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Understanding Your Electric Bill for Solar Power

Posted by Margaret Collins In Saturday, March 13 2010 under: Solar Homes, electricity, Solar System Design

Understanding your Utility Bill for SolarUpdate 2016, This post is as timely as ever: When you're looking into a solar power system for your home, you suddenly have to take a much deeper look at your overall energy usage. Assessing how energy efficient you are is the very first step; making changes to become more efficient, the second. But the third? Getting pretty up close and personal with your electric usage: you should know your actual and average kilowatt-hour usage, the breakdown of your generation charges vs. delivery charges, and how your usage changes over the year.


An experienced solar installer will also want to know these things, and sure, you could just hand over your last twelve months of bills and let them run with it, but you're about to make a big investment here. We at GetSolar can't stress this enough: be a responsible, conscious energy consumer and you'll save money, possibly a lot of money. Having a deeper layer of knowledge about your energy use will allow you to take advantage of your solar installer's expertise, ask better questions, and understand comparison quotes-- getting a better home solar installation as a result.

For most people, sitting down to take that first hard look at an electric bill is intimidating. The terminology is obscure, and nowhere explained on your bill. Let's go through and take a look at an example of a real, recent bill of mine, and what the different components have to do with your solar quote. The bill below is for the month of February; the second column of data is for January. For the record, my electric utility has an extraordinarily easy to read bill--on your bill, this information may be scattered over two or three pages instead of bundled so neatly.

Sample electric bill 1) Thanks to this clearly arranged bill, I can guess that my monthly bill ($46.67, in this example) is my total charge for 275 kWhs of actual usage. But what on earth are kWhs? If you pay attention to your bills, have an extraordinarily good recall of high school science class, or are a handy type of person in general, you'll know that kWh stands for kilowatt-hour. One kWh is a measure of production: that is, capacity x time. A 1,000 watt window unit air conditioner turned on for 1 hour will therefore use 1 kWh (1,000 watts x1 hour). Leave it on for the whole day, and you'll have used 24 kWh (1,000 watts x 24 hours)--that's more than twice my entire average daily use on this bill. This is why energy efficient appliances (look for the Energy Star seal) make such a huge impact. Note: a 5 kW solar array has a peak wattage capacity of 5,000 watts, but it will not produce 25 kWh given 5 hours of sunlight. Instead, accounting for inefficiencies, it will produce more like 18-20 kWh.

2) My utility kindly tells me that it cost $0.08/kWh to deliver electricity to me this month. Delivery fees cover the utility's maintenance costs of lines and meters and administration. Your bill may detail this as "distribution and transmission"; you may also see a "fixed delivery charge" (aka "customer charge" or "service fee") or "variable delivery charge". A variable delivery charge means that this figure depends on how much energy you're actually using--this is usually a tiered rate structure. That is, for the first 200 kWh you use, maybe you get charged $0.08/kWh; but then for the next 300 kWh, you get charged at a rate of $0.085/kWh; and so on. If you're on a tiered rate structure, solar can have a disproportionately good effect on your bill: by reducing your total consumption from the grid, you only get charged at the lower-rate tiers.

3) Generation charges reflect the cost to the utility of either generating or acquiring (by purchasing from other utilities or power plants) the electricity it delivers to you. In my case, as you can see, generation charges are higher than my distribution charges--but not by much. In total, then, I paid nearly $0.17/kWh for electricity, significantly higher than the national average of $0.13/kWh. It's even a bit higher than my state average (Massachusetts), though I can't feel too sorry for myself: Hawaiians, on average, pay over $0.30/kWh!

4) Okay, to the good stuff. When a solar installer looks at your electric use in order to design you the most appropriately sized home solar panel array, she will be using your average kWh consumption. If you designed a system to meet just your peak days, you would end up with an oversized array. In most states, net-metering and other incentive rules require systems to be no more than 100-110 percent of your usage. So when we ask for your average electric usage, we're not doing it just because we love our puppet master-like power over your actions. No: this is the number at the heart of designing a home solar system. Your year to date average kWh consumption is sometimes displayed on your bill. If it's not, you can contact your utility directly or manually add up your last 12 months of bills.

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For a further illustration of the importance of averages, just look at that neat graph on the bottom of my bill. In January, I used more than twice what I have in any other month: a solar array that would meet all my electric needs for January would produce way too much power the rest of the year. Yes, I can send excess energy back to the grid and get credits for it on my bill; but once I reach 100 percent offset there's no farther I can go. Essentially, I'm giving away free energy at this point, which you want to avoid. In some states, utilities are required to credit you for net-excess generation (NEG) above and beyond that 100 percent offset, but they are allowed to do so at lower than retail rate, so you still take a price penalty.

Having fun yet? Kinda? This stuff may seem dull, but getting a good grasp of it will help you throughout the solar quote process, and make you a more informed solar home owner, as well. You'll be able to better assess what drastic changes in your monthly bill might mean (problem with your solar array, or just a change in your energy consumption?).

And if you were wondering, no, I don't have solar. First off, I rent (ah, city living); secondly, my bill is so low usually that it would be tough for solar to pay for itself quickly in my case. But community solar is becoming a very real option in many areas. For now, I'm sticking with my insulated drapes and conservative thermostat settings, and imagining the gleaming 6 kw SunPower solar array on the south-facing roof of my dream house...

Questions about reading your electric bill? Post them here, or ask us on Twitter.

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