Payment by the Kilowatt-hour
Your electrical usage is measured in kilowatts-hours, which is a measure of both the power you’ve consumed and how much time it took you to consume that power. Both the amount of power and the time to consume have a bearing on the price you pay for the electrical portion of your utility bill. Unlike conventional wholesale pricing, the cost per kilowatt-hour actually goes up as your consumption increases.
Putting it in different terms, each kilowatt is a measure of electricity, similar to measuring a quantity of water in gallons. Your utility company charges for each kilowatt of power you use, in much the same way as a store charges you for a gallon of water. Your utility company may also impose additional costs if you use a lot of electricity though, and this is where the ‘hour’ part of a kilowatt-hour comes into play. Consuming one kilowatt in one hour equates to one kilowatt-hour (or 1 kwh). Your utility company keeps track of how many kilowatt-hours you use each month, and many utility companies increase the cost per kilowatt hour as your usage goes up. For example, if you have a standard rate plan and use over 17 kilowatt-hours per day, DTE currently charges about 1.5¢ extra for each kilowatt-hour. They offer seniors a discounted rate, but only for the first 10 kilowatt-hours consumed per day; they add nearly 10¢ per kilowatt-hour for seniors who exceed that ceiling. If you’re keeping score, that represents a rate increase of over 200% for seniors who use too many kilowatt-hours per day!
Still other rate plans are sensitive to the time of day your electrical consumption occurs, offering lower rates during ‘off peak’ hours – meaning the utility company offers discounts for those willing to do their baking or laundry later at night or early in the morning. These discounts are available because during the ‘off peak’ hours businesses are closed, and the utility company doesn’t have to supply their large power demands.
There is an additional discount which may be available to some consumers. The utility company itself has to pay premium prices during times of peak demand – whether they install extra generators which sit idle during times of ‘normal’ demand, or they have to resort to purchasing power from other utility suppliers. That ‘peak power’ comes at a premium price, and the utility company may offer discounted rates to those who are willing to have power for air conditioning or electric hot water tanks interrupted during times of peak power usage. If you’re considering an interruptible rate plan, keep in mind that there will probably be an additional meter and may be some interior re-wiring necessary to implement the plan.
To summarize, your electrical bill is measured in kilowatt-hours, and your cost can be reduced by:
- Reducing the number of kilowatt-hours you use
- ‘Spreading out’ your electrical usage, avoiding heavy use one day and light usage another
- Take advantage of rate plans which offer ‘time of day’ rate discounts, if they are available
- Consider allowing interruptible rate plans for non-essential services (such as air conditioning), but take into account any additional costs needed to implement the plan
There you have it! You now know how to reduce the pain when it comes time to pay your electrical bill.