Power Economics

Chapter 10Understand Your Energy Bills

I cannot overstate the importance of understanding your power bills. Commercial and industrial energy bill statements will have two distinct components: the electric generation/supply charge (depending on how the utility company describes the charge) and the transmission/distribution charge. The generation/supply portion is the actual energy charge, which is determined and charged in kWh (kilowatt-hours) for electricity, and in therms (0.10 MMbtu) or ccf (100 cubic feet of natural gas) for natural gas; it specifies the amount of energy consumption, the cost, and the source of energy.

The transmission/distribution charges are for the infrastructure needed to move the energy from the point of energy creation to the end-use location, including local wires, transformers, substations, and other necessities to deliver the energy. This is also called the distribution channels. These distribution channels for transmission/distribution are usually owned and operated by the utility company. A utility company may be either privately or municipally owned, or in some towns a combination of partial municipal and partial private ownership is in place.

Calculating the Cost of Demand

Demand rate is measured in kW (kilowatts) and calculated by the utility company. The demand rate or charge, which for industrial or commercial customers is listed separately in the transmission and distribution section, can be as much as 30 percent of your bill. In addition ...