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By Thad Warren
Every month, you pay an electric bill, but do you actually understand what you’re paying for? One of the most important terms on your bill is kWh (kilowatt-hour), which measures the actual electricity you consume.
A kilowatt hour (kWh) is the unit of measurement utility companies use to track your energy usage.
Just like your water utility might track the number of gallons of water you use, your electric company uses kWh to track the amount of electricity you use.
If you’ve ever wondered why your bill is high, how to track energy usage, or how to save on electricity costs, this guide is for you. Let’s break it down in a way that makes sense—no technical jargon, just practical insights.
A kilowatt-hour (kWh) is a unit of energy that tells you how much electricity you use over time.
Think of it like a gallon of gas for your car. Just like a gallon measures fuel, a kWh measures electricity usage. The more kWh you use, the more energy you consume—and the higher your bill.
Here’s how it works:
If you use a 100-watt lightbulb for 10 hours, you’ve used 1 kWh of electricity.
Here’s how much energy some common appliances use:
Kilowatts (kW) and kilowatt-hours (kWh) measure two different things.
Think of it like a car:
For example, if you have a 1,000-watt (1 kW) space heater and you run it for one hour, it uses 1 kWh of electricity. If you run it for two hours, it uses 2 kWh.
Your electricity bill is based on kWh, not kW, because it reflects the total energy consumed over the billing period. Understanding this can help you manage energy use and cut costs.
Your electricity provider charges you based on how many kWh you use each month. Knowing what a kWh is helps you:
Your electricity bill calculates the total amount of electricity consumed by your household or business using kWh. Understanding kWh is essential for managing your energy usage and reducing your electricity bills.
To calculate your kWh usage, you need to know the power rating of your appliances and the number of hours they are used. A power rating for an appliance is the maximum amount of electrical power that the appliance can use while operating and is measured in watts (W).
For example, if you use a 100-watt light bulb for 10 hours a day, your daily consumption would be 1 kWh (100 watts x 10 hours / 1000).
Ever wondered how much energy your TV, fridge, or AC unit actually uses? The answer is easy to calculate!
By accurately calculating your energy consumption, you can take steps to lower your energy bills.
To figure out how much electricity something uses, use this formula:
Using this formula can help you understand the components of your electric bill better.
If you would rather skip out on the math, we have an entire suite of electricity usage calculators that you can use for free.
Let’s say you have a 500-watt TV that you use for 4 hours per day:
If you watch TV every day for a month, that’s:
A 1,500-watt space heater used for 3 hours per day:
Over one month, that’s:
Tip: If you want an easy way to track your energy use, many smart plugs and electricity monitors show real-time kWh usage for each device.
The cost of electricity isn’t the same for everyone. Your rate per kWh depends on:
These factors collectively determine the final amount on your energy bill.
Time of day and seasonal factors can significantly impact your electricity usage and costs. Peak hours, usually during the day when energy demand is high, can result in higher electricity rates. Conversely, off-peak hours, typically at night or during weekends, may have lower rates.
Seasonal factors, such as extreme temperatures, can also affect your energy consumption. For instance, during hot summer months, your air conditioning usage may increase, leading to higher electricity bills. Similarly, during cold winter months, your heating usage may increase, resulting in higher energy costs.
Understanding these factors can help you adjust your energy usage habits and take advantage of time-of-use (TOU) pricing plans, which can save you money on your electricity bills.
Your energy provider and billing plan can also impact your electricity costs. Different energy providers offer various pricing plans, including fixed-rate, variable-rate, and tiered-rate plans. Understanding the details of your billing plan can help you make informed decisions about your energy usage and reduce your electricity bills.
For example, if you’re on a tiered-rate plan, you may be charged a higher rate for electricity usage above a certain threshold. In this case, reducing your energy consumption during peak hours or shifting your usage to off-peak hours can help you save money.
Pro Tip: Make sure to read the Energy Facts Label (EFL) before committing to a new plan for your home or business, so there are no surprises when your first bill comes.
According to the Energy Information Administration (EIA), the average U.S. electricity rate is about 14 cents per kWh.
You can see the most recent electricity rates for every state on this page.
If your electric bills seem high, your kWh rate may be the culprit!
Electricity costs in your area will depend on many factors. Local legislation, types of generation, delivery charges and more.
Most people glance at their electricity bill, see the amount due, and move on. But if you take a closer look, you’ll find a lot of useful information that can help you manage your energy usage and even cut costs.
At the core of your bill, you’ll find the total kilowatt-hours (kWh) used, which tells you exactly how much electricity your home consumed during the billing period. This number is the foundation of your charges, so understanding it is key.
Next, there’s the rate per kWh, which is the price you’re paying for each unit of electricity. This rate can vary depending on your electricity plan and provider, and it’s important to check if you’re on the most cost-effective plan for your usage. Understanding your rate per kWh can also help you make energy efficiency improvements to lower your bill.
Then comes the supply charge, which covers the actual cost of the electricity you used. This is what you pay to the energy provider that supplies your electricity. Alongside that, you’ll see the delivery charge, which goes to the utility company responsible for maintaining the power lines and delivering electricity to your home. This charge stays the same regardless of which provider you choose.
Finally, your bill will include taxes and fees, which are charges imposed by the state or local government. These charges aren’t your responsibility, but they’re important to be aware of.
For more information about reading your bill and the various charges it might contain check out this resource: How do electricity bills work?
Reviewing your bill can help you spot potential problems. If your usage seems unusually high, it could be due to an energy-hungry appliance running in the background or a billing error. It also helps to compare your rate per kWh to what other providers offer.
If your rate is significantly higher, it may be time to shop for a better plan.
Another benefit of tracking your bill is that it allows you to recognize patterns in your energy use. If you notice that your electricity consumption spikes at certain times of the year, you can make adjustments to keep costs under control.
If your bill suddenly jumps for no clear reason, it might be worth checking if an appliance is malfunctioning. Some devices—like an aging refrigerator or a faulty water heater—can start using more energy than usual, driving up your costs without you realizing it.
Lowering your electricity bill doesn’t have to mean big lifestyle changes. Some strategies are quick and easy, while others require more effort or a bigger investment. Here’s a breakdown of simple, moderate, and long-term energy-saving solutions.
For a full list of energy-saving tips, check out this list.
These small changes can start saving you money right away, with little effort or cost:
If you’re willing to spend a little, these upgrades can lower your electricity bill even more:
For those willing to make a larger upfront investment, these options can lead to major savings over time:
