There are two billing options available. One is to receive two separate bills - one from your distribution company and another from your competitive power supplier. The other is to receive a single, combined bill from your distribution company that contains charges from both your distribution company and your competitive power supplier. How your billing works, one bill versus two bills, is determined by the supplier that you choose. In any case, your statement(s) will be divided into easy-to-read sections showing how each charge was calculated.
Electricity is measured in units known as kilowatt-hours (kWh). As with many other products, how much you pay depends on both the price of the electricity and the amount that you consume. Your monthly electric bill is calculated by multiplying the cost of a kilowatt-hour by the number of kilowatt-hours used. While the average residential customer uses approximately 500 kWh per month, you may find that your use is higher or lower depending on the number of appliances and the types of appliances used in your home. You can determine your average monthly usage by looking over your past electric bills.
The rates charged for electricity vary among the different distribution companies. In Massachusetts, electric rates range from approximately 9 cents per kilowatt-hour to 13 cents per kilowatt-hour. Thus, the average residential bill ranges from $45 per month (9¢/kWh x 500 kWh = $45) to $65 per month (13¢/kWh x 500 kWh = $65), depending on the distribution company.
Breaking It Down
Electric bills are made up of two components: delivery charges and power supply charges. Your power supply charges account for approximately one-quarter to one-third of your bill and is the only part of your bill that is affected by your choice of a competitive power supplier.
Delivery charges include: distribution, transmission and transition charges, as well as costs related to the development of renewable energy sources and efficiency programs. Although the rates for delivery service will vary depending on which town you live in, your choice of supplier has no bearing on the costs of delivery. The only way to reduce the delivery portion of your bill is to use less electricity, which in effect, lowers both your delivery charges and your power supply charges. Many distribution companies and suppliers now offer efficiency programs to help you limit your energy use.
Example: Harry pays a total of 10 cents per kWh for electricity. Of that ten cents, delivery charges are 7 cents per kWh and power charges are 3 cents per kWh. On average, Harry uses 500 kWh per month, giving him a monthly bill of $50 (10¢/kWh x 500 kWh = $50). Since the power supply charge is 3 cents, the power supply portion of the monthly bill is $15 (3¢/kWh x 500 kWh = $15). This $15 portion is the only part of the bill that is subject to competition. Harry will pay an average of $35 per month to his distribution company no matter which competitive power supplier he chooses.
Included in your bill for delivery will be a transition charge. This charge allows your distribution company to recover past costs including investments made in generating plants and power contracts, known as transition costs. These costs were part of your electric rates before the restructuring, but they were not set out as a separate charge. All customers are subject to transition charges, however, the exact charge varies from distribution company to distribution company and will decrease over time as these costs are paid.
The sample bill below illustrates the concepts outlined above.
This information is provided by the Department of Energy Resources.