Energy Bill Breakdown: How Understanding Your Electricity Usage Could Save You Money

Jan 17, 2024

Energy usage in the U.S. has soared. According to Enerdata, in 2022, the country’s total energy consumption increased by 2%. Energy bills are going up not only because of an increased usage trend but also because of the lingering effects of high inflation on power costs. Steep energy bills place a heavy financial burden on consumers and add to the growing crisis of living paycheck to paycheck.

An energy bill breakdown can help you understand your electricity usage, which could in turn inform you on ways to save you money. There are also other ways to trim costs. Let’s explore.

Here’s a closer look at how energy bills break down.

Get ready for some math because how your energy is used is somewhat complex.

“The number of kWh of energy you use is multiplied by the unit rate you pay on your current tariff,” said Les Roberts, Bionic‘s content manager and an energy bill expert. “If you’re on a fixed rate deal, this charge is set at an agreed rate so it won’t change as energy prices increase; however, your bill will still fluctuate, depending on how much energy you use.”

If you’re on a variable contract, the unit rate will go up and down as market conditions change.

“The standing charge is a flat daily rate you pay regardless of how much energy you use,” Roberts said. “This rate will be multiplied by the number of days in the billing period. It is a fee that covers the costs incurred by your supplier and the national grid.”

Of course, there are taxes. “[These] are additional charges like VAT,” Roberts said.

Now that we have a breakdown of our energy bills, we can look at ways to trim costs.

Remember how if you’re not on a fixed rate contract your costs will go up when market conditions do? That’s why you should switch.

“Switching to a fixed rate deal means your unit rate won’t be affected by the rising wholesale cost of energy,” Roberts said. “Your bill will only decrease if the amount of energy you’re using does.”

When there is higher energy demand in your area of coverage, prices of energy go up.

“That’s why it can cost more to run appliances between 9 a.m. and 5 p.m., when demand is high in homes and businesses, than it does at night when less energy is used,” Roberts said. “Bear in mind when you are using your electrical appliances and if you are currently on a time of use tariff it will be cheaper to run your appliances in certain, off peak times, usually between 11 p.m. to 8 a.m. when the grid is under less pressure and costs can be up to 50% cheaper.”

It may seem like a pain, but regularly replacing home air filters is necessary — and it’s a quicker process than you may expect.

“Replacing home air filters is a five-minute job you should perform every three months on your air conditioner and furnace if using moderately priced filters,” said Neil Wertheimer, deputy editor of the AARP Bulletin. “Doing so can save on your energy bill by lowering usage up to 15 percent, and it can prolong the life of your system.”

Dirty evaporator coils in your central air conditioner can push your bill up by increasing your energy usage “by up to 40 percent,” Wertheimer said. It’s important to clean them. “Use a brush followed by dish detergent and water in a spray bottle or coil cleaner designed for the job.”

Many utility companies offer homeowners a free visit by a professional to inspect for energy leaks.

“These auditors can inspect everything from windows to insulation, and find gaps along windows,” Wertheimer said. “Plus you might qualify for a $150 tax credit for the audit.”

Insulation is key! You may already have it through most of your home, but what about the attic, a room often left uninsulated? Insulating this space is a pretty affordable DIY project.

“Improving attic insulation is one of the least expensive home upgrades with the highest payback,” Wertheimer said. “For about $30 a roll, you can add 10 inches of unfaced insulation. Homeowners should aim to create a total thickness of 15 to 20 inches. One easy strategy is to lay unfaced fiberglass down on the attic floor. It prevents cool air from escaping into the attic and through the walls. On the other hand, it traps the heat in the winter.”

Amazingly, the way your ceiling fan rotates plays a role in your energy bill.

“A ceiling fan in warmer months spins counterclockwise to push cooler air down,” Wertheimer said. “In cold weather, reversing its spin clockwise will help move warm air back down in the room.”

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