Ray's Round Up: Understanding and Saving on Your Utility Bill

Every month, millions of Pennsylvanians receive their electric utility bill and I would guess that many of us look at the total, maybe grumble a little, then make a payment and go on with our business.  I would also hazard a guess that most consumers don’t know how to read or understand their utility bills, and don’t know exactly what the charges are for or how one could be saving money.  Do you know the difference between ‘supplier’ and ‘distributor’?  Did you know that you can shop for your electric supplier, but not your distributor? How do you know where you could be saving money on your monthly electric utility bill and which costs are fixed?

After a renowned career heading the Pennsylvania Office of Consumer Advocates (OCA), which fights for the rights of utility customers before the Pennsylvania Public Utility Commission and the General Assembly, Sonny Popowsky now serves as an Executive Council volunteer with AARP Pennsylvania.  In his volunteer role, Sonny not only advises AARP on utility matters, but also talks to Pennsylvanians about their utility services and how to save money on their electric bills.  Here are some key points that Sonny discussed with an audience of AARP volunteers and members in Monroeville last month:

Electric bills are made up of two main components – the charge per unit (kilowatt) of use, and how many units are used.  Lowering either number means savings on your bill.  The charge per unit is then also made up of two parts – distribution and supply. Distribution charges consist of the costs for electricity infrastructure, such as the poles and wires that run to your home.  These charges are regulated by the Public Utility Commission and consumers do not have a choice in what company serves their home.  Supply charges consist of the cost of the electricity that you use.  In most areas of Pennsylvania, consumers may shop for their electric supplier if they wish (with exceptions in communities supplied by a municipally-owned public power company or in rural areas supplied by a rural electric co-op).  Consumers who take the time to compare the rates of different suppliers may be able to reduce their monthly electric bills by choosing a new electric supplier – but there are important factors to consider.

• First, know the difference between a fixed and variable rate. A fixed rate locks in the price per kilowatt hour you will pay for electricity for the length of your contract.  A variable rate means the price can change each month.
• Variable rates might look like the best deal, but remember, the price can go up dramatically almost overnight. During the “Polar Vortex” in the winter of 2013-14, some variable rates increased by over 300% from one month to the next.
• Fixed rates provide stability, but many fixed rate plans charge a cancellation fee if you choose to change suppliers before your contract has expired.
• One of the most important things about electric shopping in Pennsylvania is that you aren’t forced to shop. You can stay with what is known as your default electric supplier – the company that has been providing electricity to you and your neighbors for many years.  Default suppliers are required to purchase electricity from electricity producers at the best price available to them and sell it to consumers at the same cost.  This is known as the Price to Compare.
• The competitive electric suppliers also buy from the same electricity producers as the default suppliers, but sometimes are able to purchase electricity in a way that enables them to offer a price to consumers that is lower than the Price to Compare while they still make a profit.
• If you want to shop, the Office of Consumer Advocate and the Public Utility Commission provide guides that list the Price to Compare for each default supplier and also list the price and contract details that other electric suppliers in that service territory are offering. The OCA guide can be found at oca.state.pa.us (or you may obtain a paper copy by calling 800-684-6560) and the PUC guide may be found at www.papowerswitch.com

 

Shopping is not the only way to save on your electric bill, however.  Whether you shop for electric or not, the best way to lower your bill is by using energy wisely. Even if the unit price of electricity increases, you can reduce or eliminate the impact of that increase by using less energy. Using energy more efficiently does not mean sitting in the cold or in the dark. It means getting more energy value and comfort for your money.

Here are six quick tips for saving money on your electric bill:

• Recycle the old refrigerator in your basement or garage. That old refrigerator could be using three to four times as much electricity as a new model, costing up to $150 per year to operate, and most utilities will actually pay you to come and take it out of your home.
• Change your lightbulbs to compact fluorescent bulbs (CFL). Because CFL bulbs use far less energy and last much longer than traditional bulbs, you may save $40+ over the life of the bulb. These bulbs may be more expensive to purchase but lifetime savings can be even greater.
• When purchasing a new appliance, look at models with the Energy Star label. New energy-efficient models use 30-40% less energy than older models, and you may save even more with utility rebates.
• Install a programmable thermostat that can automatically lower heat or air conditioning settings when no one is home or at night.
• Adjust the temperature on hot water heaters to 120 degrees. Many people set them much hotter than necessary.
• Reduce cold air flowing into your home and dollars flowing out of your wallet by plugging leaks and stopping drafts. Use caulking and weather stripping around doors and windows and any other sources of leaks and drafts.

 

Being able to understand utility charges and using less electricity may help consumers save money on this necessary expense. This is especially critical for Pennsylvanians who are struggling to make ends meet or are on a fixed income. But I don’t know anyone who wants to pay more for electricity than they need to – hopefully this information will help you to reduce your electricity costs.

“Ray’s Round Up” features updates on current state and federal issues by Ray Landis, AARP PA’s Advocacy Manager.