home or apartment was originally built can also play a role, as can any efficiency upgrades that have been made.

Despite the varying factors, you can still get a general idea of the cost of electricity by looking at the average monthly bill for different types of homes.

One-bedroom apartment

The average monthly cost of electricity for a 600-square-foot one-bedroom apartment with a single occupant is about $89. This is based on a monthly usage of 655 kWh at the national average cost of 13.66 per kWh.

Two-bedroom apartment

Electricity for an 800-square foot two-bedroom apartment with two occupants would be about $108. This is based on a monthly usage of 796 kWh at the national average cost.

Two or three-bedroom home

A 1,500 square-foot home with two or three bedrooms would see an electricity bill of about $151. This is based on a monthly usage of 1107 kWh at the national average cost.

Average electric bill across the United States

The average home in the U.S. has an electricity bill of about $121 per month. This is based on a monthly usage of 886 kWh at the national average cost. The numbers come from Energy Information Administration (EIA) data from 2021, which is the most recent available. The next report will be released in October 2023, which will contain data from 2022.

States with the highest electric bills

The cost of electricity varies from state to state, and sometimes drastically. Note the average rate in 2021 was 13.66 cents per kWh. States with the highest electricity rates during that time include:

• Hawaii: 30.31 cents per kWh
• Alaska: 20.02 cents per kWh
• California: 19.65 cents per kWh
• Massachusetts: 19.06 per kWh

Why is your electricity bill so high?

Even if you live in a state with lower electricity rates, your electricity bill could still be rather high if you use a lot of it. Factors that contribute to your electricity consumption and overall cost of your bill include your personal habits, the weather, when you use electricity, and the number of people living in your home or apartment.

Personal habits

Any electronic device you use consumes electricity. Even those that run on rechargeable batteries still use electricity when they need to recharge. The charges for using your computer, watching TV or listening to your stereo can start to add up – especially if you have all the devices on during on-peak hours.

If you tend to leave the lights on, the ceiling fans running or other devices switched even when you're done using them, your electricity costs could be piling up for no good reason.

Weather and seasonality

Energy use tends to be the greatest during the hottest and coldest months. Air conditioners use a ton of electricity in the summer, and you may be supplementing them with ceiling fans or other cooling devices. If your heat runs on electricity, you can expect a major increase in electricity use – and cost – during colder months.

On-peak and off-peak usage

The cost of electricity also varies based on when you’re using it, whether it’s during on-peak or off-peak hours.

• On-peak hours refer to the times of day when the demand for electricity is the highest. It’s when you’ll pay the highest rates per kWh.
• Off-peak hours refer to the times of day when the demand for electricity is the lowest. It’s when you’ll pay the lowest rates per kWh.

On-peak hours are not the best time to be running the dishwasher, doing the laundry or otherwise completing tasks that consume a lot of electricity.

Number of people living in your home or apartment

The more people who live in your home or apartment, the higher your electric bill is likely to be. While electricity use may stay the same for things like heating and cooling, more people typically means more hot showers, more laundry, more dishes to wash, more lights turned on, and more electronic devices – all of which use more electricity.

Lower your energy bill by taking advantage of renewable energy

Taking advantage of renewable energy can help reduce your electric bill, especially if you go for solar. Not only is the cost of using solar to produce electricity decreasing every year, but it’s become more popular than ever.

Installing solar panels on your own home is one option, and it’s one that more than a million residences across the nation have already embraced. One of the biggest barriers to this option, however, is the initial investment.

Community solar allows you to reap the benefits—namely savings—of supporting solar energy without the costly investment. You simply enroll in a program to support a solar farm, which produces thousands of kWh of clean energy every month.

You then get solar credits on your electric bill based on your share of the solar energy produced by the solar farm.

No matter which solar option you choose, you can expect to save on your electricity bill. You’re also supporting the generation of clean energy, which can help reduce air pollution as well as the dependence on fossil fuels.

Additional tips for lowering your electric bill

Going for solar energy can help reduce your electric bill, as can a number of other steps you can take. Even if some of the steps seem rather small, they can all add up to big savings in the long run.

Take advantage of off-peak pricing

Pay attention to when you perform tasks that use large amounts of energy, such as running the dishwasher, the washing machine and the dryer. Try to plan those tasks during off-peak hours when electricity rates are at their lowest.

Look for energy-efficient options

If you’re in the market for new appliances, look for energy efficient options. Make sure to use them efficiently, too. For instance, don’t leave the fridge door open after you take out the pitcher to pour a glass of cold water. Shorten hot showers. Consider hang-drying your laundry instead of using the clothes dryer.

Also look for energy efficient light bulbs, switching out the incandescent for LED when possible. Take advantage of natural sunlight for lighting in the daytime to reduce your use of lamps and overhead lights.

Reduce ‘vampire loads’

Smart power strips can help reduce the drain of “vampire loads,” or devices that still drain electricity even when they’re not in use. You can also pull the plug on those devices altogether. Try shutting off the unused VCR, shutting down your computer when you’re done for the day, and unplugging phone and other chargers when they’re not in use.

Do a home energy audit

Use energy calculators to determine how many kWhs of energy your devices and appliances are using on a daily basis. You’ll then be able to make the wisest decisions about what appliances to use, and when.

Knowing how to lower your bill

Now that you have a solid understanding of what your electricity bill is telling you, you are in a prime position to make changes that can help to keep that bill at a minimum. Even if the cost of electricity generated by fossil fuels continues to rise, your electricity bill doesn’t necessarily have to increase right along with it. Supporting renewable energy, along with energy-efficient appliances and habits, can help your overall budget as well as the earth as a whole.