Electricity cost calculator

The price you were quoted is not the price you pay

An electricity bill has two halves, and the number in the advertising is only one of them.

The supply half pays for the energy itself. In a state with retail choice this is the part a competitive supplier bids for, and it is the cents-per-kWh figure on the mailer. The delivery half pays for the poles, the wires, the substations, the meter and the crews who restore service after a storm. It is charged by the local utility whether or not you buy your energy from someone else, and in most of the country you cannot shop for it.

On top of both sit the smaller lines: riders and adjustment clauses that recover fuel costs or storm damage, public benefit and efficiency charges, franchise fees, and state and local taxes. Individually they look trivial. Together with delivery they are frequently about a third of what you pay, and none of them appear in the rate a supplier advertises.

That is why the price field on this calculator asks for something specific rather than for a published rate. Take the total at the bottom of the bill and divide it by the kilowatt-hours the bill says you used. The result is your effective rate, and it is the only price that makes the arithmetic on this page describe your household.

The fixed charge gets its own input for a reason. It is payable at zero usage, so folding it into a per-kWh price would make conservation look more valuable than it is. A household that halves its consumption does not halve the customer charge.

A worked example at the default figures

The tool opens on 900 kilowatt-hours a month, 17 cents a kWh, a $12 fixed monthly charge and an expected rise of 3% a year.

The usage charge is 900 times $0.17, which is $153. Add the $12 customer charge and the monthly bill is $165, or $1,980 a year. The results panel shows the usage and fixed parts separately so you can see which one responds to anything you do.

Ten years is where the number stops being small. Escalating $1,980 at 3% a year gives about $22,698 in total, with the tenth year costing about $2,583 against the first year's $1,980. The table in the results shows years one, five and ten:

One simplification is worth naming. The tool escalates the whole monthly figure, customer charge included, at the rate you enter. Real customer charges move in rate cases rather than every January, so the fixed part of the ten-year total is smoother in the model than it is in life. The difference is small at a $12 charge and larger where the charge is $30 or more.

What a 3% rise a year is actually worth

Hold the usage and the price and change only the escalation.

At 0% a year, ten years of the default bill costs $19,800. At 3%, it costs about $22,698. At 5%, about $24,904. The assumption you make about future prices is worth roughly $5,100 across the decade, which is more than most efficiency measures a household is likely to take.

That is an argument for humility about the input, not for picking a big number. Nobody publishes your utility's next ten rate cases. A defensible approach is to look at what your own bill has done over the last three or four years, since you have those statements, and to sanity-check it against published national trends in the price of electricity rather than against a forecast.

Now change usage instead. Cutting 100 kWh a month, which is a real but achievable change for most households, saves $17 a month and $204 a year at the default price. Across ten years with the same 3% escalation that is about $2,339, because the saving escalates alongside the bill. Efficiency compounds in exactly the way the bill does.

• The fixed charge is immune. $12 a month is $144 a year whatever you do, and $1,650 across ten years at a 3% rise.
• The usage charge is not. Every kilowatt-hour you do not use is worth its full effective rate, delivery and taxes included, which is why the effective rate matters more than the supply rate.
• The escalation multiplies both. A saving made in year one is a saving made in all ten.

Why is my effective rate higher than the advertised one?

Because the advertised rate is a price for one component of a bill that has four or five.

Work an example backwards. A household using 900 kWh that pays $165 has an effective rate of about 18.3 cents once the customer charge is counted, and about 17 cents on the usage lines alone. If the supplier advertised 11 cents for supply, the missing 6 cents is delivery, riders and tax. Nothing has gone wrong; the two numbers are measuring different things.

This has a practical consequence when you are offered a fixed-rate supply contract. A contract that undercuts your current supply rate by 2 cents saves you 2 cents on roughly half your bill. It does not cut your bill by the ratio of the two headline numbers, and a contract that beats your utility's default supply price today may lose to it later, because default supply is repriced on a schedule and your fixed rate is not. Read the contract for the term, the cancellation fee and what happens at the end of the term, which is usually a rollover onto a variable price.

What tiered and time-of-use rates hide

A single average price is a convenience, and on some tariffs it is a misleading one.

Tiered rates charge more per kWh above a monthly threshold. A household comfortably under the threshold and a household well over it pay the same headline rate and very different effective ones, and the marginal kilowatt-hour, the one you would actually avoid, is priced at the top tier rather than at the average.

Time-of-use rates charge more during defined peak hours. Here the average is even less useful, because the same 900 kWh costs different amounts depending on when it is consumed. Shifting laundry, dishwashing and vehicle charging out of the peak window changes the bill without changing the total usage at all, and this calculator cannot see that, because it prices one blended rate.

Demand charges, which are common for commercial accounts and are appearing on some residential tariffs, price your single highest fifteen-minute or one-hour draw in the month. A household with a low total and one bad simultaneous peak can pay more than its neighbour with higher consumption.

If your tariff is any of these, the honest way to use this page is to compute your effective rate from a full twelve months of bills, accept that it is an average, and treat the result as a budgeting figure rather than as a prediction of any single month.

Common mistakes with electricity calculations

• Using the advertised supply rate. It excludes delivery, riders and taxes, which are often about a third of the bill. The result understates the cost of every kilowatt-hour, and it understates the value of every one you save.
• Using a single month. Usage is seasonal, and in most of the country the swing between the mildest and the hardest month is large. A January or an August bill extrapolated to a year is wrong in a predictable direction. Take a twelve-month average from your account history.
• Folding the customer charge into the per-kWh price. It makes conservation look better than it is, because the fixed charge does not fall when usage does.
• Assuming a state or national average is your rate. Published averages cover an entire state, across utilities and tariffs and customer classes. Yours is on your bill. Our state pages exist to show where you sit, not to replace the document in your hand.
• Reading a ten-year total as a prediction. It is one escalation assumption compounded ten times. Change the assumption from 3% to 5% and the answer moves by about $2,200.
• Comparing appliances on sticker price alone. The running cost over a decade regularly exceeds the difference in purchase price, and it is the part nobody quotes at you in the shop.

What this calculator does not include

Stated plainly, because the gaps decide how far you should trust the output.

• Tiered, time-of-use and demand pricing. One blended rate, applied evenly to every kilowatt-hour.
• Seasonality. Twelve identical months, which no household has.
• Any change in your usage. New occupants, an electric vehicle, a heat pump or a home office all move the kWh figure, and the tool prices whatever you type.
• Solar generation or net metering credits. Those belong in the solar payback calculator, which handles export pricing separately.
• Budget or levelised billing. Smoothing what you pay does not change what you use, and this page is about what you use.
• Bill assistance and efficiency programmes. Rebates, weatherisation help and low-income rate discounts exist in most states and are not modelled here.

Where we hold no published figure for something, we leave it out and say so rather than substituting a national average. That policy is set out in our methodology.

What should you check on your own bill?

• Find the total charged and the kilowatt-hours used, then divide one by the other
• Identify the fixed customer charge and enter it in its own field, not in the rate
• Pull twelve months from your online account rather than using the current bill
• Check whether your tariff is flat, tiered or time-of-use before trusting one average
• Check whether any supply contract you signed has an end date and a rollover price
• Compare your effective rate against your own bill from three years ago to set the escalation

Electricity is one line in a household budget, and it is rarely the largest. Once you have the figure, put it beside the rest in the utility bill calculator or in the wider cost of living tools, because a decision about where to live moves the whole set at once and a decision about a light bulb moves one line of one of them.

This page explains arithmetic and the structure of a utility bill. It is not energy advice or a recommendation about any supplier or tariff. See the disclaimer.