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How Do I Read My Electric Bill? Our Handy Tutorial

November 1st, 2021 | By Chad McComas

When you glance at your electric bill after installing a solar panel system, it can look confusing. Some of the numbers and terms may look unrecognizable, but we are here to assure you, it’s not so bad. Let’s break down your electric bill and how excess solar generation plays a role in your electric bill.

How the Utility Company Charges You for Grid Energy

Although everyone’s bill will not be the same, let’s use a customer in southeast Michigan as an example. Utility companies charge you for every kilowatt hour of electricity consumed each month by your home. Most utility companies will designate that use as “Inflow,” which is the amount of electricity flowing into your home from the grid. The term is found in the “Current Billing Information” section on the right-hand column of the page. You’ll see that this customer used 635 kWh of grid energy during the month of July.

Now the great part about solar is the chance to send some of the energy created by your solar panels back to the grid. This is termed “Outflow” on this statement, which is to say the amount of energy you sent out to the grid for the utility company’s use. Depending on where you live and the policy of your utility company, you may be credited at a 1-to-1 rate for the energy you send back to the grid. That is to say, for every kWh of grid energy your home consumes, each kWh of solar energy you send back to the grid is worth just as much, giving you a fantastic benefit. That 1-to-1 credit for excess energy is called net metering.

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However, this utility company does not have net metering, and here’s how we know. Of the four charges that comprise this customer’s power bill (Power Supply Capacity Charge, Power Supply Non-Capacity Charge, Power Supply Cost Recovery and Distribution), those charges total 15.6 cents for each kWh consumed by you. How do we know that? More on that in the section below.

Understanding Your Electric Bill

The numbers look strange, but let’s put them into an easy-to-read format.

Power Supply Capacity Charge: $0.045, or 4.5 cents
Power Supply Non-Capacity Charge: $0.0417 or 4.2 cents rounded
Power Supply Cost Recovery: $0.0032, or .32 cents (one-third of 1 cent)
Distribution: $0.0661, or 6.6 cents rounded
TOTAL: 15.6 cents/kWh
NOTE: This utility company upcharges you for grid energy used beyond 510 kWh. The rate is $0.0648, or 6.5 cents rounded.

Now remember, this customer is paying at minimum 15.6 cents for every kWh of energy they take from the grid. Now let’s look at the “Outflow Credit” portion of the statement. You’ll notice that this customer sent 169 kWh back to the grid, and they are being credited $0.0806 for each kWh, or 8.1 cents rounded. So, energy sent back to the grid is worth approximately half as much to them as if it’s used by their home.

Because some utilities do not offer net metering like this one, you see how much more beneficial it is to have most if not all of the energy created by your solar panels to be used by your home. If you’re in essence sending $1.00 worth of energy back to the grid, and you only get $0.50 in return, that’s not a good deal. That’s why we strongly recommend adding battery storage with your solar system purchase. By storing that excess solar energy in your battery for later use, your home can use that energy for powering your needs instead of drawing it from the grid. A battery also gives you protection in case of power outages, and it also gives you the chance to combat time-of-use rates, when some utility companies charge more for the energy you use during certain times of day. Why not use your stored energy during those times, improving the value of your battery even more?

What Do All The Terms on My Electric Bill Mean?

As already noted, there are four charges that are the main components to this bill: Power Supply Capacity Charge, Power Supply Non-Capacity Charge, Power Supply Cost Recovery and Distribution.

The Power Supply Capacity Charge is what this utility company charges you to generate the electricity used by your home. Of the 635 kWh of electricity drawn from the grid by this customer, you’ll notice that the first 510 kWh of that energy was charged at a rate of 4.5 cents, and energy over that amount is charged at a higher rate of nearly 6.5 cents/kWh. Collectively, these charges total $31.06.

Next, this customer was billed for the Power Supply non-capacity charge, which covers variable cost and operations maintenance. Like the Capacity charge, the customer is charged for their 635 kWh of usage, which totaled $26.52.

The least expensive of the four charges, the Power Supply Cost Recovery, covers fuel and the costs associated with the purchase and transport of the electricity from generating plants to the delivery system. Their total of $2.04 was tallied multiplying their 635 kWh of grid energy used at a rate of $0.0032, or one-third of one cent.

Finally, the Distribution charge takes care the costs to deliver the electricity through the grid and into your home. By using 635 KWH, the homeowners were charged 6.6 cents for each kWh used for a total of $41.98.

Add all those charges up, along with surcharges and taxes, and subtract your Outflow credit, and you see that this electric bill is $104.10.

What This Electric Bill Does Not Show

One thing that this electric bill does not show is how much electricity your solar panels generated. Not to worry about that, as Pink Energy provides you with a login to view your solar production online or through an app. This can serve as a great pride point for you, where you look to see how much energy you’re producing on a sunny day, or also serve as your first checkpoint in case there is anything amiss with your system.

Bottom Line

We hope that this tutorial on how to read your electric bill has proved very helpful. It really comes down to knowing how much electricity you used, how much you banked, and finding the net number between those two. If you have further questions about your specific bill, you can contact your Customer Solutions team at (877) 4-GO-Pink, and they will be happy to help.

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