The Real Cost of Electricity


Most people enjoy movies. I know I do. Many people seem to enjoy the ones where somebody is thinking one thing and then there’s a reversal and something completely different shows up. Sometimes they set the scene early by showing a sly character using sleight-of-hand and quick banter to make you think something is somewhere else.

It’s fun to watch sleight-of-hand or a shell game in a movie, usually because there is a wily character who is bantering with his customers and offers comic relief.

I was looking at my electricity bill the other day and I thought – son of a gun they could make a movie out of this.

Let me explain. I’m looking at my bill, and although it may not be exactly what you have at your facility or your house you can rest assured that it will have similar components.

The line items were as follows:

On peak @ $0.16 / kW-hr $7.30
Off peak @ $0.12 / kW-hr $5.89
Mid Peak @ $0.08 / kW-hr $22.32
Delivery $27.53
Regulatory charge $2.69
Debt retirement charge $2.89

Then on the back you have to look, but you will see that you’re also being charged for electricity you didn’t even get. Yes, line losses are attributed to your meter. In my case they allocate a 1.035 multiplier or 3-1/2% line loss.

It’s a bit like buying a 5 lb bag oranges at $0.99 a pound but when you get to the cash register they tell you that out of every 100 pounds of oranges, 4 pounds are spoiled on route. So your 5 pound bag of oranges costs an extra $0.20. And if they also said delivery from Florida costs an extra dollar, you might wonder – why didn’t they say that when you were at the produce counter? This seems a lot like a sleight of hand, but without the comedic banter.

When you ask most people what they think the cost of electricity is they usually state the average electricity rate, or maybe even the peak rate. In reality this is a far cry from the actual cost.

When you add up all the big and small multiple charges and divide by the power you actually used, the real cost of power in this particular example was $0.19 a kilowatt hour. And that was by consciously shifting most of the energy use to off-peak.

Regardless, when most people are looking at doing any sort of power payback analysis they should forget any preconceived notions and simply take the total cost of the bill and divide it by the actual electricity they received. Not what they’re paying for, but what they got. Then they will see that they are paying a lot more for electricity than they originally thought.

This means that projects that turn waste into energy, or use combined heat and power are a good investment as electricity prices continue to increase. This will also save you money so you can go to the movies.

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