If you were overpaying for electricity, would you know?
According to Energy Price Choice, 90% of consumers don't know what rate they pay for electricity usage on their bill. The reasons? Not everyone knows what a deregulated market is, and since the bill has to be paid monthly no matter what, some people believe 'it is what it is.' In addition, utility bills are complicated and time spent looking at a utility bill is time better spent doing something else.
We realize you may not understand your electricity bill, and will do everything we can to make sure you know the basics in order to make informed decisions. Below are the top 3 components of your bill and why they should matter to you. Looking for more? Click this link and send us any other questions you have. We're happy to walk you through your electricity bill.
Everyone should know three basics on their bill:
1. Account Number
2. Billing Period
3. Total Usage
You're probably familiar with where to find your account number and billing period (hint: these are always at the top of your bill), however your total usage is a little more complicated to understand. Electricity usage is measured by how much kWh (kilowatt hours) your business used in a given period. This section is typically located towards the bottom of your bill and has a chart comparing month to month usage.
As you see in the image to the right, January and February were higher than average usage months. This type of seasonal usage is typical for businesses in northern states who experience cold winter months, however if your business is in the south you may have higher usage in very hot summer months. Usage is important because it is a part of your electricity bill you can manage.
For example, replacing dated incandescent or fluorescent lights with new LED technology can reduce total kWh usage by around 50%. Here are some tips you can use to manage your consumption and make your business more energy efficient.
The supplier information is the most important part of your electricity bill. In deregulated states, it's the only part of your bill where you have a choice. Usually, your supplier information is located on the first page of your bill under the charges from your utility. In the bill to the right the supplier for electricity is Engie, and the orange highlighted area shows the rate ($0.06202) this company pays per kWh.
When choosing a supplier, you should make sure you are not already in contract with another supplier. Breaking a contract could cost your company thousands in 'exit fees'. Once you can verify your contract end date or that you are on a utility rate, then you can shop around for a supplier who can help you reach your goals. TPI Efficiency shops utility bills out to over 150 different suppliers and advises you on which supplier price and contract fits your business needs.
However, lowering your electricity rate can only go so far. Completing an efficiency project to reduce total consumption by 50% or more will have a larger financial impact than a small change in your electricity rate.
Rate & Rate Code
The rate you pay for electricity can be chosen through a supplier, energy broker, or
fiscal consultant (learn the differences between the three here), and is located in the supplier or utility section of your bill. In the image to the right, you can see the energy usage (95,530 kWh) was charged at a rate of $0.06202 per kWh.
The Rate Code on your bill is located in the section on charges from your utility, and can change from utility to utility. For example, a First Energy territory customer may have a GSD or GPD as a rate code signifying which type of customer you are in their system. AEP Utility may have a rate code of Tariff 876 to signify an alternative supplier. We haven't found a good online database showing every utility and rate code, so your best bet is to give your utility or TPI Efficiency a call to understand the code. From your business type TPI Efficiency will be able to help you understand if you're being charged an accurate rate for your business type.
Some businesses are on a utility variable rate and never chose a supplier. In this case, you will notice a line item on your bill labeled, "Bypassable Generation and Transmission related Component." For the bill on the right, the rate paid for electricity is not clear because the utility only showed the total charge. To find your rate per kWh, find the part of your bill showing your usage history (hint: it's the chart we talked about above), and in this bill example the kWh energy usage was 45,440 kWh. All you need now is some simple math to find the rate per kWh. Divide the total charge $3,461.53 by the energy usage of 45,440 kWh and you will find this customer is paying $0.07617 per kWh.
Why is the rate important? If you're shopping around for a better rate, you need to know what you're currently paying in order to get competitive pricing. However, when comparing supplier rates, you may not be comparing apples-to-apples. Expert Tip: make sure the rates you are comparing are either fixed all-in rate or energy-only, and not comparing one vs the other. Comparing a fixed all-in rate to an energy-only rate is like comparing an apple to an orange, they're both fruits but have different outcomes.
Utility bills can be difficult to understand, but we hope this article establishes base-line knowledge in order to make an informed decision. Don't see the information you need? Contact us, and we will be happy to help you get a better understanding of your utility bill.
TPI Efficiency is a fiscal consultant focused on helping business reduce operating expenses. We monitor hundreds of suppliers, products, and delivery platforms, then sit on your side of the negotiation table to help you find competitive pricing and terms for Electricity, Natural Gas, LED Lighting, and more.
Want to get started? Give us a call at 877-244-0182