If you’re looking to save costs on energy, first make sure you have a good understanding of how you are being billed by your utility company. Understanding the intricacies of your utility bill will allow you to fine-tune your energy-saving efforts.

First, lets consider kWh vs. kW. kW (kilowatts) is the rate at which you are using energy at any given time, while kWh (kilowatt hours) is the total energy used over a period of time (eg. a month). An easy way to look at it is to compare it to driving. In this case, kW would be miles per hour and kWh is the total miles driven over time. kWh is easy to nail down. Simply put, it’s the total energy consumed over that billing period. kW meanwhile is your energy demand rate that is averaged out in fifteen minute increments. The kW rate shown on your bill reflects the highest 15 minute average in that billing cycle. So if you have 50 kW early in the month but then do not go higher than 30 the rest of the month, the kW on your bill will still be 50 (of course, your kWh will be much better off having gone from 50 kW for a period down to 30 kW).

The other thing to be clear on is, not all accounts are the same. With very low-use accounts, kW may not even be billed (just total kWh). Naturally, bigger accounts become more complicated as different variables come into play. On peak / Off peak hours is a common one, with overnight (off peak) hours being billed at a lower rate. Large accounts also have an option for discounted kW rates based on controllable loads. This means that a large account can qualify for a discounted kW rate if they are able to significantly lower their energy usage for a period of time (by 50 kW or more to be eligible). This can be done by turning off equipment or by operating a portion of the facility on a generator. There are different Tiers for contract levels as well. Accounts on 10 year contracts are due to receive higher discounts than those on a 5 year contract, for example.

Your bill may contain terminology that you are not familiar with. Power Factor is a measure of how effectively electric current and voltage gets converted to useful power. If you have a Power Factor lower than 90%, your system is not as efficient as it could be and you are likely to incur a penalty charge for this on your bill.  Basic Service Charge is a flat monthly charge that covers fixed costs associated with metering, billing and maintenance of meters and electric lines. City fees are collected by your energy company on behalf of your municipality to use public right-of-way for electric and gas facilities. Fuel Cost Charges can be significant and can vary depending on the time of year. They are best defined as a reflection of the forecasted costs of providing electricity for you in a given month.

Because of the different rate tiers and miscellaneous costs, Premier Lighting calculates energy savings using a blended kWh rate. The way we determine is by taking the total cost of the bill/Total Energy kWh. Taking the above sample bill, you would divide $222.05 by 1785 kWh to get 0.13. Thus the blended kWh rate would be 13 cents.

Being a company that specializes in lighting retrofits, we often get asked how much of the utility bill is for lighting. Unfortunately there is no way to tell that with 100% accuracy, but on average lighting accounts for 30-50% of most commercial facilities utility bill.

When considering energy efficient upgrades of any kind it is crucial to understand your kWh rate to determine your payback. Before you take one bill and run with it, please keep in mind that your kWh rate can and will change over time. To accurately estimate savings, your best bet is to look at several months worth of utility bills over the course of one year and use the formula above to determine the kWh rate you pay. Once you have an accurate kWh rate, you can be confident in your energy savings calculations.