Cost of Electricity

Cost of Electricity

The cost of your electricity is divided into two parts, service and supply.

The company who maintains the equipment (poles, transformers, etc.) and overhead (office workers, billing, etc.) is the company that charges a service charge. The company that makes the electricity is the company that charges a supply charge and is charged by the kilowatt (1,000 watts) of electricity used.

Lets assume your electric company charges $15 a month for their service plus 10 cents per kilowatt-hour (1,000 watts per hour). If you use 1000 Kilowatt-hours the service charge would be $100. Your total service charge would be $115 plus taxes. If competing electric company is charging 8 cents per kilowatt-hour then your electric charge for 1000 kilowatt-hours would be $80. Therefore your total electrical bill will be $95 plus taxes.

Assume a new company started generating electricity using hydro generator rather than coal-fired generator. They would only charge 7 cents per Kilowatt-hour. In the example above your electric use charge would be $70 thus your entire bill will be $85. However in case the old company could change to a new method of generating electricity, perhaps wind-turbines. This may help them to match or go less than competing companies. So to avoid competition in the market from other suppliers they will demand a a contract for a fixed period of time.

Now there is a new source of electricity, solar. Solar panel can be purchased by the consumer and placed on their roofs. The cost of having panels installed and wired to your roof is approximately $30,000 to $50,000 for 100-amp service. During night or very cloudy days these panels would not supply power. The battery system provided with the solar system will usually work for night and some cloudy days but are limited. Therefore a backup system would be required. This could be a gas or propane generator. You would have to consider the cost of fuel for the generators as well as the ware and maintenance of the generator. To totally go solar you would have to have the electric company disconnect your power. If you were to use the electric company as backup you would still have to pay the service portion of the bill. Along with the cost of installing the panels you must consider the maintenance of them. Also the cost of increased home insurance in case of hail, fire, or other damage to them.

Another option is to use rental system. A company will install and maintain the panels with a 20-year contract. You will pay per kilowatt-hour for the use of the panels plus the service charge of your electric company. However you can have a reversible meter placed on your house, which will credit you any kilowatt-hours you are able to put back on the net. If your panel produces 20 kilowatt-hours in one day but you only use 15 kilowatt-hours then the electric company will credit you 5 kilowatt-hours at the going rate. Read the rental contract carefully, some companies will charge you the amount of kilowatt-hours produced whether you use them all or not. Therefore the amount you receive for the unused power my not be what you expect.