Part 1: Understanding your electric bill can save you money

(© Shutterstock)

(© Shutterstock)

Part 1: The basics

The energy industry is changing, and that means changes for the customer. Electricity generation isn’t just the role of a central power producer anymore. Renewable energy resources are — increasingly — distributed around neighborhoods on residential rooftops, microgrids or solar farms. People have a greater role than ever before in sourcing their own energy.

The more customers know about what it takes to get electricity to their doors, the better they are able to make the right decisions for their budgets. Knowing power industry terminology can help consumers cut costs. Here are a few basic terms.

Energy and power

Electricity is energy converted from one form, such as wind, sun or natural gas, to another form that can keep lights and electrical equipment running.

Power is the rate at which energy — electricity — is generated or used.

Close-up of electricity meter (© Shutterstock)
(© Shutterstock)

Watts, kilowatt hours and rates

Electricity use is measured by the kilowatt hour, which is a unit of energy. A watt is a unit of power. One kilowatt equals 1,000 watts, and a kilowatt hour is one hour of electricity use at the rate of 1,000 watts. Electric bills show the number of kilowatt hours used in a billing period.

Utility-scale energy use is measured in megawatts (1,000 kilowatts) and gigawatts (1,000,000 kilowatts).

The rate a customer pays for electricity is based on a number of factors beyond the number of kilowatt hours used. These include the rate base — investments the utility company has made in facilities and other things needed to provide service to customers — and regulations set by local, state and federal governments.

Red pipes and other power station machinery (© Shutterstock)
Power grid infrastructure includes substations with transformers and high-voltage connectors like these. (© Shutterstock)

The power grid

The power grid is a network of generation and transmission facilities that delivers electricity to customers. Substations that manage the flow of electricity from power generation plants, transformers that raise or lower voltage, electrical towers and transmission lines are all part of this network.

It is a complex system that must be carefully monitored, from power generation to usage.

Demand is the amount of electricity that customers use at any given moment, and peak demand is when there is maximum usage. Sometimes demand will exceed supply — when it’s hot and everyone’s air conditioners are cranked up, for instance. That is why demand side management by utility companies is necessary to maintain reliable electricity. Companies either reduce energy consumption or spread usage over times of day when demand is less. To help them do this, customers may be offered discounts and other incentives to shift their heaviest electrical use to off-peak times of day. Electricity is more expensive when used at peak demand times.

It’s all about load, the amount a customer uses at any given time. To maintain good electrical service, load balancing goes on constantly. Utility companies match supply with load in various ways by drawing on different sources, including energy storage facilities that employ high-capacity storage batteries or other technologies to store energy for later use.

Base load is the minimum demand on the power supply in a 24-hour period. In the past, this basic demand has been met by one or more base-load power sources that run continuously. The base load is usually about 35 to 40 percent of the maximum load. Spikes in demand at peak load times are supplemented by smaller plants that kick into action according to need. These plants often cost more to run than base-load power plants.

This article is the first in a five-part series on power-grid terminology. Next up, solar, wind and other renewable energy resources.

By: Lea Terhune