Consumer Guide to Electricity Rates – Understanding Local Rates

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Electricity bills can be confusing for those who haven’t taken a close look before or are new to paying for their own energy. As prices increase, it is important for consumers to understand their bill and what the different components are so they can see why it’s increasing and what they can do to lower the prices to make using electricity more affordable. 

The Basic Energy Charge

When homeowners are looking for a new electrical company to use, they’ll typically begin by checking local electricity rates. This is the base rate for energy use and does not include other charges and fees. This is calculated in Kilowatt-hours (kWh) and the provider will set the rate per kWh. Those who are shopping around can see what the base charge is per kWh to compare different providers.

Homeowners can also view the base energy charge on their bill to see if the amount of energy they’re using is increasing or decreasing per month. If there’s a major issue causing a surge of electrical use in the home, this is where it will be detected. 

Delivery Charges

The delivery charge covers the cost of getting electricity to the home. In Texas, homeowners may have noticed that the delivery charge has increased recently. This is because of the increased cost to provide electricity to homes and to improve existing structures to reduce the potential for power outages, especially during extreme winter weather. The delivery charge should stay relatively stable unless increases are approved and implemented. Then, the homeowner will be billed going forward at the new rate. 

Different Types of Rates

There are different types of rates that homeowners may see when they’re comparing providers. It is important for homeowners to understand which type they have to see how it impacts the bill they pay each month. 

• Fixed – A fixed rate means the homeowner pays the same price per kWh for the duration of their contract. It doesn’t matter what time of day they use the energy or what the current market conditions are. This makes the bill a bit more predictable for homeowners.

• Variable – If the rate is variable, the kWh rate will vary depending on the market. This can help homeowners save money at some times, but it may be more expensive in other months.

• TOU – TOU or time-of-use means that homeowners pay a different rate depending on the time the energy is used. During peak hours, homeowners pay more for their electrical use. This means they can save money if they use less energy during peak hours and use more energy during the off-peak hours.

• Tiered – With a tiered rate, the rate can increase as the homeowner uses more energy. If homeowners use less energy, they’ll pay a lower amount per kWh. If they use more energy in one month, they’ll pay at the increased rate based on the kWh rate for the higher amount of energy. This can mean more savings when energy use is low. 

Take the time to read through your bill carefully using the information here to help understand what it says. Doing this can help you learn more about what you’re paying for and how you can reduce your energy costs to save more money. It can also help you find the best option when you’re ready to shop for a new energy provider. 

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