Like most people, you receive an electricity bill every billing period. However, do you actually make the time to read through the charges?
While residential electricity charges are generally consistent, nonresidential buildings can have drastically varied energy bills. As a commercial real estate property manager or engineer, it’s extremely important to look at your utility bills – they can be inaccurate and identify issues within your building.
So, here’s a breakdown on how to read your utility bill charges. In the coming weeks, a second post will discuss peak hours and peak demand charges that can account for a high energy bill. Armed with this knowledge, you’ll find key data points to help make your building better.
kW vs. kWh – What Do I Need To Know?
Unless you’ve taken (and remembered) an energy or physics class that delved into power and energy consumption, kilowatts and kilowatt-hours are units are confusing concepts to master. By understanding the metrics that you’re assessing, you’ll be able to make better energy management decisions.
A kilowatt (kW) is a unit of power that measures the energy consumed at a specific moment (not over time).
A kilowatt-hour (kWh) is a unit of energy that measures the total energy consumed during a particular time period. Keep in mind that kWh is kilowatts * hour, not kilowatts/hour – this makes a difference when computing.
The most common way to explain the difference is “the car analogy”: let’s say you go for a 10-minute drive that averaged 27 miles per hour. At exactly 1:03 into your drive, your speed was 15 miles per hour. During that time, your distance traveled was 4.5 miles. In this case, kilowatt is your speed at that exact moment and kilowatt-hour is your total distance for the whole trip.
When assessing these factors in energy management, a kilowatt is the demand and kilowatt-hours is the consumption of the building. On your energy bill, kWh is listed for the whole building, and may be broken down into rates multiplied by the kwh. More detailed utility bills will include kW, but generally this metric would be visible on a real-time energy management dashboard or another place where the exact power consumption at a given moment would be easily identifiable.
Utility Bill Charges Demystified
Depending on your utility provider, you have several lines on your utility bill summary and may even have two separate sheets in your electricity bill. Instead of simply paying the total amount at the bottom, check out each of these lines. Here’s a breakdown of the four main charges:
- Generation: Charges for the actual production of electricity. Electricity can be generated through a large utility company (e.g. Pepco, PG&E, etc.), an alternative energy supplier, or generated on-site through solar panels and other generation mechanisms.
- Transmission: When electricity is generated off-site, the electricity must be transmitted from the generation site through power lines and towers to the end-users. Some areas have regional transmission operator that runs and regulates transmission facilities.
- Distribution: These charges cover the process of getting electricity to your building, such as electricity poles, lines, meters, and the workers who install and maintain this hardware.
- Surcharges: Any other charges – usually taxes – that often are required to pay federal agencies and taxes.
Often, these charges have additional lines to further breakdown where these costs originate. You can verify all of these numbers based on your own meter readings and energy data.
How kWh Determines Charges On Your Electricity Bill
Most utility bills include the four components listed above. Generally, the transmission, distribution, and surcharges are approximately equivalent every billing period. The total kWh consumed per building will be multiplied by different energy rates (more on peak demand charges in the next blog) to calculate the total energy bill. As the total consumption of your building varies, so too will all charges that are determined by the kWh.
Rates on electricity have several components that may determine how you are charged. Location plays a big role in determining rates; the rates for the same building may be drastically different in Rhode Island than Hawai’i. If you disagree with the charges on your bill, you can calculate what you should have been charged based on your meter readings. Pepco’s Rates 101 explains how to calculate various parts of your bill. Alternatively, you can install a real-time energy management system to verify you’re being billed correctly.
When you begin an energy management program, start by looking at your total kwh; this determines how much you are charged every billing period. As a first step, reducing total kwh can help significantly reduce your energy consumption. In the following post, peak demand charges and peak hour charges will refine your energy management program while making targeted, effective electricity charge reductions.