Let’s Do The Math on Electric Heat

When asked what we pay for electricity, most just say…about $ x per month. The approximate dollar amount per month is what we know. Figuring out what we are actually paying for and understanding it is a maze in our electric bills.

Sometimes our electric bills can be confusing. While the State of Connecticut has the second highest electric rates in the United States, few of us really understand what makes up our electric bill that ends up making the bottom line as large as it is.

Let’s start with looking at the bill, this one from a section of a United Illuminating residential customer’s bill:

Our electric bills are divided into three basic parts: [a] the cost of the electricity, then [b] the cost of transmitting the electricity from the source through to our homes, and then [c] the cost of maintaining the distribution system that enables our electric utilities and energy providers to supply us with steady, reliable amounts of power.

All three of these parts:  the commodity of electricity, the transmission charge, and the distribution charge, makes up our monthly electric bill – each and every month.

Connecticut is in a “deregulated market,” which is to say that the part [a] of our electricity service – the electricity itself, may be purchased from a wide variety of energy providers.  The part of our electricity service that remains regulated by the state agency PURA [Public Utility Regulatory Authority], is the transmission and distribution part of the bill. In short, you may shop for a different electric energy provider but your electricity will always be delivered by your local utility [CL&P, UI, etc].

Now, let’s turn to each of the charges and add them up!

1. Electricity.                                                $.09400 cents per kilowatt hour

2. Transmission Charge                           $.008835 cents per kilowatt hour, averaged between .009817 and .007854.

3. Distribution Charges

Distribution                                                    $.049113 cents per kilowatt hour

Combined Public Benefits Charge               $.007512 cents per kilowatt hour

Competitive Transmission Assess              $.015222 cents per kilowatt hour

Non-Bypassable FMCC                               $.008548 cents per kilowatt hour

Decoupling Adjustment                                $.000291 cents per kilowatt hour

Two credits

Decoupling Adjustment                                [$.000253 cents per kilowatt hour]

Pension Tracker and Earnings                    [$.000698 cents per kilowatt hour]

Total Distribution                   $.079744 cents per kilowatt hour

4. Monthly Customer Charge                  $15.85. Divided by the number of kilowatt hours purchased [837], adds another $.0183393 cents per kilowatt hour

Total in cents per kilowatt hour, for the Electricity, Transmission charges, Distribution charges, and Monthly Customer Service charge                $.2009183

As you can see, only about ½ of your electric bill is for the actual electricity that you’re paying for [9.4c out of 20.09c cents per kilowatt hour]. The other half is in transmission and distribution costs and then an assortment of added state fees.

How does this amount, 20.09c cents per kilowatt hour, compare with other fuel costs such as heating oil?

There are 3412 btus in one kilowatt hour of electricity and 140,000 btus in one gallon of heating oil.  Therefore, the conversion factor from one to the other goes like this:  3412 / 140,000 = 41.03.  That means it takes 41.03 kilowatt hours of electricity to equal the btu equivalent of one gallon of heating oil.

Now, multiply 41.03 by the kilowatt hour rate you pay of .2009 cents per kilowatt hour, and you end up with $8.24.  That’s right; to buy the Btu equivalent of one gallon of heating oil at the cost of 41.03 kilowatt hours of electricity would cost you the equivalent of $8.24 per gallon.

Fortunately, according to the Connecticut Office of Policy and Management surveys of Connecticut oil prices – heating oil in Fairfield County during the week of October 20th ranged from $3.44 to $3.86 – heating oil sells for less than 50%  of the cost of electricity.

Connecticut’s General Assembly passed legislation in the last session to provide incentives to convert your home or condominium away from electric heat – as it is the most expensive way to heat a home in general use today.  Look for loan programs and other incentives soon as electric heat may very quickly become an expensive thing of the past – and a good thing it will be for every one of the 190,000 electric heat users in Connecticut.

About ctcema

President, CEMA
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1 Response to Let’s Do The Math on Electric Heat

  1. Pingback: Since EIA Is Never Right, Let’s Focus on What We Can Really Do About Winter Heating Costs | ICPA's Blog

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