The three parts of every bill
Whether your utility is a regulated monopoly, a municipal provider or a competitive supplier in a deregulated state, the bill breaks into the same three pieces.
Supply (also called generation or energy). The cost of the electricity itself, billed per kWh. In a deregulated state such as Texas, Ohio, Pennsylvania or Illinois, this is the part you can shop for; the supplier's name appears on the bill.
Delivery (also called distribution, transmission or T&D). The cost of getting the power to your house over wires owned by the local utility. Also billed per kWh, and often split into several lines: distribution, transmission, a system benefits charge, a storm recovery rider, an energy efficiency charge, and so on. You cannot shop for this part.
Fixed charges and taxes. A flat monthly customer or service charge that you pay whether you use one kWh or a thousand, plus sales tax, franchise fees and municipal surcharges. Some of these are percentages of the bill, some are flat.
The reason this matters for estimating an appliance's cost is simple: only the per-kWh parts change when you plug something in. The fixed charge does not.
A worked example
Here is a representative bill for a house that used 850 kWh in a month. The numbers are illustrative, but the structure is what you will see on almost any US bill.
| Line item | Rate | Amount |
|---|---|---|
| Generation supply, 850 kWh | 9.50¢/kWh | $80.75 |
| Distribution, 850 kWh | 4.80¢/kWh | $40.80 |
| Transmission, 850 kWh | 1.40¢/kWh | $11.90 |
| Riders and surcharges, 850 kWh | 0.95¢/kWh | $8.08 |
| Customer charge | flat | $12.00 |
| Taxes and fees (approx. 5%) | % | $7.68 |
| Total | $161.21 |
Two different "rates" come out of this bill:
- All-in average: $161.21 ÷ 850 kWh = 18.97¢ per kWh. This is what a year of bills divided by a year of usage gives you, and it is how the EIA computes state averages.
- Marginal rate: 9.50 + 4.80 + 1.40 + 0.95 = 16.65¢, plus about 5% tax = 17.5¢ per kWh. This is what the next kWh actually costs.
For an appliance decision, the marginal rate is the honest number. If you run a 1,500 W space heater for 8 hours a day on this bill, it adds 365 kWh a month, which costs 365 × 17.5¢ = $63.88. The fixed $12 customer charge was there before the heater and will be there after it.
The difference between the two rates is usually one or two cents, so if you only have the total, dividing by kWh is a perfectly good estimate. The exception is a very low-usage home, where a $20 fixed charge on a 200 kWh month inflates the average rate by 10¢.
Where to find the numbers
- Paper bill. The front page has the total and usually a bar chart of monthly usage. The breakdown is on page 2 or 3 under a heading like "Detail of current charges."
- Online account. Look for "View bill PDF," "Bill details" or "Usage." The PDF is the same as the paper bill. Many utilities also expose a "compare rate plans" tool that lists the per-kWh components of each plan.
- Tariff sheet. Every regulated utility publishes its rate schedules, often as a PDF called something like "Residential Service Schedule R." Search the utility's name plus "residential tariff." This is the definitive source for the per-kWh components and the tier thresholds.
- The meter. Your kWh used for the period is the difference between this month's and last month's meter readings, both printed on the bill. If usage looks wrong, compare the reading on the bill with the number on the physical meter.
Things that change the rate mid-bill
Tiers. On a tiered plan, the supply rate jumps once you pass a monthly threshold (in California, the "baseline allowance"). If you are already above it, any new load is billed at the higher tier. Use that rate.
Time-of-use. If the bill lists separate peak, off-peak and sometimes mid-peak kWh, you are on a time-of-use plan, and the right rate depends on when the appliance runs. Our time-of-use guide covers how to think about this.
Seasonal rates. Many utilities charge more per kWh from June to September. The rate on a February bill may not apply in July.
Fuel or purchased-power adjustments. A line that moves every month to pass through the utility's changing fuel costs. It is per kWh, so it belongs in the marginal rate, but do not be surprised when it changes.
Minimum bills and demand charges. Rare on residential plans but growing. A demand charge bills you for your highest 15-minute draw of the month, so a 7 kW EV charger or a 4.5 kW water heater can add a separate fee unrelated to kWh. If you see a "demand" line, read the tariff.
Putting the rate to work
Once you have your marginal rate, type it into the rate box on the electricity cost calculator instead of picking a state. Every result on the page is then specific to your house. For the appliance side of the equation, the wattage chart covers the typical draws, and the measuring guide shows how to get the exact figure for anything that plugs in.