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How to Calculate Your Electricity Bill for Commercial Facilities

How to Calculate Your Electricity Bill for Commercial Facilities

By Vanessa Peng

If you’re in the facility management field, knowing how to read your commercial or industrial electricity bill is, without a doubt, extremely important to know. Understanding exactly how much you spend on energy and your electricity usage allows you to make the right financial decisions for your facility and helps you put the ideal plans into action to save your facility money. This brief article will show you how to calculate your electricity bill.

In order to figure out how to read your energy bill and figure out what your electricity rate is, first you have to know what a kilowatt-hour or kWh is.  

What is a kWh?

A kilowatt-hour is a measure of your energy usage.

A kWh is equal to one kilowatt of power sustained for one hour. One kilowatt hour is equal to 1,000 watts for one hour.

Think of it this way, a kWh doesn’t measure how much electricity you use in one hour, but rather measures the amount of energy you would use to keep a 1,000-watt machine running for one hour. For example, if you use a 1,000-watt machine for one hour you would have consumed 1 kWh of energy.

What’s the difference between kW and kWh

Kilowatt (kW) and kilowatt-hour (kWh) may sound and look the same, but they are measuring completely different things. 

The difference between the two is kW is a measure of power, while kWh is a measure of total energy. A kW is 1,000 watts and is a measure of how much power demand your facility uses. kWh shows you how much energy you’ve used for a certain amount of time.

How to Calculate your kWh rate for your facility 

Utility companies use your total kilowatt-hour usage and multiply it by your kilowatt-hour rate to determine how much to charge you for electricity. 

Your kilowatt-hour rate is the price you’re paying for electricity from your utility provider. 

To calculate your kWh rate, divide your power bill minus any taxes and divide that figure by your power consumption. 

power rate formula representing how to calculate kwh rate

 

Why knowing your kWh rate is important to your bottom line

Knowing your kWh rate is extremely important. Without this knowledge, you can’t properly make any financial decisions for your facility, especially when it comes to energy efficiency.

Your kWh may look like a small number, but a commercial facility needs to use a lot of power in order to operate. What may look like a tiny kWh rate can quickly reach tens of thousands of dollars in a month. 

When you decide to make energy efficiency upgrades to your facility, knowing your kWh rate helps you figure out your projected savings, payback period, Return on Investment (ROI), and Internal Rate of Return (IRR) on the improvements. This means you will know exactly how much money you will save on your energy efficiency projects and if they are worth it or not. 

You can share this information with stakeholders and decision-makers. Energy efficiency upgrades move much quicker up the chain of command when you have real, tangible figures in front of you to present.

An example electric utility bill from PG&E

Why you need 12 months worth of electricity bills to find the accurate average kWh rate

As an energy efficiency solutions company, prior to an audit of a facility, we ask our customers for twelve-months worth of electricity bills. The reason we ask for a full year is so we can get a truly accurate average kWh rate for each facility. 

Monthly usage can vary between seasons and how many hours per day your facility is operating. At the same time, rates can fluctuate throughout the year due to weather conditions and other factors, and we want to take every variance into account. With an accurate average kWh rate, we show our customers the real projected savings, payback period, ROI, and IRR numbers rather than fabricated figures. 

Why you need interval data when looking at energy storage and solar projects 

When we calculate our customer’s average kWh rate for energy storage and solar projects we add yet another layer of information in order to get the most accurate projection of energy savings and payback period. In energy storage and solar projects we use our customer’s interval data to get the most accurate calculations. 

Interval data is meter data collected at specific intervals, usually every 15 minutes or hourly. Interval data can be collected with an interval meter, smart meter, or in our case we can capture it all online through an electrical utility information request.  When it comes to energy storage and solar energy, kWh rates fluctuate throughout the day depending on peak demand rates or how much energy is produced. Interval data provides the most true energy consumption information.