For some of us, the only physical pieces of mail we still get regularly are those monthly electric bills. We begrudgingly open them, note the total, and send off our payment. Then we move on with our lives.
But taking a closer look and finding ways to be more energy efficient at home can not only benefit your bottom line, but also become a significant window into your ability to reduce your share of planet-heating greenhouse gas emissions. Cutting back on unnecessary electricity consumption is going to be key in the coming years: Scientists have warned that climate change will both increase future demand for electricity and drive prices up.1
All in, though, electricity bills aren’t complicated. Understanding yours—and whether there’s anything you can do to reduce your usage and reliance on fossil fuel-derived electricity—starts here.
Understanding your electricity bill
Depending on where you live and who powers your home, the format of electricity bills can vary. Some can be short, some super detailed. All of them, though, have the same key components.
How is an electricity bill calculated?
The main portion of the bill is determined by how much electricity a home uses in the current cycle (usually monthly or 30-days) measured in kilowatt hours (kWh). Depending on your electricity provider—and whether you have a choice as to which company that is—a bill could include separate charges for generating, supplying the electricity (transmission), and distributing it to you. (All this taps the complex combination of infrastructure known as the grid). Those different rates, which could be flat or variable depending on power agreements, are set by providers who are overseen by regulatory bodies.
There can be a list of other charges on your bill, including green energy charges, taxes, surcharges, and more fees that are specific to your area or provider. Your contract with the utility company should outline these fees. Sometimes bills will also display average daily electricity consumption in kWh or other data to help you better understand your usage patterns.
In addition to the various charges you ultimately have to pay, your bill should also include some identifying information like your meter number and account number. Sometimes utility providers, particularly municipalities, might also include charges for sewer, water, trash, and recycling on the same bill with the electricity charges.
What’s the average cost of electricity in the U.S?
The average cost of electricity across the whole US is around $0.1643 per kilowatt hour as of May 2024, according to the Energy Information Administration. But this number can vary greatly depending on your state or region. For example, a kilowatt hour of electricity costs around $0.10 in Utah, while that number more than quadruples to over $0.44 in Hawaii in the same time period.
This can be due to multiple factors, namely that places like Hawaii or Alaska aren’t connected to a larger electric grid due to location, whereas western states like Utah, New Mexico, and Colorado have low delivery costs for the juice they get from fossil fuel power plants. However, even if the cost of a kilowatt hour is more expensive, how much electricity a household uses has the biggest impact on electricity bills. Electricity may be cheap, but if you live in a warm southern state, running the AC during the summer months will rack up a hefty charge.
How does location impact electricity costs?
Location impacts costs because electricity markets operate differently in different parts of the country. Many Americans get their electricity from a “regulated wholesale market,” in which electric companies effectively work as monopolies by generating, transmitting, and distributing electricity from start to finish with oversight from state public utility commissions. Most people living in the West and South live in this type of market.
“Deregulated” or “restructured” markets have separate entities generating and distributing power. About two-thirds of Americans live in parts of the country where independent organizations (known as ISOs and RTOs) manage this market to ensure electrons get where they need to go and prices are appropriately set, the EPA explains. That means they’re not totally “deregulated,” as the term would lead one to think.
Location also determines energy mix. In some renewable-heavy states like California, electricity prices may be higher than average, but this isn’t necessarily due to solar or wind being inherently more expensive: It often boils down to the complicated process of connecting renewables to the grid. In some states with significant renewable energy development—take Iowa, New Mexico, Kansas, and Oklahoma—energy prices are growing slower than the rate of inflation, and renewable development tends to drive savings.2
Is rooftop solar a viable option for lowering electricity bills?
It depends on whether solar is right for you, but if it is, you could see much lower electricity costs over the lifetime of the system. However, the upfront cost of installing solar panels on your residence (whether on your roof or in the ground, and before any state or federal tax credits) could cost into the five figures. But switching to solar can save owners tens of thousands of dollars over the life of those panels—not to mention contributing to the expansion of a greener energy system.
While those figures may seem daunting, researchers have noted that between 2010 and 2020, the cost of solar photovoltaics fell by 15% each year.3 As more and more projects come online, lessons in efficiency are learned along the way, further helping drive down prices, explains Gregory Nemet, a professor at University of Wisconsin–Madison’s La Follette School of Public Affairs who literally wrote the book on how solar energy became so cheap. “And there’s been the Inflation Reduction Act,” he adds, “Which is creating a lot of tax credits, especially for homeowners to do things like install more efficient appliances, and put solar panels on their roofs.”
What about home energy storage?
Like rooftop solar, a home battery might not be right for everyone. But there are circumstances in which one does stand to lower electricity costs overall. If they connect a battery to a rooftop solar array, homeowners can sock away excess electrons for times when the sun’s not shining—eliminating the need to access utility-provided power in those instances. Those without rooftop solar could also benefit from storing electricity when rates are low, thus avoiding price spikes that can come at times of peak demand. Here’s what you should consider when weighing if home energy storage is right for you.
- Climate Change Impacts and Costs to U.S. Electricity Transmission and Distribution Infrastructure, Energy, Mar. 2020 ↩︎
- Clean Energy Isn’t Driving Power Price Spikes, Energy Innovation, Jul. 2024 ↩︎
- The Momentum of the Solar Energy Transition, Nature Communications, Oct. 2023 ↩︎