high electric bill

Why Is Your Electric Bill Higher Than You Expected?

  • Written By: Shannon Bedrich

  • Electric bill higher than expected? How can that be? You read the electricity providers’ information and picked what you thought was the best electricity plan available in your state. You even compared electricity rates offered and chose the cheapest plan.

    Now you’ve received your first electric bill, and the power costs are much higher than you expected. And you’re wondering, Why is my electric bill so high? Why doesn’t the electricity rate on my bill match what you signed up for? Why is my electric bill higher than I expected?

    When it comes to choosing the right electricity plan, it really does pay to spend time reading the fine print. To get an accurate apples to apples comparison, the details buried deep in each plan’s rate documents are the ones that determine how much you’ll actually pay at the end of each month.

    7 Reasons Why Your Electric Bill is So High

    Here are the top 7 issues we see when an electric bill is higher than expected.

    1. You misunderstood the electric rate you were buying.
    2. You forgot to factor in delivery charges (which can be 50% of your total bill!)
    3. Your contract expired and you are on a month-to-month rate.
    4. Your plan has a tiered usage rate and you didn’t hit the usage levels.
    5. You’re paying pre-paid electricity fees
    6. Your plan has bill credits or a minimum usage fee.
    7. You used more than you thought you did.

    Read on to find out the details!

    Why Is My Electric Bill So High?

    1. You Misunderstood the Electric Rate for Your Electric Bill

    In most states like Ohio and Connecticut, the price is straight forward. The quoted electric rate multiplied by your usage equals how much you pay for the energy generation portion of your bill. The delivery of electricity to your home is not included in the quoted rate and is billed directly by your local utility.

    However, Texas is unique. The Public Utility Commission of Texas requires electricity providers to show ‘all-in’ rates which include both energy and delivery at three standard usage levels: 500 kWh, 1000 kWh, and 2000 kWh.

    Unfortunately, Texans often confuse these three electricity rates as ranges or unit prices for a kWh. They’re not.

    In reality, the rate you pay for your actual electricity usage will most likely be different than the quoted rates unless you use exactly 500, 1000, or 2000 kWh’s in a given billing cycle.

    That’s why it’s important to shop rates based on your actual usage. And lucky for you, that’s what you can do with ElectricityPlans! Just enter your average usage when you shop. We’ll calculate your average rate and estimated bill automatically.

    Live in Texas? See How To Read An Electricity Facts Label (EFL) for more information.

    2. You Forgot to Factor in Delivery Fees on Your Electric Bill

    The delivery fees are for your local utility’s transmission and delivery (aka poles and wires) to your location.

    Regardless of where you live, all electric bills have both an energy generation component and a delivery component. 

    While you can’t comparison shop for utility delivery charges, you will definitely have to pay them. Forgetting to factor in delivery charges is a common oversight.

    Delivery can account for half or more of your electric bill.

    Note: In Texas, electricity is marketed based on an average price per kWh that includes electricity and delivery. In Ohio, Connecticut, Pennsylvania and other deregulated markets, you only shop for energy, not delivery.

    3. Your Contract Expired And Your Electric Bill is Month-to-Month

    If you sign up for a fixed-rate, fixed-term electricity plan you are committed to a specific number of months with that supplier.

    Some time near the end of your initial contract term, your electricity supplier will send you a new offer. You can accept that, or you can shop for a new electricity plan from a different supplier.

    However, if you let your electricity contract expire without accepting the new offer or selecting another electricity provider, your provider will move you to a variable rate month-to-month plan by default.

    This can be very costly!

    When a provider moves you to a month-to-month default electricity plan, your rate may go up anywhere from 30-50%.

    This is obviously a huge swing in your electric bill, especially if this occurs in summer (high usage) months.

    If this is your situation, you should shop for an electricity plan immediately. And then sign up for renewal reminders so you don’t forget again!

    4. Your Plan Has A Tiered Rate

    Tiered rates can be a good deal, if you read the fine print. You’ll pay a different rate for your usage depending on how much you have used.

    Here’s an example of a tiered rate so you know what we’re talking about: “8 cents per kWh for usage up to 1000 kWh and 10 cents per kWh for usage over 1000 kWh.”

    Often, electricity providers will tier their rates to appear exceptionally low to coincide with the 3 standard advertised usage levels in Texas.

    Since customers naturally go for the cheapest electricity rate, they sign up for these types of plans without knowing that their rate will go up significantly if they go over a certain usage level.

    Read How To Sniff Out A Teaser Rate In Texas for more.

    5. You’re Paying Prepaid Electricity Fees

    In Texas, prepaid electricity plans are gaining in popularity since they are “no deposit” and do not require a credit check. Providers offering prepaid plans advertise getting power turned on for as little as $40.

    Prepaid plans allow customers to put money in an account with the electricity provider, and, as the customer uses electricity, money is taken from the account at a given rate per kWh used.  

    Prepaid plans tend to come with additional fees, like a daily fee that ends up adding $50 or $60 to your bill each month.

    Every provider is different with respect to the fees that they charge, so it’s really important to know what to expect. Read your prepaid provider’s Prepaid Disclosure Statement to get the full scoop on fees.

    6. Your Electricity Plan Includes Minimum Use Fees & Bill Credits

    Minimum use fees kick in when a customer doesn’t use a minimum amount of electricity in a billing cycle.

    Provider’s advertise what appears to be a great electricity rate, but the rate is only for customers that use, for example, 1000 kWh of power or more. If you were to only use 800 kWh in a given month, your electric bill will be higher than you expect because of a minimum use fee for usage less than 1000 kWh.

    Electricity providers in Texas use bill credits to make rates appear cheaper at a particular advertised usage level. Bill credits essentially make advertised rates appear too good to be true. For example, a well-placed bill credit at 2000 kWh can have customers believe they’re getting a rate way below market.

    If your electricity usage is consistently 2000 kWh each month or slightly more, then this type of bill credit may work great for you. Otherwise, you may not receive the bill credit at all if your usage is too low. On the flip side, if your usage is super high, the bill credit gets diluted and has very little benefit.

    At ElectricityPlans.com, all minimum use fees and bill credits are clearly outlined in the pricing details for each plan. We read the fine print for you so you can easily estimate your bill based on your typical usage.

    And, if you use the Electricity Bill Calculator feature (Texas only), we’ll even calculate exactly what you will pay, based on your usage! No more minimum use fee or bill credit surprises.

    7. You Used More Than You Thought You Used

    In your first bill cycle, the items above might be why your electric bill is higher than you expected.

    But after the first bill cycle, the number one reason why your electric bill is so high is usage. You simply used more electricity than you thought.

    Bill Shock is a common occurrence in January, February, August and September.

    • In January and February, people forget that their natural gas heater uses an electric blower to move that hot air around. Or, they use space heaters and don’t realize how much electricity those items use.
    • In August and September, people forgot how hot it really was, and how much they were adjusting their thermostat to keep cool. Don’t forget, even if the kids are back at school, fall doesn’t start until the end of September.

    If you are in an older home, your house “envelope,” or barrier between inside and outside temperature, may not be as solid. Your air conditioner may be working overtime to keep your home to the setpoint on your thermostat. Consider using ceiling fans, and make sure to keep your blinds closed during the day to keep out the sun. Make sure you get your A/C checked annually and get a tune-up to ensure it’s running efficiently.

    Most electricity companies will have a graph on the bill showing your usage for this month vs. last month, and usage for this month vs. last year at the same time. If not, you can access this information in their online portal. Take the time to look at your usage for this billing cycle, before you call your electricity company. It can save you some time.

    Some companies even offer weekly reports showing your usage for the week, and projecting your monthly bill. These reports help you make adjustments along the way, so you don’t use too much electricity.

    About Shannon Bedrich

    Shannon Bedrich, co-founded ElectricityPlans in 2016 after shopping for electricity rates using a confusing state-sponsored website. A CPA and our CFO, Shannon is the one that deciphers the fine print on each electricity plan. Outside of work, Shannon enjoys spending time with family, rooting for the Aggies, and exploring all that Houston has to offer.

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