How To Calculate Energy Usage

The average American pays more than $150 per month for electricity — it’s one of the biggest household expenses for many people. If you’re looking for ways to reduce your monthly utility bill, learning how to calculate electricity cost can help. When you understand what you’re paying for electricity and when, you can adjust your consumption patterns to save money.

At Price To Compare, we’re committed to helping residential and business customers manage energy costs. Learn more about electricity usage calculations and explore how you can compare energy plans to find even greater savings.

Electric Bill Breakdown

The first step in figuring out how to calculate electricity cost is understanding your utility bills. Every electricity bill is different. Some utility companies chart out your average monthly usage; others tell you how much energy you use in a day or week.

Find the latest bill from your electric utility, and look for a few key sections:

Supply Charges

This section tells you how much you’re paying for electricity in cents per kilowatt-hour (kWh). You may see multiple rates, which indicates that you’re paying different prices for peak and off-peak periods. If you have a variable-rate plan, you may be charged several different peak and off-peak rates throughout the month. “Peak” refers to the times when demand is highest; these rates are usually higher than the rest of the day.

Delivery and Distribution Charges

These are the fees that your utility company charges. They cover the cost of accessing the network, delivering power to your house, resolving outages, and maintaining the local grid infrastructure. Delivery and distribution charges are typically fixed, but utility companies aren’t allowed to set them arbitrarily — the state public utilities commission usually approves them first.

Taxes and Fees

This section can contain a variety of taxed fees that depend on where you live. Some states charge fees to fund programs for investing in renewable energy, energy efficiency, or low-income energy assistance.

Step-by-Step Calculation Process

Your electricity bill can help you understand your overall energy usage. However, you might need to do a few calculations to break down the costs and find ways to save.

• Average daily usage. Locate the total number of kWh you were billed for, and divide that amount by the number of days in the billing period. This tells you approximately how much power you’re using every day. As you take steps to lower your electric bill, it’s a good baseline for comparison.
• Peak v.s. off-peak. Add the total number of peak and off-peak rates, and divide each figure by the number of days in the billing period. If your peak usage is high, you might be able to save money by reducing energy usage when residential electricity rates are highest — usually, between 3 p.m. and 7 p.m. on weekdays.
• Appliance energy usage. Determine how much power your appliances use by learning how to calculate the kilowatt-hours consumed by each device. To get an estimate, multiply its wattage by the hours you use it every day. The formula is: (wattage × hours used per day) ÷ 1000 = daily kilowatt-hour (kWh) consumption.

Once you can tell how much electricity an appliance uses, it’s easier to identify which items have the biggest impact on your utility bill. You might discover that your aging refrigerator isn’t running efficiently or that your frequently used dryer is driving up your energy bill.

In general, electricity consumption is the one aspect of a utility bill that you can control. Most additional fees charged by the utility company are fixed, which means that they stay the same each month regardless of usage.

Different Energy Plans & Their Impact on Your Bill

If your home or business is located in a deregulated energy market, you may have more control over your energy costs. In this type of market, you’re not required to buy energy from the utility company — you can select the energy supplier and plan you prefer.

The energy plan you choose can have a significant impact on monthly charges, so understanding your electricity bill is a must. Here are some of the most common plan options:

• Fixed Rate. This type of plan charges you a single rate for every kilowatt of electricity you use. The time of day doesn’t impact your price. If you tend to use the most energy during peak hours, this type of plan could be a way to reduce your energy bill. Assuming your energy usage stays consistent throughout the month, fixed rates also help you budget accurately.
• Variable Rate. In a variable rate plan, your rate changes as the market fluctuates. These shifts can be unpredictable, which means you might owe different amounts each month even if your usage stays the same.
• Time of Use (TOU). These plans charge you different rates during different times of the day. Rates are typically highest during peak hours and lowest during off-peak hours.If you use a lot of energy during low-demand periods, this type of plan could help you save. For example, charging an electric car overnight may lead to a lower electric bill.

At Price To Compare, our customers typically prefer the stability of fixed-rate plans. While cost-cutting is possible with other plans, the unpredictability and high peak rates can make it challenging to save.

Tools and Tips for Simplifying Bill Calculations

You don’t need to run calculations by hand, especially when it comes to appliances — the U.S. Department of Energy offers an energy usage calculator. Simply choose your appliance, wattage, utility rate, and estimated usage data, and the calculator will help you understand how much it costs to run.

It’s also helpful to know what peak and off-peak hours are in your area. If the times don’t appear on your bill, contact your energy provider or utility company for details.

Reducing Energy Costs

Cutting back on your electricity usage is an efficient way to lower your bill. Here are some ways to use less energy:

• Switch to LED lights.
• Use natural lighting during the day.
• Seal drafts and cracks.
• Install smart outlets or power strips that switch off power to idle appliances.
• Program a smart thermostat to reduce heat or AC when you’re not home.
• Buy energy-efficient appliances.
• Reinforce your home’s insulation.
• Wash clothes in cold water.
• Dry clothes outside during the summer.

If your state has a deregulated energy market, consider switching energy suppliers. Finding an energy plan that aligns with your typical consumption patterns can be an effective way to reduce costs. You can even find a renewable energy plan that cuts costs and carbon emissions at the same time.

Find Better Electricity Rates With Price To Compare

Electricity is a significant monthly expense for many residential and business customers, but Price To Compare can help you take control. Our convenient online marketplace makes it easy to shop around for the best rates in your area — just enter your ZIP code to compare available plans. Our online market allows you to switch energy providers online in mere minutes!

Want to see how much you can save? Start shopping for electricity plans today.