Understanding electricity rates

What a Kilowatt-Hour Measures

Power and energy are different. A watt measures power at a moment; a watt-hour measures energy used over time. One kilowatt-hour equals 1,000 watt-hours. A 1,000-watt appliance running for one hour, or a 100-watt appliance running for 10 hours, uses 1 kWh.

A cents-per-kWh number expresses money per unit of energy. Whether that number is a tariff charge or an aggregate statistic depends on its source and definition.

How EIA Builds the Average

EIA’s average retail price is total retail revenue divided by total retail electricity sales for the selected geography, sector, and period. RateWatt uses the price field published in EIA’s retail-sales API and preserves annual and monthly observations separately.

This method makes the figure useful as a broad benchmark. It also means the number is weighted by electricity sold and revenue collected across the reporting population. It is not a simple average of posted tariff prices.

Why a Bill Can Differ from the Benchmark

A customer bill is calculated under an applicable tariff. Depending on that tariff, the calculation can include:

• energy charges based on kilowatt-hours;
• usage blocks or time-of-use windows;
• fixed customer or service charges;
• demand charges based on kilowatts;
• minimum bills, adjustment clauses, riders, taxes, or fees.

EIA’s revenue-per-sales average captures the collected delivered cost in aggregate, but it does not retain those account-level rules. Consult the current official tariff to reproduce a bill.

Illustrative Tariff Comparison

Suppose Plan A charges 8.9¢/kWh plus $13.50 each month, while Plan B charges 11.2¢/kWh with no fixed charge. These are invented terms, not market quotes.

• At 500 kWh, Plan A is $58.00 and Plan B is $56.00.
• At 1,000 kWh, Plan A is $102.50 and Plan B is $112.00.
• The energy price in Plan A is about 20.5% lower, but total cost depends on usage.
• The plans break even at about 587 kWh: $13.50 ÷ $0.023.

The example demonstrates why the full tariff matters. It does not identify which plan is preferable for a customer, and real schedules can contain additional terms.

What the State Benchmark Can Support

Use RateWatt’s state pages to compare statewide averages from the same annual period. Use trend pages to compare stored periods within the same series. Neither comparison predicts a future bill or establishes the cause of a difference.

For an account-level calculation, identify the utility, schedule code, effective date, usage, and any demand measurements. The rate-structure guide explains the main tariff designs and where to obtain the controlling terms.

Frequently Asked Questions