At first, utility bills can seem pretty complicated. Different rates. Different plans. Generation charges. Delivery charges. Consumption. Tariffs. Peak and off-peak rates. It takes some work to understand how much electricity you use each month and throughout a typical year. So here's a breakdown.

For starters, it’s important to understand how to measure electricity.

Kilowatts (kW): This is the amount of power at a given moment in time.

Kilowatt hours (kWh): This is the amount of power (or kilowatts) over the course of an hour. This is how your electric utility bills you.

For example, if you're brewing coffee while the AC is running, both appliances may need 3 kilowatts of power to operate. But if you turn the AC off after making your coffee, you may consume just 2 kilowatt-hours in the hour before you leave for work.

Now, let’s talk about your actual bill. There are several different things that utilities will charge you for related to your electricity use. The terms they use may differ from utility to utility. Here are the most common charges they’ll use. Not all of these will show up on your specific bill though.

Generation charges: This is the cost to generate the power you consume.

Delivery, distribution, or transmission charges: This is the amount your utility charges to deliver power to your home. It’s also charged based on the number of kWh you use from the grid, and is intended to maintain or upgrade the electricity grid infrastructure.

Capacity costs: This is often a set fee and helps to ensure your utility has enough available capacity to meet demand during peak periods.

Taxes: This will vary depending on where you live, but some cities charge a tax that is added to your energy bill.

Tariff or rate plans/schedules: Utilities will use these terms somewhat interchangeably. Tariff plans and rate plans are essentially the rates at which your utility charges you for your electricity. Your utility usually publishes their rate/tariff plans on their website and you often have a choice of which plan you use.

Time-of-Use (ToU) rates: Many utilities have gone to time-of-use plans that charge different amounts for electricity at different times of day. Off-peak is the least expensive and is usually from midnight until around 3 p.m. Partial-peak is a higher rate and usually occurs for the hour prior to the peak period and for several hours after. Peak or super-peak is the highest cost and usually happens during the period of highest demand—from around 4 p.m. to 9 p.m.

Base services charge: Some utilities (like PG&E in California) have a base fee that all customers on certain rate plans pay. This fee is essentially in exchange for a lower per-kWh rate.

Tier 1 and Tier 2: Some utilities also split the amount of kWh you use into tiers. Tier 1 is a baseline amount of kWh that represents what an average household will use over the course of a month. It’s charged at a lower rate. Tier 2 is all the kWh you consume above the baseline Tier 1 level. Those kWh are charged at a higher rate.

Gas (or thermal or heating) charges: If your utility provides both electricity and natural gas, you’ll receive a combined bill that also breaks out your gas charges separately. This is billed based on the number of therms you use, and the rate-per-therm your utility charges.

Your utility bill, pre- and post-solar 
A few things will change between your pre- and post-solar electricity bill. The biggest change will be that your electricity bill will go down. How much depends on how big of a system you had installed, whether it includes a battery, your utility’s net metering structure and how much electricity you normally use each month on average. 

On the part of your bill that shows your usage, you should see some negative numbers that indicate you generated more electricity than you used and returned the excess to the grid. You should have a line item that shows your bill credits if you generated more than you used and your utility has net energy metering (NEM) or a similar program that provides credits for excess production that’s returned to the grid.

If your net metering credit is less than the cost of buying energy from the grid, adding batteries to your solar system can maximize your savings. Instead of exporting excess energy to the grid for minimal credits, batteries store this energy for later use, especially during peak evening hours. This allows you to reduce reliance on costly grid power and become more energy-independent while saving more in the process.