Homeowners may have given little thought to their energy provider in the past, but increasing fuel costs leave consumers looking for new ways to cut spending. Even in single-provider areas, learning about how your energy provider charges for electricity service can help greatly reduce your utility bills.
The first step in reducing costs is learning how your energy provider charges for electricity. Electricity prices are based upon the current market value of electricity, which includes the fossil fuels used for production and the costs of generating electricity and transporting it to your home or office. Electricity is priced per kilowatt hour (kWh), which is the amount required to provide 1000 watts of power for a one-hour period. Electricity rates can be tiered, and additional fees added per kilowatt hour, so the only way to know the exact price you are paying is to look at your most recent statement. If you have questions about the charges indicated, call your provider and ask for an explanation of any fees that may be confusing.
Another factor to consider is whether your energy provider uses a tiered rate structure for billing. In a tiered plan, the price/kWh increases beyond contracted thresholds in monthly use. For example, you may pay $.15/kWh up to 500 kWh, but $.20/kWh for every unit above the threshold. Reducing consumption of energy through lifestyle or home improvement will reduce the most expensive use first, which can be a great incentive to implement conservation strategies. Tools for evaluating your household energy efficiency can be found online.
Understanding the fees charged above and beyond your price/kWh can help you uncover ways to reduce your bills. For example, demand charges are calculated based upon the maximum amount of electricity used at any one point during the billing cycle. If your energy provider uses demand charges, spreading out appliance use throughout the day will reduce costs. In some areas, utilities will use lower rates at night, to encourage use of power-hungry appliances during the off-peak hours. Small adjustments to your lifestyle based upon these types of pricing structures can lead to big savings.
In some areas, utilities have begun offering various types of rate plans to give more choices to customers. Fixed rate plans allow customers to lock in a cost/kWh for a contracted period of time, generally one year. With a fixed rate, consumers need not fear fluctuation in pricing, but may pay more than the market price for gas at any given time during the contract period. Variable rates give customers the option of paying the going rate for electricity each month. Prepaid electricity plans allow homeowners to pay in advance for utility service and carefully monitor usage online. Depending upon your budget and usage, you may find that looking into your average payments and comparing them to the rate options available from your provider will lead you to select a plan that will save you money.
In deregulated utility areas, consumers are free to shop around for the best pricing and payment plan to meet their needs. Many resources are available online to help comparison shopping, and generally the Department of Energy or state regulatory agencies provide monthly rate comparisons charts as well.
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