Explaining Your Energy Bills & What They Mean

No one likes getting bills in the mail.

Energy bills are especially treacherous. They’re long, confusing, and hard to read. This is especially true if you don’t have much experience reading energy bills, which most people don’t. 

But understanding your energy bill is super important for identifying savings opportunities and being aware of your monthly usage. (It’s also just a good skill to have—welcome to adulthood.)

We’re here to help you make sense of your energy bills.

Let’s dive in.

Utility bills will typically charge you for four things:

  1. Simple account or customer charges, which cover the cost of maintaining your account.


  2. Usage charges, as the name suggests, are based on the amount of energy you use.


  3. Rate charges for the fastest rate at which you used energy.


  4. Various surcharges, fees, and taxes. These will vary depending on where you live. Customers in California, for example, might see “franchise fee surcharge” listed on their gas and electric bills. That fee covers costs associated with rights to use public streets to provide gas and electric service. In Massachusetts, customers will see public policy charges mandated by the state and federal governments, including those for energy efficiency, renewal energy, and distributed solar charges.


    Here’s an example of what a bill breakdown might look like:

The utility bill provides a snapshot of your overall energy usage. But you’ll still get other bills in the mail that detail your gas and electricity charges.

Let’s talk about your electricity bills. 

Units for electric bills are usually shown in kilowatt-hours (usually written as kWh or kW-hrs). The kWh is the electricity used at a rate of 1000 Watts (one kilowatt) for an hour. 

Most electric bills are split into two main types of charges: delivery and supply.

The supply portion of your electric bill covers the electricity used and the rate you pay for that electricity. Delivery rates are fixed rates, and they’re set by your local utility company. They account for the transportation of the electricity from the generation site to your home or business. 

Here are a few examples of other charges you might see on your bill. 

  • Distribution charge: A charge for the system of power lines, poles, substations, and transformers directly connecting the supplier’s distribution lines to homes and businesses.
  • Transition charge: A transition charge is a fee paid to your local utility for distribution services. This allows the utility to recover its stranded costs and implementation costs.
  • Energy conservation charge: a state program charge to help fund state and utility energy efficiency measures.
  • Renewable energy charge: a charge to fund state renewable energy measures.

  • Distribution demand charge: a monthly fee that you pay as part of the cost of maintaining the electric utility’s infrastructure required to deliver electricity to your building.

Like your electricity bill, your gas bill might also include charges for environmental or energy efficiency programs and distribution charges.

Here are a couple of energy bill examples.


You’ll notice that each has different taxes and fees based on its location. California customers, for example, get billed for a wildfire fund. Colorado customers have a summer season charge—heightened demand and delivery charges increase costs.



by | Aug 18, 2022

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