Electric Bill Components

Customer Charge
The customer charge is generally the base monthly charge the customer pays regardless if they use any power or not. This base charge covers things like the cost of meter reading, billing and accounting.

Energy Rate
The energy rate is the rate paid for each kilowatt-hour of energy used by the customer. The energy rate might be structured in many varying ways. Some utilities use a flat energy rate. This means the customer pays the same for the first kilowatt-hour as the last kilowatt-hour they use. This makes calculating the energy rate fairly simple since the energy rate does not change.

Some utilities use block rates where the cost per kilowatt hour varies based on the amount of energy the customer uses. In a block rate, the first block - for example the first 500 kilowatt-hours of energy used by the customer - is the most expensive and charged at the highest rate. The next block of energy used - say the next 1000 kilowatt-hours - is charged at a medium rate. Any energy use greater than the first two blocks, or 1500 kilowatt-hours, is charged at the lowest rate. The size and number of blocks can vary greatly from utility to utility.

Block rates have fallen out of favor with regulatory agencies because of the belief that these rates encourage the waste of electricity by promoting the attitude: "The more I use the cheaper it gets."