The Energy Consumer's Bulletin- a New England energy news blog

The Energy Consumer's Bulletin

What does your electric bill tell you about where the money goes?

Posted by Loie Hayes on Sunday, July 16, 2017 @ 08:07 AM

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The average Massachusetts and Rhode Island household uses about 600 kilowatt-hours (kWh) of electricity every month. At about 20 cents for every kWh, this amounts to an electric bill of $120 a month. Here’s a guide to better understand where that money is going.

There are two major sections to your bill, the Delivery portion and the Supply portion. These represent both how much it costs to generate the power you use, plus the cost of getting that power from the point of generation to your home. While you have some choice about how your electricity is generated, which is reflected in the Supplier Services section of your bill, the Delivery charges are determined by your electricity company and are regulated by the Department of Public Utilities in Massachusetts and by the Public Utilities Commission in Rhode Island.

Delivery Charges

Distribution is the biggest part of your delivery charges.

The Delivery charges are similar for both states. Distribution is the biggest part of your delivery charges, and includes the cost of maintaining the poles and wires connecting your home to the electrical grid, as well as billing and other administrative costs. Transmission covers the costs associated with the highvoltage wires and towers that you see marching across the countryside, connecting power plants to the grid. Together these add up to about 40% of the average total electric bill.

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The customer charge is a fixed amount that doesn’t vary depending on how much energy you use. You can think of this as your membership fee at the gym. You pay it just so you can use it, and it’s the same whether you attend 30 classes or just one. If you don’t use much electricity, your customer charge will take up a larger percentage of your total bill, and conversely if you use a lot of electricity, your customer charge will be a smaller percentage. For the average ratepayer this amounts to about 5% of your bill.

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Energy Efficiency Pays for Itself

Both states also have a small charge to support Energy Conservation or Energy Efficiency. This charge funds the Mass Save and Energy Wise RI programs and related efforts to help us reduce our need to invest in new electricity generation facilities. Energy efficiency programs also help keep your overall energy bills affordable by helping you trim your electric consumption without sacrificing comfort.

In both states, the efficiency programs are ostensibly designed to invest in all cost-effective energy saving measures, with “cost effective” defined as costing less than the cost of buying energy supply. For instance, if it costs less to install LED lightbulbs in a home or office building, the utilities should do that rather than buy more power from the market, whether the power is generated from fossil fuels or renewable energy. In practice,6671091413_3846b235ba_n.jpgthe programs fall far short of using all cost-effective efficiency measures to keep our electric costs under control. Evaluations point out that benefits of those programs exceed their costs by approximately 3 to 1, which means that the programs are passing up opportunities to save say, $2.00 for every $1 spent.

The average household pays less than 11% to efficiency programs in Mass. and 7% in Rhode Island. Program evaluations show both states are getting a great rate of return on their efficiency investments, and that Massachusetts is garnering greater benefits than Rhode Island as a result of its higher investment.

Supplier Charges

The percentage of your overall bill tied to Supplier Services varies over time with the cost of generation and the quantity of electricity your home uses. In the average bill, supplier costs currently account for 45% of the total monthly electric bill. The actual percentage changes year by year as the cost of supply changes with market conditions. Distribution and transmission costs also change but less frequently. In New England, increasingly, power plants are rewarded not just for energy they generate, but also for demonstrating their ability to reliably come on-line when needed to meet demand. These rewards are called “capacity” payments. Most capacity payments are made to natural gas power plants, but renewable energy and energy efficiency also qualify. This year, in some parts of Massachusetts, capacity payments account for almost a third of the supply charge to consumers.

Basic Service vs Competitive Supply

When you open an electric account, you are automatically enrolled in the utility’s Basic Service. Customers can opt for a competitive supplier to switch away from the utility’s supply, but buyers beware! Often competitive suppliers can’t beat the price per kWh of the utility’s standard offer for very long for individual accounts.

Only Mass Energy/PP&L sources renewable energy exclusively from New England generators.

Basic supply is a mix of both green and brown electricity from all the generators in our regional grid. The renewable energy content increases slightly every year thanks to state mandates. Some competitive suppliers may claim to offer cheap green options, but as our members know, the type and location of the renewable energy projects you are sourcing from determines how effective that purchase is in fighting the impacts of climate change. Only Mass Energy/PP&L sources renewable energy exclusively from New England generators. Suppliers that “greenwash” boast about clean energy, but a closer look proves that their sources are way out of our region and do little to nothing to improve our local emissions. We posted a blog article reflecting on the importance of effective green electricity.

Before you sign any contract with a supplier, it’s important to read the fine print to understand the potential charges on your bill and energy sources. Remember, if you are a National Grid customer you must be enrolled in Basic Service for your supply to participate in Mass Energy/PP&L’s green power program.

Bottom Line

Green Power members can feel good knowing that their electric usage is matched with local green sources. And you can keep the costs of your electric bill manageable by improving the energy efficiency of your home. More information for Mass residents here and RI residents here.

Mass Energy and People’s Power & Light actively advocate for policies that keep your electric bill fair and transparent, while investing today for a sustainable future. If you have any questions, feel free to reach out at greenreply@massenergy.org and greenreply@ripower.org.

Learn more about our local renewable energy initiatives, make the switch today

Tags: renewable energy, electricity, energy efficiency

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