Electricity bills can be confusing, especially as many states shift toward deregulation. In the past, utilities were often publicly owned or controlled at every stage. But as the landscape has changed, billing structures have become more complex.
In the video above, This Old House expert Ross Trethewey explains the intricacies of modern electricity billing, shedding light on the various pricing models and offering practical advice for homeowners.
What Are Some Common Electrical Billing Structures?
Let’s explore the most common models you might encounter on your electricity bill.
Fixed Rate Usage
The most straightforward billing structure is the fixed rate usage per kilowatt-hour. This means you pay a set rate for all the electricity you use in your home. Here is an example to help you understand this better:
- A 100-watt lightbulb consumes 100 watts of power at any given moment.
- Running that lightbulb for one hour will consume 100 watt-hours or one-tenth of a kilowatt-hour.
- Your bill is calculated based on the total kilowatt-hours used during the billing period.
This simple model offers predictable budgeting, as the rate remains constant regardless of when you use electricity.
Demand Charges or Peak Pricing
Some electricity providers use a model called “demand charges” or “peak pricing.” This structure is based on the highest amount of electricity used in a short period, typically a 15-minute window. Here’s how it works:
- Your bill is determined by the highest usage tier you reach during any 15-minute window in the month.
- Once you hit a higher tier, you remain in that pricing category for the entire month.
- Running multiple high-energy appliances simultaneously can result in unexpectedly high charges.
Though less common for residential customers, this model is important to understand and manage. Avoid clustering the use of high-energy devices to minimize costs.
Time-of-Use Billing
Time-of-use billing is becoming increasingly popular among electricity providers. With this structure, the rate you pay changes depending on the time of day. Here’s what you need to know:
- Rates are typically higher during peak demand hours (often in the evening).
- Off-peak hours, usually late at night and early morning, have lower rates.
- Some regions offer free electricity during certain off-peak hours due to excess renewable energy production.
This billing structure encourages consumers to shift their energy usage to off-peak hours when possible, reducing costs and balancing the load on the power grid.
Tiered Rate Plans
Some utilities use tiered rate plans, where the cost per kilowatt-hour increases as you consume more electricity. Here’s a basic rundown:
- You start at the lowest rate tier and move up as your usage increases.
- The more energy you use, the higher the rate you pay for additional consumption.
- This model incentivizes energy conservation and penalizes higher usage.
Being mindful of your consumption and staying within lower tiers can keep your expenses down.
How Can You Manage Your Electricity Usage?
To make the most of your electricity plan and potentially reduce your bills, implement these strategies based on the level of control you have over various devices in your home.
No Control Devices
Some electrical devices in your home need to run continuously and can’t be adjusted for energy savings. These include the following:
- Medical equipment
- Refrigerators
- Security systems
- Well pumps
Focus on ensuring these devices are energy-efficient models when it’s time to replace them.
Some Control Devices
Several adjustable appliances and systems can be modified to reduce energy consumption during peak hours. These small adjustments can make a difference in your energy bill:
- HVAC systems: Set your thermostat to use less energy during high-demand periods.
- Pool pumps: Schedule them to run during off-peak hours when possible.
- Water heaters: Install a timer to heat water during off-peak hours.
Full Control Devices
Devices that you have full control over can be scheduled to run during off-peak hours to save money. These include the following:
- Dishwashers
- Dryers
- Electric vehicle chargers
- Home entertainment systems
- Washing machines
Use timers or smart plugs to ensure these devices operate when electricity rates are lowest.
Behavioral Adjustments
Besides controlling devices, modifying your behavior in these ways can contribute to energy savings:
- Limit the use of high-energy appliances during peak hours.
- Regularly clean and maintain appliances for efficient operation.
- Turn off lights when leaving a room.
- Use natural lighting during the day.
Addressing Phantom Power
Phantom power, also known as standby power or vampire energy, refers to the electricity devices consume when they’re turned off but still plugged in. This hidden energy usage can account for up to 10% of your electricity bill.
Here’s how to combat phantom power:
- Invest in smart power strips that automatically cut power to devices in standby mode.
- Unplug chargers and small appliances when they’re not actively charging or in use.
- Use energy monitoring devices to identify which appliances are the biggest culprits of phantom power in your home.
- Use power strips for electronics and turn them off when not in use.
Common Phantom Power Culprits
Common culprits of phantom power include:
- Clock radios
- Microwaves with digital clocks
- Modems
- Phone chargers
- Printers
Taking steps to unplug or manage these devices can lead to noticeable savings over time.
