Utility language is technical for good reasons and impenetrable for bad ones. These are the terms that actually turn up on bills, in regulatory filings and in supplier marketing, defined without circular references to other jargon.
Units and measurement
- Kilowatt-hour (kWh)
- The unit almost all residential electricity is billed in. One kilowatt of draw sustained for one hour. A 1,500-watt heater running four hours uses six kWh. The average American household uses about 871 a month.
- Kilowatt (kW)
- A rate of draw rather than a quantity, the difference between speed and distance. Residential bills are usually based on kWh, but demand charges are based on kW.
- Therm
- The unit natural gas is usually billed in, holding about 29.3 kWh of energy. The conversion is what lets you compare a gas price with an electricity price.
- Interval data
- Your consumption recorded in short blocks, typically 15 or 60 minutes, by a smart meter. Required for time-of-use billing, and usually available to you on request. It is the single most useful diagnostic for an unexplained bill.
Charges on your bill
- Supply / generation charge
- The cost of the electricity itself. The part a competitive supplier sells you in retail choice states, and the part a regulated utility passes through at cost.
- Delivery / distribution charge
- The cost of the wires, poles, substations, meters and the crews that maintain them, plus in many states the policy programmes funded through the bill. Set by the regulator and unavoidable regardless of who supplies you.
- Fixed customer charge
- A flat monthly amount billed regardless of usage, covering metering, billing and connection. A few dollars in some states, $15 to $30 in parts of the Mountain West and Great Plains, which reduces what efficiency work can save you.
- Rider
- A charge added to the base rate to recover a specific approved cost: storm restoration, efficiency programmes, renewable procurement, nuclear decommissioning. Legitimate, and the main way a bill grows without a visible rate change.
- Fuel adjustment clause
- Trues up the gap between forecast and actual fuel cost. The utility neither profits nor loses on fuel; it simply passes the difference through, usually annually.
- Demand charge
- Bills your single highest interval of draw during the month, in kilowatts, on top of your energy. Rare residentially but offered in Arizona and elsewhere. Penalises running several large appliances simultaneously rather than using a lot overall.
- Public benefits charge
- Funds state policy programmes through the bill: low-income discounts, efficiency, sometimes nuclear or renewable contracts. Connecticut's spiked in 2024 and became a political fight, then fell back as specific items rolled off.
Rates and tariffs
- Rate schedule / tariff
- The specific pricing structure your account is on, identified by a code on your bill. Most utilities offer several and apply the default unless you ask for another.
- Price to compare
- In retail choice states, the utility's own supply price, published so competitive offers can be measured against it. The correct benchmark when shopping, and the one broker sites are least likely to show you.
- Standard offer / default service / basic service
- The supply a utility provides to customers who have not chosen a competitive supplier, procured through regulated auction at cost. Different states use different names for the same thing.
- Tiered / inclining block rate
- Consumption above a threshold is priced higher. Makes the bill rise faster than usage, and means the average rate understates what an additional kilowatt-hour costs you.
- Time-of-use (TOU)
- Different prices at different hours, reflecting the real cost of the marginal generator. Valuable if you can shift load, a quiet penalty if you cannot.
- Budget billing
- Equal monthly payments averaged over the year with a true-up at the end. Smooths cash flow without reducing the total.
How the industry works
- Public utility commission (PUC)
- The state body that sets rates for investor-owned utilities. Also called a public service commission or corporation commission. Elected in about a dozen states, appointed elsewhere.
- Rate base
- The depreciated value of the assets a utility has built and the regulator has approved. The utility earns an approved return on this, which is why a regulated utility earns by building things.
- Rate case
- The public proceeding in which a utility asks for more revenue and other parties contest it. Usually takes most of a year and rarely grants the full request.
- RTO / ISO
- Regional transmission organisation or independent system operator: the body that runs the wholesale market and dispatches generation across a region. PJM, MISO, ISO New England, NYISO, ERCOT, SPP and CAISO.
- Capacity market
- An auction that pays generators to be available rather than to produce. PJM's cleared at a record price recently and pushed residential rates up across nine jurisdictions in a single year.
- Retail choice
- A market structure where households can buy supply from a competitive provider while the utility continues to deliver. Available in about sixteen jurisdictions, with mixed results for residential customers.
- Municipal aggregation
- A city or county buying supply on behalf of residents, who are enrolled unless they opt out. Has generally outperformed individual switching because it buys at scale with no sales cost.
- Securitisation
- Refinancing a large one-off cost, such as storm restoration or a retired plant's remaining book value, with low-interest bonds repaid through a small long-lived charge. Genuinely lowers the cost of recovery.
- Stranded cost
- The undepreciated value of an asset retired before the end of its book life. Regulators generally allow recovery, which is why ratepayers can pay for a closed plant and its replacement at the same time.
Solar and storage
- Net metering
- Exported solar offsets consumption at the full retail rate. The original and most favourable arrangement, now being replaced in several states.
- Net billing
- Exports are bought at a separate, lower rate while consumption is billed at retail. Shifts the value of solar toward self-consumption and makes batteries more attractive.
- Avoided cost
- The utility's marginal generation cost, and the basis for export compensation in much of the Southeast and regulated West. Typically well below retail.
- Coefficient of performance (COP)
- Heat delivered divided by electricity consumed. Resistance heating is always 1.0. A heat pump moves heat rather than making it and typically achieves 2.5 to 3.5, which matters more than any difference between state rates.
Where to go next
If you are working through your own bill, start with how to read an electricity bill, which walks through the structure in the order it appears. If you are trying to work out whether switching supplier is worth it, supply versus delivery is the one that decides it.