Your electric bill is full of charges, numbers, and symbols that can be difficult to understand. However, by knowing what your bills are made up of, you can save money on energy costs.
What is a kWh?
A kilowatt hour is essential when considering your business’s energy consumption. This is because your business’s electricity in Fort Worth supplier will often calculate your monthly bill based on the number of kWh you use. Understanding what a kW and a kWh are can help you take control of your energy bills, make better decisions for your business, and save money by reducing your usage.
A watt is the amount of electric power used in one instant, while a kilowatt hour measures the total power used over some time, such as an hour. For example, a 1,000-watt heater for three hours will consume 3 kWh of electricity. The best way to understand this is by using an energy monitor or tracking the wattage of individual devices and equipment in your business (like your flat-screen TV or stereo).
Knowing how many kWh of electricity each device uses and when it is used is critical information when making decisions about what to keep on at your business, as well as how much to charge your customers for energy. Understanding the difference between watts and kilowatts will allow you to easily compare electricity rates from different providers to find the best deal for your business.
Electricity bills can often be confusing, with numerous charges and terms that may not be immediately clear. Understanding these components can help you manage your energy use more effectively and identify areas where you can save money. Here, we break down the key components of your electricity bill and highlight the importance of maintaining your appliances, including the impact of services like commercial fridge repair, on your overall energy costs.
What is a Demand Charge?
Your business’s electricity bills include more than energy usage charges – you also pay for the stress your business puts on your local power grid. These demand charges can make up 30-70% of the delivery portion of your bill in certain territories, rate classes, and months of the year.
Your demand charge is based on the maximum amount of power used in a 15-minute interval (also known as your peak demand) during a billing cycle. Your demand meter records the maximum power use for the most demanding 15-minute period in your monthly billing cycle, then multiplies that number by the prevailing customer demand charge (often called a max demand or non-coincident demand charge).
Demand charges encourage businesses to spread out their energy usage over time to avoid putting excessive stress on their local power grid. Demand charges are often seen during the on-peak hour, during the summer, when everyone simultaneously turns on their air conditioning.
The exact billing method for demand charges varies by utility. Still, the general trend is to move away from charging customers a flat $/kW demand charge and toward charging them the same way they are charged $/kWh for their energy usage. Demand charges can be an easy place for businesses to find additional savings.
What is a Supply Charge?
Your supply charges represent the cost of electricity that you use during a billing period. The amount charged reflects the rate per kilowatt-hour (kWh) you’ve agreed to with your energy supplier, plus the kWh consumption during the billing period. You can reduce the amount you pay for your electricity supply charges by working to cut your usage and switching to a lower rates plan.
The supply portion of your bill also includes generation costs that go toward the actual production of electricity. This could include the cost of operating a nuclear plant, natural gas as an input for a combined cycle generator or building solar and wind farms. The amount charged for the generation portion of your bill is determined by your energy supplier’s contract details (in deregulated markets) and tariff rate structure.
Another component of the supply charge on your electric bill is a transmission and distribution (T&D) rate that covers the network expenses that get electricity from power plants to you. This includes the cost of the high-voltage lines transporting electricity across town and city blocks and then down to your meter through lower-voltage lines. Your local utility company regulates this part of the bill and cannot be changed by you as an energy supplier.
What is a Capacity Charge?
A capacity charge is an added charge for reserving electricity on the power network that might be required to meet your peak usage. It is generally shown on a commercial electricity bill as a Capacity, Availability, or Supply Assurance Charge (although terms vary by location and supplier).
For example, one of our clients has four staff in their small industrial unit who use lighting, IT equipment, a few motors running minor processes, and a plastic extruding machine that uses a lot of energy twice weekly for around 4 to 6 hours each time. These are not unusual electricity demands for an industrial site, but as their demand is very high and the equipment runs for a few hours, their capacity charges can also be very high.
The good news is that, unlike the demand and supply charges, capacity charges aren’t based on how much electricity you consume in any given month or year. This is because the information used to calculate your capacity charges is sourced from auctions that are held to buy capacity from electricity generators and transmission operators on a long-term basis.
Getting to grips with the different components of your electricity bill will help you understand how your electric costs are calculated and allow you to lower these costs by switching rate structures, managing peak demand, or changing your energy usage habits.
