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How to Calculate Your True Electricity Cost

There once was a story on an investigative news show that challenged a real-life brain surgeon and rocket scientist to read a phone bill.

This was back when landlines were still the standard.

…They couldn’t do it!

Ever feel the same with your electric bill?

Some companies do make theirs hard to read. And the only reason for it is so you don’t know how much you really pay.

Any communication can be made simple and easy so practically any person can understand it.

Learn how to read your energy bill so you don’t get duped.

And find out some surprising insights you may not already know even if you feel you understand how to read an electric bill:

1. The Most Important Thing: kWh Rate

The bottom line on any electric bill is what you pay for your true kWh rate. To get that number, you simply divide your total kWh used in a month by your electricity cost.

Remember, you may have other utilities on the same bill like gas and water. Make sure not to include those numbers.

Also remember to add in any fees you had to pay your electric company. Some try to charge you a very reasonable (or even ridiculously low) kWh rate. But then they increase what you actually pay with all sorts of absurd fees.

These fees could be:

So the formula is:

monthly electricity cost ÷ kWh = kWh rate

According to April 2020 data, the average national rate is 13.19 cents per kWh. And in Texas, the average consumer pays 11.36 cents per kWh.

You should come up with a number close to 11.36 cents per kWh. If you don’t, double-check your math and that you included additional fees you paid that month, if any.

2. Potential Confusion: How Many kWh You’ve Used in a Month

Electric bills can get quite creative and different, depending on your REP.

For example, your REP may bill you using a tiered billing structure. For example, say you use 989 kWh hours in a month.

They might charge you one rate for the first 500 kWh. Then they may charge you a higher rate for kWhs 501 – 989.

Your electric bill should show the number of kWhs used in each tier for the month.

3. What Can You Do with the Info You Get?

Once you know your true kWh rate, you have some choices to make:

  1. You can talk to your REP and possibly fire them if your rate is way too high
  2. If they have you trapped in a contract, take time to learn what you do that causes rates to increase so you can change your habits
  3. Google the ways you use electricity and how you might use it more efficiently
  4. Login to an online electricity usage monitoring software so you can see how you use electricity and learn how to be more efficient (if your REP provides one)
  5. Be happy with your rate if it’s in a good range and simply accept it as-is

Only you can decide what to do. But at least you now have the information so you have an accurate understanding of your electricity costs.

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