When you look at your electricity bill, chances are that you only look at the “amount to be paid” and make the payment in a hurry without studying it thoroughly, as most people do.
So, if you would like to explore the various aspects of an electricity bill rather than just the amount, we’ll walk you through the basics of "know your bill".
Understanding an electricity bill is a tricky concept, but it's no rocket science once you have understood all its components completely. We will walk you through the various components of an electricity bill and understand it better.
What Is electricity bill?
An electricity bill is an invoice document stating the units consumed on an everyday basis at home, office, school, or other places.
The first and foremost reason why understanding your electricity bill is important is because it allows you to make smarter decisions to reduce your energy usage, which in turn helps you save money. During the Covid-19 pandemic, when most of the world was locked inside, people started to pay a little more attention to their energy usage and understood the benefits of reading their electricity bill. However, a greater percentage of the population is still unaware of the importance of knowing your bill.
How to understand the bill?
If your goal is to know your electric bill, you must start by breaking down the components of the bill. Your light bill is the document that gives you the overall electric bill summary, your basic account information, electric charges, current charges, a comprehensive breakdown of the consumed energy within a month, and your electricity consumption pattern during last 12 months. Here's how you read your electricity bill:
The first and foremost step towards understanding your electricity bill is to get an understanding of reading the meter. This will reflect your current and previous readings, which helps record your bill wisely without adding extra zeros. The difference between your previous and current reading is the actual kWh you consumed in this particular time. Let's say your previous meter reading was 20,000 kWh, and now it's reflecting 20,500 kWh; the difference is the actual kWh of electricity used during that particular period.
Getting electricity in your home is a process that involves a series of services that directly reflects on your electric bill. Some of these charges are transmission charges, customer charges, distribution charges, and generation charges, all of which add up to your electricity bill. The total is the final amount to be paid.
A usage profile is further classified into two parts; the first one consists of the total kWh that you consumed in the last month, and the second one will reflect the usage of kWh for this month and the previous months. This part also shows the total kWh regularly used, which helps you analyse the readings better, which means you can make necessary changes in your energy consumption habits which in turn which help you save money.
There's a lot more than just the readings to understand what constitutes an electricity bill. The kWh plays a significant role. To understand the electricity bill, it's important to understand what kWh is.
What is kWh?
The kilowatt-hour is the unit that measures the electricity usage in a day or month. kWh is a combination of two measurements in one, which is speed and time. The speed helps to analyse how fast the electricity is consumed, and the time measures how long it takes to consume electricity at that particular speed. Note one kilowatt is equal to 1,000 watts. Let's understand what 1kWh looks like in real life.
- Charging your phone every day for hours over one month consumes 1kWh.
- Switching on your microwave for two minutes every day for one month consumes 1 kWh.
- Using two desktops for 8 hours every day for one month is equal to 1kWh.
- Using six laptops for 8 hours every day for one month is equal to 1 kWh.
- Using an air conditioner with one medium window for one hour every day is equal to 1 kWh.
Your monthly electricity bill depends upon several factors, including where you live, how many people you live with, or other household requirements. Therefore, the electricity bill differs for everyone.
Common components of an energy bill
If you're making plans to cut down on energy bills, it's important to understand the various components that could impact the overall cost generated.
The first in the list is Tariff and category, which helps determine the applied rate structure on the bill. It usually starts with LT or HT, which means low tension and high tension, respectively. LT is generally applied for more residential and commercial areas where the energy usage is comparatively low (less than 230V single phase or 400 V three phases); however, HT codes are used for larger complexes and industries with 11kV and above.
Unit consumed is the number of kWh consumed in a particular month according to which the final electricity bill is made. This is measured by taking the difference between the previous month’s meter readings and the current month’s readings. Let's say your previous meter reading was 20,000 kWh, and now it's reflecting 20,500 kWh; the difference between previous and current month is the actual kWh of electricity used during the given month.
The tariff structure is yet another component of your electricity bill that significantly affects your expenses. In the case of residential connections, the slab-based structure is followed where the units are charged at a lower rate, unlike the industrial connection where the charges are much higher. In case the number of units consumed increases, energy charges also increase along with it.
Every tariff structure comes within an inbuilt FAC rate which is applicable at each slab. This is the additional price incurred due to an increase in the prices of fuel every year.
- Electricity Duty and Taxes
Apart from these, if you want to know your electricity bill and plan to reduce your electricity consumption, there are two important factors which need to be considered. These are Units Consumed (the units consumed over the course of one month) and Connected Load (the energy consumed when all systems including devices or equipment are operating at the same time). Both of them need to be managed wisely to manage your electricity bill.
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