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How to Read Your Utility Bill

By Emily Main

For most people, utility bills are little headaches that we have to deal with 12 times a year—confusing jumbles of numbers that are for the most part meaningless until we jump down to the “Amount Due” number and our eyes bug out. When you understand what all those numbers mean, however, your utility bills can be less of a headache and can also help you learn where to save energy and cut costs.

Utility bills vary state to state and utility to utility. But these sections will appear somewhere on pretty much every bill:

Electricity Used

Every bill you get will have a number on it noting what the electricity meter read when the utility’s employee came to read it. The number will be listed in kilowatt-hours, or how much energy your home uses per hour. A kilowatt is equal to 1,000 watts. To give you some perspective, a 100-watt bulb operated for 10 hours equals one kilowatt-hour (kWh). Operating a 36-inch LCD TV, which uses 144 watts, for 5 hours a day over the course of a month, on the other hand, uses 22 kWh.

Electricity Charges

Some utilities give you a baseline allowance, basically a set number of kilowatt-hours at one particular price, and charge you a lower rate for that initial number of kilowatt-hours. Anything above that allowance is charged a higher rate. If that’s the case in your utility, you’ll see two numbers on your bill that will look something like this:

Total kWh: 672


600 kWh @ $0.0456789

72 kWh @ $0.05890987

Things start to get confusing when you look at how the electricity charges are divided up on your bill. When the energy industry was deregulated in the early 1990s, utilities gained the ability to charge separately for electricity supply and energy distribution.  As a result, you’re charged for both. One section of your bill will be labeled “Supply,” where you’re charged for the actual electricity you used that was generated at the power plant, and another will be labeled “Distribution” or “Transmission.” Those charges go to pay for carrying that power over high-voltage power lines to transfer stations, and again from transfer stations over the low-voltage power lines that enter your home.

Combined, the Supply and Distribution charges equal the total amount you pay for electricity. The price per kilowatt-hour (the combination of both supply and distribution charges) varies by region, but the national average is 10.7 cents.

Finally, your utility will also tack on other charges for maintaining your home’s electricity meter and other administrative costs.

Average Daily Electricity Use

One useful tool utilities frequently provide is a graph that spells out the average amount of electricity you used each month for the past 12 months. This helps you understand what times of year are particularly energy-intensive and can help you devise seasonally appropriate energy-saving strategies.

Natural Gas Bill

If you use natural gas to power stoves, hot-water heaters, and heating systems, you may receive a combined gas and electric bill (depending on your vendors). The costs will be broken up in the same way as your electricity bill, with supply charges and delivery charges separated, but the main difference is how natural gas is measured. Utilities measure the amount of gas you use in hundred cubic feet (ccf), but they convert that measurement to therms, an actual unit of energy (96.7 cubic feet of natural gas equals one therm). Gas dryers use, on average, 3.5 therms per month, and gas stovetops use 2 therms per month. Currently, the national average for natural gas is about $1.15 per therm, though, like electricity, the cost varies state to state.

What to Do With All This Information

Once you’ve learned to understand what you’re paying for, you can start to trim costs. According to the Department of Energy, the largest percentage of your utility bill—43 percent—goes towards heating and cooling. The rest of a home’s energy can be broken down as follows:


Air conditioning/cooling=12%

Water heating=12%

Lighting 11%

Computers and electronics=9%

Dishwashers and laundry equipment=9%



The graph on your utility bill that spells out average daily electricity use will probably show spikes in the colder months and dips in the warmer months (even in warm states like California, heating takes up the biggest chunk of the average homeowner’s utility bill). So if you’re looking to cut the amount of money you spend on electricity every month, keep your heating and cooling systems at top efficiency and seal up air leaks in your home, which you can find with a basic home energy audit. More and more utilities are providing these audits to customers for free or at a low cost, and they involve having someone come to your house with special tools to detect where air is leaking. Auditors can tell you whether you simply need to add more insulation to your walls and attic or if you need more major repairs such as replacing windows or sealing your heating ducts. If your utility doesn’t offer energy audits, you can perform a DIY energy audit using EnergyStar’s Home Energy Yardstick or find a certified energy rater through a private company.

For more tips on saving energy on water heating, lighting, and the other appliances in your home, see “The Energy Carbon Connectio