How to read a business electricity bill

A commercial bill is two products on one page

The supply portion is the energy itself, and in a competitive market it is the only part a supplier competes on. The delivery portion covers getting that energy to your meter — the network that carries it, the local wires that distribute it, the meter and the regulated charges attached to them — and it is set by the utility serving the address whatever the supplier does. Reading the invoice starts with sorting the lines into those two groups, because a change of supplier touches only one of them. Underneath, the arithmetic is additive: supply charges plus delivery charges plus any demand, fixed customer, rider and tax lines, less credits. The exact assembly is governed by the utility's commission-approved tariff rather than a generic rate table, which is why two businesses on the same utility can see different line sets.

• Supply is the energy, and the part competition affects.
• Delivery is the network, the local wires and the meter.
• The delivery utility is fixed by the address, not chosen.
• Only the supply lines move when you change supplier.

What a commercial bill has to show

A bill is reviewable only if it carries the facts a review needs, and states set those by rule. Texas's bill-format rule requires the beginning and ending meter-read dates and readings, the number and kind of units metered, the applicable rate schedule, the total amount due, any conversion from meter-reading units to billing units, and the word "Estimated" prominently displayed when the reading is an estimate. Without the read dates, the read type and the rate class, no one can tell a usage change from a shorter billing period or an estimate that has not yet been trued up. The same rule fixes the vocabulary for the non-supply lines — energy charge, fuel charge, meter charge, PUC assessment, municipal franchise fee, miscellaneous gross receipts fee and sales tax — and forbids a utility from using a different name for a charge it defines, so the same concept carries the same word on every bill in the state.

• Account, service address, premise identifier and rate schedule.
• Billing-period dates and the number of days billed.
• Beginning and ending reads, their type, and any billing conversion.
• Consumption in kilowatt-hours, and demand in kilowatts or kilovolt-amperes.
• A fixed vocabulary for the non-supply lines, so a line means the same thing on every bill.

Billing demand is defined by the tariff, not by your highest reading

The demand line is the one most often misread, because it does not simply report the largest number the meter recorded. It reports a quantity the tariff defines, and the definitions are specific. A large-power rate schedule in West Penn Power's Pennsylvania tariff shows the shape of it: demand is billed in kilovolt-amperes, which the same tariff defines as 1,000 volt-amperes; the measured demand for a month is the average of the weekly demands falling in the billing month; a weekly demand is the maximum simultaneous fifteen-minute kVA reading, and never less than half of the month's highest weekly demand; and the billing demand is the greatest of several alternatives, including the measured demand during on-peak hours, forty per cent of it during off-peak hours, and half of the highest billing demand established in the preceding eleven months. Reading your demand line therefore means reading the schedule it was produced under, not just the number printed beside it.

• Demand is a tariff-defined quantity, not simply the highest reading.
• It can be billed in kVA, which turns power factor into a billing matter.
• A floor on measured demand can lift it above the meter's low points.
• A ratchet can set this month's demand from a peak recorded eleven months ago.

One bill or two: consolidated and dual billing

A competitive account can be billed in either of two ways, and the choice decides who you pay and who answers a dispute. Under utility consolidated billing the distribution utility issues one invoice carrying its own delivery charges and the supplier's energy charges, collects the payment and remits the supplier's share — so a single bill does not necessarily mean the utility supplied the power. Under dual or supplier billing the utility bills delivery and the supplier bills supply separately, and the account reconciles two invoices against one meter. Texas expressly recognises both a single consolidated bill and two bills; Pennsylvania's commission publishes consolidated billing practices for electric generation suppliers and distinguishes those accounts from dual-billed ones. Whichever applies, keep both documents beside the same meter data.

• Consolidated: one utility invoice carrying delivery and the supplier charge.
• Dual: separate utility and supplier invoices against one meter.
• A consolidated bill can still be a competitive supply contract.
• Match both documents to the same billing period and meter data.

Estimated reads, actual reads, and the true-up

An actual read comes from the meter; an estimated read is used when the utility cannot obtain one, and both must be labelled. Texas permits estimated bills for good cause, provided an actual reading is taken at least every third month, and requires the word "Estimated" on the bill; other states set their own minimum interval. The consequence arrives later as a true-up. When the next actual read is taken, the difference between it and the estimated consumption already billed is charged or credited, and the correction can move more than the energy line: under consolidated billing it flows into the supplier's charge, into demand computed from interval data, and into the tax figured on the corrected amount. A bill that jumps without a matching change in operations is often a true-up, not a rate change.

• Estimated reads are permitted when an actual read is unavailable, and must be labelled.
• Texas requires an actual read at least every third month; other states set their own interval.
• The true-up bills or credits the difference between an estimate and the following actual read.
• A true-up can move demand, supply and tax lines, not just consumption.

The billing determinants: kWh, kW, kVA and power factor

The units on a bill decide the arithmetic, and they are not interchangeable. A kilowatt-hour measures energy — power used over time — and drives the volumetric charge. A kilowatt measures real-power demand, the rate at which power was drawn, and drives a demand charge on a demand-metered account. A kilovolt-ampere measures apparent power, which combines real power with the reactive power that inductive loads such as motors, transformers, welding equipment and variable-speed drives draw. The two are linked by power factor: apparent power equals real power divided by power factor, so at a power factor of 0.80, 800 kilowatts corresponds to 1,000 kilovolt-amperes. A tariff that bills demand in kilovolt-amperes, or sets a minimum billing demand from measured power factor, therefore charges more for the same real-power output when the site's power factor is low. Reactive demand may also appear as its own line, in kilovolt-amperes reactive, above an allowance the tariff defines.

• kWh is energy and drives the volumetric charge.
• kW is real-power demand and drives a demand charge.
• kVA is apparent power — kW divided by power factor.
• Low power factor raises the kVA behind the same kW, and can raise the bill with it.
• Some tariffs bill reactive demand in kvar above a defined allowance.

The rider lines, and why they change between utilities

Below the main charges a commercial bill usually carries named riders: separately identified surcharges and credits recovering costs the utility cannot put in base rates. They are named, not generic, and the set differs between utilities in the same state. West Penn Power's tariff lists a Tax Adjustment Surcharge, a voluntary surcharge tied to federal tax changes, an Energy Efficiency and Conservation Charge, a Smart Meter Technologies Charge, a Default Service Support Charge, and an hourly pricing rider for customers taking default service. PPL Electric's retail tariff, filed in the same state for the same year, carries seven plus a two-part state tax adjustment surcharge: a Universal Service Rider, a net-metering rider, a Metering and Billing Credit Rider, Act 129 compliance riders, a Merchant Function Charge Rider, a Distribution System Improvement Charge and a Storm Damage Expense Rider. The matrix in that tariff attaches those riders to named rate schedules, and the commercial and industrial schedules do not all carry the same set. Two similar businesses can therefore see different riders on the same utility's bill because they are on different schedules.

• Riders are named cost-recovery lines, not one generic surcharge.
• Their names and their number differ between utilities in one state.
• A utility's rider matrix attaches them to specific rate schedules.
• Commercial schedules do not all carry the same riders — compare like with like.

Transmission is a network charge; distribution is the local one

Delivery splits into two layers with different arithmetic. Transmission carries power over the high-voltage network between generation and your area, and the West Penn Power tariff quoted above carries it as a distinct item — a Non-Market Based Services Transmission Charge for regional transmission costs it does not reconcile through its default-service rider. Distribution is the local function: the wires from the substation to your meter, the meter itself and the service connection. The Energy Information Administration draws the same line, describing high-voltage transmission lines carrying electricity over long distances and lower-voltage distribution lines delivering it to premises. For a buyer the practical point is that transmission can be reasoned about separately from anything a supplier offers, while distribution and metering are set by how your site is served rather than by how much you consume.

• Transmission is a network charge; distribution is local delivery.
• Transmission can appear as its own named charge on a commercial bill.
• Distribution reflects service voltage and connection size, not usage.
• Neither layer responds to a change of supplier.

Taxes, exemptions, and the other non-supply lines

Below the energy and delivery charges sit taxes and assessments whose treatment depends on the jurisdiction and the tariff. Some states levy a gross-receipts or gross-revenue tax on utility service, shown as a separate line, a surcharge, or embedded in the filed rates; Texas names a miscellaneous gross receipts fee for utilities operating in an incorporated town above a thousand in population, and a municipal franchise fee for the use of public rights-of-way. Sales tax is a second story: many states offer a manufacturing exemption or reduced rate, but the exemption turns on the state's own definitions — whether the electricity is used directly in production rather than in offices, lighting, heating and cooling or a warehouse, and whether the state applies a predominant-use, separate-meter or apportionment test. A manufacturer should not assume the exemption clears every line: it may reach neither the delivery charges nor a gross-receipts tax, and the utility normally applies it only after the required certificate or direct-pay permit is filed and the account is coded correctly.

• Gross-receipts and franchise fees may be separate, embedded, or a surcharge.
• Sales-tax exemptions for manufacturers are state-specific and use-tested.
• Production load may qualify where office, lighting and HVAC load does not.
• An exemption may not reach delivery or gross-receipts charges.
• The utility applies an exemption only once the required documentation is filed.

Work out your own effective price per unit

The number worth knowing is your effective price: the total supply and delivery charge for a period divided by the units consumed in that same period. It is not the price per unit you were quoted, and it is not the supply rate either, because it absorbs the demand line, the fixed customer and metering charges and the riders. Computed for each of the last twelve months it produces a baseline that actually describes your account, and that baseline is what any new offer has to beat. It also makes seasonality visible: two months with similar consumption can show very different effective prices when one of them carried a high billing demand. Normalise for the billing period before comparing months, too, because a period is not a calendar month and can run from the high twenties to the mid thirties of days; dividing the units by the billed days gives a daily figure that separates a real change from a longer period.

• Effective price is total charge divided by units consumed, for the same period.
• It differs from a quoted unit price by design, because it absorbs the rest.
• Twelve months of it describes your account better than any single month.
• Divide by billed days before comparing months — the period is not a calendar month.

Budget billing, and reading a bill you do not trust

Budget or levelised billing changes when a business pays, not what the power costs. The utility averages the expected annual charges into an even periodic amount and reconciles the difference against actual charges at a settlement date, producing a debit when payments fell short or a credit when they ran ahead. That suits cash flow and defeats cost reading, because the installment can stay flat while the account's real liability climbs: a rate change or one high-demand interval appears in the underlying charges and the growing variance long before it moves the payment. When a bill looks wrong, work through it in order — the number of days in the period, the read status and whether an estimate is still outstanding, then the demand line on its own, since an unexplained jump there is usually an operational event rather than an arithmetic error — and then split the question by who sets the line: supply to the supplier, and delivery, metering and riders to the utility. Competitive supply depends on the service address, the meter and the utility territory; municipal utilities, cooperatives and some jurisdictions have no choice at all.

• Budget billing levels the payment, not the cost; the true-up settles the difference.
• A flat installment can hide a rate change or a demand spike until settlement.
• Check the days billed and the read status before treating a rise as an error.
• Read the demand line on its own before calling a bill wrong.
• Send each question to the party that sets that line.

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