How to understand electricity usage in your home and lower your costs
You might be asking, “Why is my electric bill so high?” Energy costs across the United States are extremely high and show no sign of going down anytime soon. Because of this, many people are finding ways to reduce their energy usage and understand phantom power or standby power — gadgets or appliances that continue using energy even when they aren’t in use.
Knowing how electricity rates are calculated and how households can be more energy efficient are the keys to reducing high bills once and for all.
In this article:
- Understanding your electric bill
- 3 common hard-to-fix reasons for high electric bills
- 6 fixable reasons your household electric bill might be high
- Potential solutions and tips for reducing bills
- Considering renewable energy options
- Frequently asked questions
Understanding your electric bill
It’s important to understand that kilowatts (kW) and kilowatt-hours (kWh) are not the same thing. A kW measures power, the rate at which electricity is used at a given moment. In contrast, a kWh measures energy, the total amount of electricity consumed over time.
When you look at your electric bill, you’ll notice that you’re charged based on the number of kWh your household uses over the billing period.
What makes up the cost of electricity?
Electricity bills can vary by utility and state, but most break down into two main categories:
1. Supply (also called Generation or Energy Charge)
This is the cost of producing or purchasing the electricity you consume. Utilities either generate electricity at their own power plants or buy it on the wholesale market. The sources might include natural gas, coal, nuclear, hydro, wind, or solar.
2. Delivery (also called Transmission and Distribution or T&D)
This is the cost to deliver electricity from the power plant to your home. It includes:
- Transmission: High-voltage lines that carry electricity long distances.
- Distribution: The local network of poles, wires, and transformers in your area.
This fee supports the maintenance of shared infrastructure and grid reliability.
Other common charges on your bill
In addition to supply and delivery, your bill may include the following line items:
- Base charge (also called Fixed customer charge or Basic service fee): A flat monthly fee that covers administrative costs like billing, meter reading, and account maintenance — regardless of how much electricity you use
- Time-of-use (TOU) rates: If you’re on a TOU plan, your per-kWh rates vary depending on when electricity is used
- Peak hours (typically late afternoons and early evenings) have higher rates
- Off-peak hours (usually overnight or midday) have lower rates. For example, running your dishwasher at 9 p.m. might cost less than at 6 p.m.
- Transition charges (also called Public purpose charges): May include stranded cost recovery (paying off past utility investments like closed plants), system benefit charges (supporting low-income programs, energy efficiency, or clean energy initiatives), and public goods programs (funding outreach, research, or environmental improvements)
- Taxes and regulatory fees: Local or state taxes and other utility surcharges that may appear as separate line items
The amount you are ultimately charged each month is determined by how much kWh your household consumes. According to the U.S. Energy Information Administration (EIA), on average, households in the U.S. used about 899 kWh each month in 2022 (the most recent data available).
3 common hard-to-fix reasons for high electric bills
Your electric bill can be high for many reasons — some you can fix, others you can’t. These are the more common issues that you have less control over.
1. Seasonal changes and climate impact
Seasonal weather can greatly impact your household’s electricity usage and monthly bills. Any time you have to increase the use of electric heating or cooling, you’ll pay more. Air conditioners, in particular, are known for how much energy they consume.
Climate change has also led to more extreme weather patterns. Electric prices can be volatile at any time of year because of the increased storms and longer periods of hot or cold weather.
2. Increased household occupancy
While some energy costs, like heating, are less likely to change with more household members, other smaller uses can add up. For example, more people in a home means more devices charging, extra lighting, and more appliance use. Plus, more bodies in one area can increase the temperature of a room, meaning more A/C in the hotter months.
3. Usage of energy-intensive appliances
Most homes have energy-intensive appliances — like your HVAC, water heater, and oven — that are unavoidable power draws, making up a large share of your monthly electricity costs.
| Energy-Intensive Appliances | Percentage of residential energy usage |
| Air conditioning | 19% |
| Space heating | 12% |
| Water heating | 12% |
| Refrigerators | 8% |
| Lighting | 6% |
| TVS and related | 6% |
| Clothes dryers | 4% |
| Source: U.S. Energy Information Administration (EIA) 2023 report |
6 fixable reasons your household electric bill might be high
Chances are that one of the main fixable reasons for high electric bills applies to you. While these fixes can be more expensive upfront, they can significantly reduce your overall energy usage.
1. Inefficient home appliances and systems
Outdated or inefficient home systems, such as HVACs or appliances, can be big energy drains. Updating to newer, more energy-efficient models is one way to quickly reduce energy consumption.
- Older refrigerators typically consume about 35% more energy than an ENERGY STAR refrigerator.
- Inefficient air conditioning units: Replacing an aging AC with a new, high‐efficiency unit can cut cooling energy use by 30% or more.
2. Phantom loads and standby power
Just because an electronic device isn’t being used doesn’t mean it isn’t using power. Some appliances and devices are known as phantom loads, standby power, or even vampire users. That means they are constantly using power if they are plugged in.
Although these devices don’t use as much electricity as your fridge, phantom loads can add up to 5-10% of total residential energy usage. Here are some common phantom load users to keep an eye out for:
- Toasters
- Coffee makers
- Cell phone and laptop chargers
- Floor or desk lamps
- Voice-activated devices (like Google Home)
- TVs
- Projectors
- Microwave ovens
- Printers/Scanners
- Hairdryers
3. Insufficient home insulation
When you seal and insulate your home properly, you can cut heating and cooling costs by about 15% each year. Since a home’s HVAC system is already such a significant energy user, it uses even more electricity if the home isn’t properly insulated.
Even if you believe your home is well insulated, there is a good chance it isn’t. According to an October 2024 study by the North American Insulation Manufacturers Association, approximately 89% of single-family detached homes are under-insulated. Focus on insulating these high-loss spots first: attics, basements, crawl spaces, floors, and walls.
4. Utility billing errors
Billing errors are unfortunately more common than you may realize and remain an important reason to check your electric bill every month. Keep in mind that some of the errors are undercharges rather than overcharges.
Common billing errors include:
- Bill miscalculation
- This is one of the most common. You can avoid overpaying these errors by calculating the bill yourself, line by line. If the amount doesn’t match your bill, contact your utility company.
- Invoicing periods
- Incorrect rates
- Inaccurate meter readings
- Duplicate charges
5. Time-of-Use (TOU) rate plans
You might unknowingly be on Time-of-Use (TOU) rate plans, which charge different rates for electricity depending on the time of day. Under TOU plans, electricity is more expensive during peak demand hours, which is usually late afternoon to evening.
TOU plans mean you could be paying up to three times more per kWh when demand is highest. Shift heavy loads — like laundry or electric vehicle charging — to off-peak windows to shave money off your bill. For example, the SRP TOU plan states that customers on average save 4.8% on their annual electric bill.
You can check to see if you’ve been default-enrolled into a TOU plan by checking your utility bill. If you’re defaulted in and want to switch back, look for an “opt-out” form or contact customer service — some utilities let you revert to flat rates within a set window. (If you are a solar customer, many utilities require you to be on a TOU plan.) Opting out might make more sense if you need the most energy during peak high-cost times. However, with many utilities, if you have solar panels, you’re required to be on a TOU plan.
6. Net metering discrepancies
If you have solar panels and your electric bill is still surprisingly high, the cause might be a misunderstanding of your net metering agreement or an issue with your solar system’s actual performance. Net metering allows you to send excess solar power to the grid for credits, but the value of these credits can vary. Some utilities offer full retail rate credit, but many have shifted to “net billing,” where exported energy is valued less than the electricity you buy.
Additionally, your system’s output can be affected by seasonal changes, unexpected shading, or equipment problems, leading to less self-generated power than anticipated. Increased household energy consumption can also outpace your solar production.
To address this, carefully review your net metering policy on your utility’s website or DSIRE to understand how credits are calculated and applied. Also, regularly check your solar monitoring system for any production anomalies and compare current energy use to when your system was installed. If discrepancies persist, contact your solar installer for a system check-up to ensure you’re maximizing your solar investment.
Potential solutions and tips for reducing bills
With such big chunks of electricity usage accounted for already, you may be wondering how to save electricity elsewhere.
Here are several ways to reduce your energy bills:
- Audit your energy usage: A professional energy auditor (sometimes called an “energy rater”) will inspect your home, pinpoint its energy efficiency, and suggest ways to improve it.
- Strategize energy use: If you strategize your energy usage for major appliances like washing machines between peak and off-peak hours, you’re likely to save money. Companies often charge higher rates for electricity during peak periods like 2 PM to 7 PM when more people are using it.
- Check your filters: Even an up-to-date HVAC system won’t work as well if the filters are dirty. Regularly replacing them can improve the system’s energy efficiency by up to 15%.
- Upgrade to energy-efficient appliances: You can cut your utility bill by up to 20% by replacing old models with modern, ENERGY STAR–rated appliances. Of course, this depends on how old and outdated your current appliance is.
- Use smart home technology: Devices like smart thermostats, which automatically switch off your heating/cooling system when the room reaches the set temperature, can save you up to 8% on annual heating and cooling.
- Fix-up ductwork: Just like poorly insulated houses, leaky ductwork also contributes to increased energy costs. When ducts can’t carry warm or cool air through the home efficiently, the HVAC has to use more energy to keep temperatures comfortable.
- Don’t run small loads: When you’re able to, wait until your washer or dishwasher is full before running a cycle — this cuts down on extra energy and water use by minimizing the number of loads you run.
Considering renewable energy options
Have you thought about how you can take advantage of renewable energy options, which reduce your carbon footprint? Some of the more common renewables for residential properties include solar, wind, and hydropower. However, one way you can save the most money on your electric bills, in the long run, is by investing in solar power for your home.
Although the average solar panel system takes 6-10 years to pay off, homeowners can expect to see a 50%-75% reduction in their energy bills. The payoff period and energy bill savings depend on location, usage and net metering policy. However, some people with enough sun access and solar panels can have little or no electric bill.
Pros of solar power:
- Low maintenance
- Reduced reliance on the power grid
- Increased home value
- Panels usually last 30+ years
- Reduce personal environmental impact
- Reduction in energy bills
- Tax benefits to reduce installation costs
Cons of solar power:
- If needed, relocation of solar panels is difficult
- Solar storage can be expensive
- Require a lot of roof space
- Upfront costs can be high
- Weather dependent
Frequently asked questions
How much does 1 kWh of electricity cost?
Every area will have a different per-kWh price, but the average in the U.S. is 16.44 cents per kWh as of February 2025. In the contiguous U.S., North Dakota has the lowest rate at 8.25 cents per kWh, and Rhode Island the highest at 30.15 cents per kWh.
How often do electricity prices per kWh change?
There is no set time when electricity prices can change. Depending on things like your particular utility and rate plan, supply and demand, and weather conditions, prices could change from day to day. Prices can also change less frequently and shift from season to season or even year to year.
Why are electric rates going up almost every year?
Other than inflation, a few main reasons electric rates rise nearly every year include higher fuel costs, the aging power grid, and weather pattern changes caused by climate change.
