4 Tips for Understanding Your Electric Rate Options
Over the years, most Americans have typically paid a fixed price per kilowatt-hour (kWh) of electricity that they use at home – no matter the time of the week they use it or how much they use at any one point in time.
In this scenario, your monthly bill is a simple formula of total electricity used (in kWh) times a consistent price, for example, 10 cents. Of course, in most cases, other fees are added to this, such as a meter or distribution charges, that then equal your bill’s total dollar amount.
However, with the rise of smart electric meters, the growth of renewable energy, the desire to address climate change and other factors, there’s a new landscape where many consumers may have a range of options in how they’re charged for electricity.
In general, these new rates seek to better align consumption of electricity with the production of clean energy sources and away from the costly afternoon/early evening window, which should help lead to a more efficient and more reliable power grid for everyone.
Let’s look at some tips for understanding the rate options that may be available to you:
1. Check your bill or app to see what rate you're currently on.
If you don’t know what rate you're currently on, don’t fret! The vast majority of Americans are unaware of how they’re being charged for electricity. To start, grab your most recent electric bill – or log in to your power company’s app or online portal. On your bill (paper or digital), you’ll likely see a section that says “rate” or “tariff” that will have your current rate.
It can often just say “Residential Service” here or some other difficult-to-decipher initialism, and you might have to check this against your power company’s website or give them a call. If you’re having a hard time tracking it down, try searching for your power company’s name plus “residential rates”, and hopefully, you’ll find a page with your options (here’s one example).
2. Compare your current rate against other options you might have.
If you were able to track down your current rate, you can now begin comparing that to other options that might be available to you, such as a time-of-use (TOU) rate where prices differ over two or three sections of the day or hourly pricing where your rate changes every hour.
Some power companies have built online tools that can help you analyze whether a change makes sense for you. With these tools, you can often see what your bills would look like using the past year of your electricity usage data. Other companies may have dedicated customer service staff that can help run these calculations and see what’s best for you.
Remember, a new rate may not save you money – it’s important to understand how you will be charged under any new plan before agreeing to it. If you’re unable to conserve electricity in the afternoons, for example, then a TOU rate likely doesn’t make sense for you. However, if you can, then you could see noticeable bill savings each month.
3. Look into a prepay plan or a subscription rate for increased bill predictability.
If you’re like many people today, you would appreciate some stability in your monthly power bills, and power companies are increasingly looking at options to deliver this for their customers. One way is a prepay plan, where you load money into your account and then can see daily how much of your balance you have left. Some consumers find this helps them budget throughout the month, but it may not be for everyone.
Another new billing plan is the subscription rate, which gives you a set price, say $120, each month for your bill no matter how much energy you use. Usually, your monthly price is based on your past usage, and if you use a lot of electricity each month, your price may go up next year. Power companies are just beginning to test these subscription rates, but many industry experts expect to see more of these in the coming years.
4. Check if you can participate in a peak-time rebate program.
Even if you decide to stay on your standard fixed rate plan, there are still plenty of opportunities to save on your power bills and also help the grid during times of extremely high demand (think a really hot summer afternoon). One of these is a peak-time rebate program (here’s one example).
These types of programs can vary, but typically, once you enroll, your power company will notify you (via email, app, text, etc.) at times when the grid is strained – or the day before when extreme weather is clearly on the way. If you make choices to lower your home energy usage during these times, you can get money back as bill credits.
But, before you sign up, make sure you understand the terms of the program. Under some programs, you may lose control of your smart thermostat for a couple of hours, which may be fine for some but highly undesirable for others.
With all of these new options, selecting a new rate can be daunting, especially when this isn’t an area anyone really had to think about in the past. However, finding a rate that better suits you can lead to monthly savings on your bill, and it could provide benefits for the grid and environment too.