How to Read Your Electric Bill

The first step on your journey towards rooftop solar is to learn how to read your electric bill. Doing so will help you to determine how much you currently pay for your electricity, how much you’re likely to save by installing solar panels on your roof, or whether going solar is even going to benefit you financially at all.

A recent Eversource bill is usually the first thing we ask to see when we first start talking to a prospect. Solar reps refer to it as killing the bill, since most try to use the monthly bill as a weapon against the utility company, as in “can you believe how much they’re charging for this? Our solar company would never charge you that much.”

I prefer to call it “understanding the bill.” The goal is to help customers understand what they’re being charged for and why, and how their bill is a reflection of the bigger picture of what’s going on with electricity. 

That doesn’t always lead to the decision to go solar. Sometimes I can tell within three seconds of looking at someone’s bill that rooftop solar isn’t likely to be a good option for them.  

In this post I’ll explain all the ins and outs of how to read your electric bill so that you can understand what you’re being charged for and why. We’ll also look at some steps you can take to reduce your electricity bills (and not all of those steps require solar panels), and ultimately decide whether installing rooftop solar makes sense for you.

Key Terms You’ll See on Your Electric Bill

Electricity bills are not particularly easy to read. Sometimes it seems that Eversource deliberately makes it more difficult than it needs to be, perhaps believing that complexity makes people less likely to ask awkward questions about the things they are being charged for. 

Let’s start with a few key terms that you’ll need to know in order to truly understand your electric bill.

Kilowatt Hour

The basic unit of measurement for electricity is the kilowatt hour. This is different from a kilowatt in as much as it also encompasses the concept of time. For example, you may have a 100 watt light bulb. If you used that light bulb for 10 hours, it would consume one kilowatt hour of electricity – 100 watts, multiplied by 10 hours of use. 

A typical house on Cape Cod uses an average of 500 kilowatt hours of electricity per month, with most using far more in the summer than in the winter since we tend to cool our houses with electric air conditioners but heat them with oil or gas furnaces.

Electric Supply

Most people mistakenly believe that it’s Eversource that supplies us with our electricity. That’s not true. Eversource merely delivers the electricity to our homes and businesses. The supplier is a different company that has negotiated to supply electricity at a set price for a specified period of time, usually 6 months. 

Eversource can either negotiate this price on our behalf, or a third party aggregator can negotiate it on behalf of a municipality or group of municipalities, or individual customers can choose their own supplier.

For the vast majority of Cape Cod customers, Cape Light Compact negotiates the supply rates on behalf of all fifteen towns on the Cape. The current supplier is NextEra Energy, one of the largest energy companies in the world.

Anyone who has opened an Eversource account in the last 16 years has the Cape Light Compact rate as their default supplier, and it will only have changed if the customer took the deliberate step of signing up with a third-party supplier. If you’ve lived in your house for longer than 16 years, you’re likely to see Eversource Basic listed, rather than NextEra as your electricity supplier.

Massachusetts is one of only a dozen or so states that allows individual customers to choose their own supplier. That can be both a good and a bad thing. More on that later.

At the time of writing, the default rate for the supply of electricity from NextEra was about 17.2 cents per kilowatt for the January through June period, scheduled to go down to about 15 cents per kilowatt hour on July 1 through the end of the year. 

It’s quite normal that supply rates are more expensive in the winter months since most electricity in New England is generated using natural gas, and natural gas is more expensive in the winter.

Delivery Fees

The delivery fee is where Eversource makes its money. In Massachusetts, it’s not unusual for delivery to make up anywhere from 40% to 60% of the total bill. That’s because much of our electricity is brought in from out of state. 

All the transmission wires, substations, pylons and transformers have to be maintained, as well as the vegetation around or underneath that infrastructure. 

Eversource does that work and charges us for it in the delivery fees on our bills. And, of course, the enormous cost of upgrading grid capacity in preparation for the electricity transition is also covered by this charge.

R2 Assistance Program

Certain customers – low income, single parents, people with disabilities, etc. – are eligible for assistance with their electricity expenses. 

When Eversourse determines that a customer is eligible for such assistance, it is in the delivery fees that the discount will show up. The green bar on the front of the bill will be much shorter than the blue bar.

That’s how I can tell at a glance whether a house is likely to be a good candidate for solar, just by looking at the corresponding lengths of those two bars. It’s not that R2 customers are prohibited from going solar, it’s just much more difficult to make the numbers work and offer any real savings, if the customer is already paying a discounted rate for their electricity.

How to Save Money on Your Electricity Bill

If you understand that your electricity bill is really two bills in one – one for the supply and another for the delivery, then there are ways to save money on both sides.

Rate Per Kilowatt Hour

But before you even start, the key number you should look for when reading your electricity bill is your rate per kilowatt hour. This is the baseline number against which all savings calculations can be measured. Trouble is, Eversource won’t actually tell you what that rate is, they leave you to calculate it for yourself.

It’s easy to do, though. Simply take your current charges (not the amount you owe, since that may include a balance carried over from last month) and divide that by the current usage. 

Most people mistakenly believe that everyone pays the same rate for their electricity, at least within a given town, just like everyone who drives into a gas station is going to be charged the same price for regular unleaded. 

Not so with electricity. For all kinds of reasons we’ll get into shortly, your neighbor could be paying a very different rate per kilowatt hour. But at the time of writing, most people on the Cape are paying somewhere between 30 and 35 cents per kilowatt hour for their electricity.

Saving on Electricity Supply

As noted earlier, Massachusetts is one of only a dozen or so states that allows individual customers to choose their own electricity suppliers. That’s because the electricity market was deregulated in 1998 in an attempt to bring market forces and, therefore, downward pressure on electricity rates.

For business customers it has worked as intended. For residential customers, not so much, but if you know how the market works and pay close attention to what you’re paying, it’s still possible to save money on your electricity supply.

Saving on Delivery Fees

On the delivery side, if you think you might be eligible for the R2 assistance program, it’s really worth taking the time to apply. It could save you many thousands of dollars over time. While Eversource is supposed to reassess your eligibility every year, in reality, I’ve come across people who have been on the program for years, without ever being asked to reapply.

Saving by Going Solar

As you might expect from the Cape Cod Solar Guys, we’re all about helping Eversource customers explore the possibility of going solar. But going solar does not necessarily mean putting solar panels on your roof. 

Not every Eversource customer is able to do that, but everyone can still save money by going solar.

Community Solar

Community solar has been described as solar for renters, since you do not have to own your own home in order to qualify. Any electricity customer can subscribe to a small portion of a solar farm that may be located several miles away. 

That allows them purchase the electricity from their portion of the farm at a discounted rate and receive a corresponding discount on their Eversource bill.

Rooftop Solar

Finally, there is rooftop solar. Teaching you how to read your electric bill is typically the first thing a good solar rep will do when they first meet you to discuss the feasibility of rooftop solar. The bill contains key information that will tell you if going solar is even going to save you any money.

Your electric bill won’t be the final word on whether you can go solar, but it’s a vital starting point from which t start exploring the possibility.

Final Thoughts on How to Read Your Electric Bill

As someone who sees a lot of electric bills, it never ceases to amaze me how little attention the average person pays to what is a pretty significant monthly expense. It’s not uncommon for me to meet people with paperless billing and direct debit for payment who haven’t actually looked at their bill in years.

If you compare that to gasoline, our other great energy expense, the difference is like night and day. 

I contend that, if you drove into a gas station one day and found that the price had risen by 30% since the last time you filled up, you would certainly notice. And probably drive straight out again in search of cheaper gasoline.

And yet I run across people all the time who have had a similar rate increase in their electricity supply rates and continued to pay without even noticing until I pointed it out.

Learning how to read your electric bill is the first step you taking control of an expense that is likely to take up a growing share of the average household budget in the coming years.

If you would like help learning how to read your electric bill, feel free to contact us, and we’ll help you to understand what you’re paying, why you’re being charged for it and where you might be able to save some money.