A Complete Guide to Understanding Electricity Rate Structures

If it’s time to look for a new electric company, it may be a good idea to look into the electricity rate structures they offer to find the right one. Some companies will only offer one structure with all of their plans, while others will offer different plans with different structures. Understanding the structures and how they can impact the bill can be important for those who want to find the right plan for their needs.

How Electricity is Measured

It is important to understand how electricity is measured for your electric rates. Electricity goes into the home through a meter, which tracks the kWh (kilo-watt hours) of electricity each month. This is the part of the electric bill that can vary per month in most structures, and one that is impacted the most when users try to lower their electric bills. On top of this, the bill may also include other charges and fees.

Time-Of-Use Rate Structure

With a time-of-use (TOU) structure, the amount paid per kWh can vary based on the time of day. During peak hours, the electricity used will cost more than during off-peak hours. Users can save money by using more electricity during off-peak hours and saving electricity as much as possible during peak hours. It is recommended to ask the electric company for the peak hours to know when to conserve energy as much as possible.

Tiered Rate Structures

With a tiered rate structure, the amount of electricity used is broken down into different tiers. The first tier has the lowest rate, and the rate increases per tier depending on how much energy the person uses. The goal of this type of structure is to help encourage people to conserve energy use, as they will pay less if they use less energy. Those who can reduce their energy use may see the most savings from a plan like this.

Fixed-Rate Billing Options

Some companies offer a fixed-rate structure, where the amount paid per kWh is the same no matter how much energy a person uses or the time of day they use it. For those who have a consistent energy use month-over-month, this can mean their bill is about the same every month, making it more predictable. Combining this with ways to save money on electricity can help users reduce their bill as much as possible.

Other Fees and Charges

It is important to keep in mind that the use per kWh isn’t the only expense on an electric bill. Pay attention to base fees, delivery fees, and other charges that might apply when choosing the right structure and plan, as these can make one option more expensive than another. Customers will want to make sure they find the lowest fees possible to increase their savings in the long run.

Those who are ready to switch electric providers may want to take the time to consider the different plans and energy structures so they can find one that meets their needs the best. All structures have pros and cons, so it is important to consider them carefully, as the right one may be different for each household. Then, it’s possible to find the right company with the lowest rates to get the best deal on electricity and save more money.