Energy guide
Understanding electricity rate structures
How flat, tiered, time-of-use, and demand-based tariffs work, and why a statewide EIA average cannot tell you which tariff applies.
A rate structure defines which bill inputs change the charge
Flat tariffs use one energy price; tiered tariffs change price at usage thresholds; time-of-use tariffs change it by schedule; and demand tariffs charge for measured peak kW. RateWatt's 2025 US residential benchmark is 17.30¢/kWh in EIA's annual-frequency series, but it is average revenue per kWh, not a tariff.
Tariff first, benchmark second
The utility tariff defines the charge; EIA’s statewide average revenue per kilowatt-hour only supplies a broad same-period benchmark.
- Flat
- one stated energy price
- Tiered
- price changes by usage block
- Time-of-use
- price changes by schedule
- Demand
- charge depends on peak kW
Definitions checked against EIA documentation August 3, 2026. Benchmark chart: EIA annual-frequency retail-sales series, 2025.
US average revenue per kWh by sector (2025)
Annual statewide-weighted benchmark, in cents per kWh.
- Residential
Residential
17
- Commercial
Commercial
13
- Industrial
Industrial
9
What this shows The sector averages differ, but this chart does not reveal the tariff structure, eligibility terms, demand windows, or fixed charges faced by any customer.
What RateWatt Shows and What It Does Not
EIA calculates average retail electricity price as revenue divided by sales. RateWatt stores that measure by state and customer sector. It is useful for broad comparisons because each displayed annual row uses the same measure and period.
EIA says it does not collect or publish individual utility tariffs, time-of-use peak and off-peak prices, or demand charges. The statewide average therefore cannot identify a customer’s applicable schedule. Use the utility’s current tariff or an official tariff repository for that job.
A statewide EIA average can rank states; only the published tariff can price an account.
Four Common Tariff Structures
| Structure | What changes | What to verify in the tariff |
|---|---|---|
| Flat energy rate | One stated price per kWh for covered usage | Season, riders, minimum bill, and fixed charges |
| Tiered or block | Energy price changes after usage thresholds | Block limits, reset period, and eligibility |
| Time-of-use | Energy price changes by time window | Peak hours, weekends, holidays, and seasons |
| Demand charge | A charge depends on measured peak kW | Interval, ratchet, billing demand, and $/kW |
Flat Energy Rates
A flat energy tariff applies one listed cents-per-kilowatt-hour price to the usage covered by that schedule. “Flat” does not necessarily mean that every bill component is bundled into that price. The tariff may separately list a customer charge, adjustment clause, minimum bill, tax, or rider.
Do not substitute RateWatt’s statewide average for the listed energy price. The EIA average is revenue divided by sales across reporting customers; it is not the same calculation as applying one tariff to one account.
Tiered or Block Rates
A block tariff divides usage into defined ranges. In an inclining-block schedule, later blocks have a higher price; in a declining-block schedule, they have a lower price. The block size and reset period come from the tariff.
To reproduce a bill, allocate usage across each block in order, apply the listed prices, and then add the other applicable terms. A generic national example cannot establish a utility’s actual thresholds.
Time-of-Use Rates
A time-of-use schedule assigns prices to named time windows. Those windows can change by weekday, weekend, holiday, or season. Some schedules also distinguish critical-event periods.
A valid comparison needs usage measured in the same intervals as the tariff. Monthly kWh alone cannot show how much consumption fell into each window, and the statewide annual average cannot supply the missing interval pattern.
Demand Charges
Energy and demand are different measurements. Energy is accumulated consumption in kilowatt-hours; demand is a rate of power draw in kilowatts. A demand tariff may use the highest measured interval, a defined on-peak maximum, or another billing-demand rule.
The tariff must be read before calculating the charge. The measurement interval, demand ratchet, minimum billing demand, and price per kilowatt can all affect the result.
How to Verify a Current Structure
- Identify the serving utility and the exact rate-schedule code shown on the bill.
- Open the current official tariff and confirm its effective date and customer eligibility.
- Record each energy block or time window, plus fixed, demand, minimum, rider, and tax terms.
- Match the bill’s usage and demand intervals to those terms.
- Use the RateWatt state value only as a statewide annual benchmark, not as a replacement tariff.
The U.S. Department of Energy’s OpenEI Utility Rate Database can help locate schedules, but the serving utility or regulator remains the authority for a current tariff.
Frequently Asked Questions
What is a flat electricity rate?
A flat energy rate applies one stated cents-per-kilowatt-hour price across the usage covered by that tariff period. A bill can still include fixed charges, minimums, riders, taxes, or other terms, so the tariff sheet controls.
What is a tiered rate?
A tiered or block tariff changes the energy price after usage crosses a stated threshold. An inclining block charges more in later blocks; a declining block charges less. The utility tariff defines the thresholds, dates, and eligibility.
What is time-of-use pricing?
A time-of-use tariff assigns different prices to named time windows. Peak, off-peak, weekend, holiday, and seasonal definitions vary by tariff. EIA does not publish the applicable price windows for individual utilities.
What is a demand charge?
A demand charge is based on measured power draw in kilowatts, often the maximum recorded over an interval during a billing period. It is distinct from an energy charge based on total kilowatt-hours. The tariff defines the measurement interval and price.
Does RateWatt show my utility’s tariff?
No. RateWatt shows EIA statewide average revenue per kilowatt-hour. EIA says it does not collect or publish utility tariff rates, time-of-use prices, or demand charges. Obtain current terms from the utility, regulator, or an official tariff repository.
Can the state average tell me which structure is cheaper?
No. A statewide annual average combines many customers and tariffs. Comparing structures requires the complete tariff and the same customer’s interval or monthly usage; RateWatt’s benchmark cannot identify a best plan.
Sources
- U.S. EIA, factors affecting electricity prices and average-price method.
- U.S. EIA, utility-rate and tariff data boundary.
- U.S. EIA electricity glossary.
- U.S. DOE OpenEI Utility Rate Database.
Primary documentation checked August 3, 2026.
Use the right source
RateWatt supplies the benchmark; the official tariff supplies the charge rules.
- Benchmark a state’s annual average. All state rates
- Learn how average revenue per kWh is built. Rate explainer
- Review the portal’s data method. Methodology
Tariff terms and eligibility change. Verify the schedule code and effective date with the serving utility or regulator.
The chart uses RateWatt's stored EIA annual-frequency retail-sales series for 2025. Tariff definitions and source boundaries were checked against current EIA documentation on August 3, 2026. See our editorial standards & corrections policy, the methodology behind these numbers, or report a data error. Data current as of 2025.