How electricity companies charge you
Have you ever looked at a utility bill? Really looked at the bill? More than just looking at the amount due. If you can, I would encourage you all to look at the bill to see some of the numbers on there. For this lesson, we are going to look at this utility bill. This is from PPL for June 2024.
At the top of the bill, you will see basic information, including:
- Account Number
- Due Date
- Amount Due
- Service Address
- Billing Period
In terms of this class, we really want to understand the usage. As we have already discussed, kWh (kilowatt-hour) is the basic unit of electricity and a unit of energy. This should be the unit on any electric bill might read. (You might see some additional units on there, including kW or BTUs, especially if your utility provides both electricity and natural gas service to your home.)
Total Usage: The amount of electricity (energy) used in the billing period. For the example bill it is 1,,434 kWh
Supply Charge versus Delivery Charge
This may be the most confusing part. This bill contains different charges for both Supply and Delivery. So what's the difference?
Supply Charge is for generating the electricity, typically from a power plant. In this example, the supply charge is $141.82 (which is the electricity usage 1,434kWh × $0.09890/kWh).
Unfortunately, that is not the only charge in this bill. Here we see a Delivery Charge. The Delivery charge is to maintain the poles and wires to deliver the electricity to your home. In this case, the Delivery Charge is $82.31, which includes all customer charges and distribution fees. You might be surprised to see the delivery charge is nearly 1/3 of the total bill.
Depending on the provider, your bill may be more complicated or simpler than this bill. Not every utility separates out delivery and supply charges, however some companies may include additional charges like a demand charge.
So, looking at this example bill, what is the actual cost per kWh of usage?
This is much higher than the electric charge shown, because we included all the charges, taxes, and fees.
This bill also shows your usage over time. The chart on the first page of the bill shows the total electricity used between July 2023 and June 2024.
Take a look at this bill and try and answer the following questions.
- How much electricity was used in this time frame? (Answer: 12412 kWh)
- What is the average usage? (Answer: 1034 kWh)
- What month used the most electricity? (Answer: August)
Real-World Application
Your Turn: Grab your own (or a family member's) electricity bill and:
- Circle the account number and due date
- Calculate kWh used: (Current reading – Previous reading)
- Find the split between supply vs. delivery charges
- Note one thing that surprised you
Understanding your bill is the first step to managing energy costs wisely!
If you do not have access to an electric bill of your own, use this example electric bill from PPL Electric Utilities.
Basic Calculation
Your June bill shows:
- Supply charge: $90.00
- Delivery charge: $40.00
- Total kWh used: 875 kWh
Calculate:
Total bill = $90 + $40 = $130.00
Effective cost/kWh = $130 ÷ 875 = $0.1486/kWh
Compare Two Months
August (high usage): 1,500 kWh → $150 supply + $65 delivery = $215 total
September (low usage): 600 kWh → $75 supply + $30 delivery = $105 total
Calculate effective rates:
- August: $195 ÷ 1,500 = $0.130 /kWh
- September: $90 ÷ 600 = $0.150/kWh
Even with the same rates, September costs more per kWh because fixed delivery fees ($15–$20) get spread over fewer kWh.