23 March 2016

The Keys to Understanding Your Electricity Bill


The key to saving money on anything is learning how to understand it properly. This goes for all of your expenses. Reading the fine print will help you spot extra fees you don’t need. A lot of people understand this about things like insurance and phone contracts. But with many of our everyday utilities, we aren’t as vigilant as we should be.

Here’s a quick guide to your electricity billing. Reading through this can help you understand more about it. This will ensure you spot ways to save yourself money!

Electricity bills have tax structures--

In industrial businesses, electricity companies tend to charge a very high flat rate. But residential and commercial electricity companies tend to use a tier structure for bills. This is in place to ensure that people who use more pay more and people who use less pay less.

These tiers are based on the units of electricity you consume. The tier you are in will be visible on your electricity bill. The units you are consuming will determine if you save money or are charged extra. Let’s say, for example, that you use 150 electric units per month. The tiers from your provider may be as follows: Using between 0-100 units per month carries no extra charge. Using between 101-300 a month will cost you a flat rate of $30. Using between 301-500 will cost you $50. Within this structure, you’ll be charged $30 for those 150 units.

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Rates change throughout the year--

A surprising number of people aren’t aware that electricity can cost more depending on the time of year. Most electricity rates will change throughout the year, often without clear notice to the consumer. A lot of providers out there will charge you more for the electricity you use in summer compared to what you use in winter.

This does, in a way, make a lot of sense. Especially if you look at it as paying less for the electricity you use in winter, when you need the heat. But people already pay more than they should for electricity, so you should be careful. Check the seasonal rates with your company. A good electric company will keep low rates during the summer, even if it is a little bit more.

Some states apply additional tax to your energy usage--

You may see something on your bill that reads electricity tax. You may be thinking, “isn’t the amount I’m being charged by the company enough?” Well, this one isn’t the fault of the electric company. Some states charge consumers a tax for having electricity in their homes. There is also electricity duty to keep in mind. This is another tax that is applied by the government that is calculated by your energy use.

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It may sound sensical for such a tax to be paid by the electric company. But the government isn’t exactly known for charging big companies more than regular citizens! There are some states out there that don’t charge a tax for residential electricity, but these are reducing in number often. The chances are you live in a state in which the government charges you both electricity tax and electricity duty. Reducing your energy usage may help reduce the latter, but you’re stuck with the former for sure!

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