Understanding and Analyzing Your Utility Bills

Understanding the current energy use on your farm is the first step to becoming more energy efficient. A great place to start is by looking at your utility bills. Reading utility bills can be confusing and frustrating at times, but with a little effort, you can gain valuable insights into your energy use and costs.  This article helps break down different parts of your electric and heating utility bills to help you identify opportunities for energy and money savings.

In short, utility bills include charges for some or all of the following:

1. Simple Account/Customer Charge, to cover the cost of maintaining your account, sending bills, etc.,
2. Usage Charges, based on the amount of energy used,
3. Rate Charge for the fastest rate at which you used energy
4. Various surcharges, fees, and taxes.

This article will first explain what the consumption units (kWh, Ccf, therms) mean on your utility bills and how they are calculated. It will also discuss the difference between Natural gas, Propane, and Oil energy sources and the different units used to measure them.

This article will also cover different types of rate structures that your electric company may charge you. Understanding the various rate structures might help to lower costs by either switching to a different rate structure or adjusting your energy usage patterns.

Consumption Units

The word “usage" refers to the amount of energy used during the billing period. The usage is calculated using different units for varying energy sources

Electricity

Units for electric bills are usually shown in kilowatt-hours (kWh, kW-hrs), which is equal to the electricity used at a rate of 1000 Watts (one kilowatt) for one hour. Below are examples of some common household appliances, the rate at which they use electricity (wattage), and the amount of energy used for a typical task.  To find the kWh used by equipment, multiply its kilowatt rate (kW) by the number of hours it is being used. For example, the wattage for a light bulb is 33 W (0.033 kW), and if a light bulb is used for 1 hour, that is 0.033 kWh (0.033 kW x 1 hour)

• (kWh = kW*hours)

Heat Energy

There are different fuels that can be used for heat (thermal) energy. Common sources include Natural gas, Propane, and Fuel Oil. Different energy sources are expressed in different units and have different heat content.

Natural Gas

Natural gas is typically measured in Ccf (100 cubic feet) or Therms. 1 Ccf of Natural gas produces around 1.037 Therms of heat. This conversion marginally varies with different locations and different times of the year.

Propane

Propane is single component gas, which is often stored and supplied under such high pressure that it becomes a liquid, and the usage is usually expressed in liquid gallons. Farms that use propane usually have a propane tank on site which is usually refilled by the supplier as needed.

Fuel Oil

Fuel oil is delivered by truck and stored in tanks at the farm, similar to propane.  It is also sold by the liquid gallon.  Fuel oil is occasionally used on farms but is more commonly found in industrial settings.  Keep in mind that a direct comparison of cost between natural gas, propane and fuel oil could be misleading because they are sold using different units (i.e. kWh vs. gallons vs. Ccf). The Penn State Extension Energy Selector Tool can help you account for those differences and clearly see which fuels are most cost-effective.

Rates

The next step to understanding your energy bill is your usage charges. The majority of your total energy costs are usually usage charges, and they are calculated by multiplying your usage by the rate for that energy (expressed in $/ unit). Different energy suppliers may have slightly different usage charges and rate plans.

Propane or Fuel Oil

Charges that account for the current cost of the propane or fuel oil usually have a fixed or simple rate structure, so there is a fixed amount of money charged per unit of usage (i.e. dollars per gallon).

Natural Gas

The supply charges for Natural gas also follow a simple rate structure and charge a fixed amount per unit of usage (i.e. dollars per therm). There may also be additional “gas cost adjustment charges" to account for changes in gas prices.

Electricity

Electricity is typically the most complicated utility, in terms of rate structures.  The charges and rates can also vary based on your consumption pattern. It is helpful to understand the different types of rates a supplier can charge you.  The most common rate structures are “Fixed Rate", “Tiered Rate", and “Time of Use Rate".

Fixed (or Simple) Rate

In a fixed rate for electricity, the supplier charges a fixed amount of money per kWh of electricity used.

Example: A farm uses 2,000 kWh of electricity during a month. The farm is billed using a fixed rate charge of $0.121 per kWh. How much will the farm be billed for their electricity use?

Tiered (or Step) Rate  

At a tiered rate, the electricity supplier charges a higher rate once a particular threshold of energy use is exceeded.

Example: A farm uses 2,000 kWh of electricity during a month but is billed using a tiered rate, where the first 500 kWh cost $0.10 per kWh, the next 500 cost $0.13 per kWh, and any usage beyond that costs $0.15 per kWh. How much will the farm be billed for their electricity use?

Figure 1 shows a comparison of the fixed rate vs tiered rate in the above examples, as a function of total monthly electricity usage.  As usage increases, the overall cost of electricity for a tiered rate increases, whereas the fixed rate always stays the same.  Because of this, there may be some situations where a fixed rate is less expensive and other situations in which a tiered rate is less expensive.  

Figure 1. Graph showing rate vs. usage for fixed and tiered rates.

Table 4 shows a comparison of the total energy cost resulting from either fixed rate or tiered rate described in the above examples, as a function of total usage.

As you can see, as the usage increases the fixed rate becomes more cost efficient, but if the usage is below 1167 kWh per month, a Tiered rate structure is more cost efficient. To find the usage at which a fixed rate structure becomes more cost efficient, this tool can be helpful.

Time of Use Rate

In a Time of Use rate, the electricity supplier may charge a higher rate during those times of day when power is most heavily in use by customers in that region (the “peak" period). Times when electricity is not usually in heavy use are called the “off peak" period. Sometimes a “mid peak" period is also defined, when electricity use is moderate.

Example: A farm uses 2,000 kWh of electricity per month, and is billed on a Time of Use rate as follows:

• Weekday peak times: 7am- 11am; 5pm-7pm; $0.18/kWh
• Weekday mid-peak hours: 11am -5pm; $0.15/kWh
• Weekday off-peak hours: 7pm-7am; $0.05/kWh
• Weekend off-peak hours: 12am-12pm; $0.05/kWh

How much would the farm be charged if they used more of their electricity during the peak period than the off-peak (500 kWh off peak, 700 kWh mid peak, 800 peak)?

How would the charge change if the farm was able to shift their usage more to the off peak period (800 kWh off peak, 700 kWh mid peak, 500 peak)?

As you can see in the two tables above, reducing the energy usage during peak hours and using equipment that requires a lot of energy during low peak hours can reduce your energy bill – if you are being charged on a Time of Use rate.

Demand Charges

Demand charges are usually charged for commercial, and industrial customers. These are additional charges on top of regular usage charges that are based on the maximum rate (in kW) of energy used (measured over a 15 min interval). Your utility provider looks at electric usage over the past month and checks which 15-minute interval had the highest usage and uses that to determine your demand charges.

Example: The farm in the previous examples raises poultry, and runs 10 feeders for an hour every day. If you look at the chart below, the blue bar represents the usage if they run all the feeders at once, and the red bars represent the usage if they run the feeders separately. While the total amount of usage is the same, the peak usage is very different and demand charges are based on peak usage. If the utility company charges $10.00 per kW for demand, the demand charge in the first scenario would be 10*10= $100.00. The demand charge in the second scenario would by 10*1= $10.00.

Figure 2. Example of Energy Usage for Concentrated vs. Distributed Feeder Use.

While the timing of some loads such as ventilation cannot always be controlled, spreading out the controllable loads so they are not all running at once can save a lot of money on demand charges. You can also talk to your utility company about managing demand charges because many of them have programs to lower demand charges

Other Surcharges, Taxes, and Fees

On top of your usage charges, which are based on how much energy you use, a good portion of your total costs also come from other charges like distribution charges, customer charges, and other taxes and fees. These charges cover to cost of delivering your energy to your house or business. They often take into account the cost of maintaining and operating all the powerlines, poles, meters, wires, etc. Common additional charges include:

• Distribution Charges - These charges cover the cost of delivering your energy to your house or business. In electric bills, these usually cover the costs of equipment required to deliver electricity from high voltage transmission lines to your home or business safely. For natural gas, these usually cover the costs of gas pipelines, gas meters, and maintenance and management of the gas network. Distribution charges are a fixed rate that is multiplied by your usage for the billing period. Demand charges can also be listed along with distribution charges.

• Customer Charge - These cover the costs for maintaining your account, such as billing costs, meters, and equipment. This is usually a fixed amount every month
• Transmission charges - This often shows up in electric bills and it covers the cost of transporting the electricity from the place that generates it to distribution lines. Similar to distribution charges, they are calculated by multiplying a fixed rate by your usage during that billing period.
• Taxes and Fees - Farms in Pennsylvania do not have to pay sales tax so if you see sales tax on your utility bills, talk to your Utility provider about that.
• Other fees may also show up on your utility bill that may cover some specific costs such as making repairs after storms and installation of smart meter programs.

Supply charges may be flexible depending on your supplier, but distribution charges are often fixed. However, distribution charges may vary depending on where you live. Your suppliers usually don't have control over your distribution charges. This applies to both your electric and gas bills.

Commercial vs. Residential Utility Rates

Rates and plans can be very different for commercial and residential customers. For example, three-phase electricity and higher voltage service are usually only available under a commercial rate, whereas residential rates (under which many farms are served) are usually limited to single-phase service. The amount charged under a residential vs. commercial rate typical size of a commercial customer vs. a residential customer.

Below is a snapshot of some example commercial and residential rate differences for different utilities.

Labeled Sample Electric Bill

The following figure shows a representative sample of an electrical utility bill, with annotations pointing out major components that have been discussed in this article.

Using this Information

Now that you understand the basics of what is included in a typical utility bill, here are some ways you can use this information to save money and energy on your farm.

• Switching to different rate: There are some situations where having a fixed rate is less expensive than a tiered rate or vice versa. So, switching to a different rate plan based on your average energy usage can help you save money. The tool linked above can help you figure out which rate is better for you based on the rate plans available to you and your average energy usage.
• Changing the timing of energy: If you are on a time of use rate plan, changing the times you use high wattage equipment to low peak hours can greatly reduce your energy bill.
• Lower your peak usage: If you are being charged demand charges, lowering your peak usage can greatly help you reduce your energy costs. While some equipment has to run at certain times, spreading out the loads you can control will lower your peak usage. Many electric companies also have programs that incentivize lowering your demand charges, so it may be beneficial to contact your electric supplier.
• Switching to different supplier: While the distribution and transmission charges are usually the same across electricity suppliers, the usage rates and rate types vary between suppliers. It may be beneficial to switch to a provider that offers better rates or offers different rate plans that work better for your energy usage.

Conclusions

Analyzing your utility bills can give you helpful insights into your energy usage and help find opportunities to reduce your energy bills. Understanding your energy usage will also give guidance in choosing suppliers or rate plans, and can help find the best times to run certain equipment so you can be more cost-efficient. 

Penn State Extension renewable energy programs

Prepared by Adira Nair, Department of Agricultural and Biological Engineering. Reviewed Siobhan Fathel and Daniel Ciolkosz.