Understanding US Electricity Rates

US electricity rates depend on your utility, customer class, rate plan, and when you use electricity—not just your state. A national average provides a starting benchmark, but your actual bill can include energy charges, fixed charges, demand charges, taxes, and credits. To estimate costs or compare plans, use the rate schedule that applies to your account rather than treating an average price per kilowatt-hour as your local rate.

US Electricity Price Benchmarks by Customer Class

Sources: EIA’s annual figures in Table 5.3 and its July 2026 Electricity Monthly Update. Geographic coverage is the 50 states and the District of Columbia. The 2025 figures are identified as preliminary in the retrieved Table 5.3; monthly estimates can also be revised.

Data checked October 12, 2026. EIA’s latest available monthly update covers July 2026, was released September 24, 2026, and lists October 23, 2026, as the next release date. July figures are monthly observations—not full-year 2026 averages—and should not be compared with annual figures as though the periods were identical.

What an EIA Average Actually Measures

EIA calculates average retail electricity prices from electricity sales revenue divided by electricity sold. These figures describe revenue per kWh across a customer group; they are not a list of the energy rates available to individual customers.

That distinction matters because a tariff can recover revenue through several charges. A commercial average expressed in USD/kWh does not mean a business can multiply consumption by that number and then add its actual demand charges to produce an accurate bill. Doing so mixes a statistical benchmark with account-specific billing rules.

EIA explicitly states that it does not publish utility tariffs, demand-charge rates, or peak and off-peak retail rates. Use EIA for national and state comparisons, and the utility’s official tariff for billing calculations.

Why Electricity Rates Differ Across the US

Electricity prices reflect more than the cost of generating energy. Utilities also recover costs associated with power plants, transmission lines, distribution equipment, financing, maintenance, and regulatory requirements. Fuel availability, weather, and local infrastructure affect those costs differently across service territories.

Three distinctions help explain why another customer’s rate may not apply to your account:

• Location: Local generation resources, fuel transportation costs, grid conditions, and pricing regulation affect electricity prices.
• Customer class: Residential, commercial, and industrial customers have different service requirements. Large industrial customers may receive electricity at higher voltages, reducing some delivery costs.
• Season and timing: Higher demand can require more expensive generation. A tariff may reflect those differences through seasonal rates or time-of-use pricing.

A state average still combines customers served by different utilities and rate schedules. It is useful for broad comparisons, but it cannot tell you the price of operating a particular load at a particular address.

Wholesale electricity prices are another separate measure. They describe electricity traded on the power system, not the complete retail cost delivered to a home or business. Most retail customers do not pay the wholesale market price directly.

The Charges That Make Up an Electricity Bill

These categories appear in utility billing explanations and tariffs, but not every account has every charge. PG&E’s California B-19 tariff, for example, separately specifies customer charges, energy charges, demand charges, and additional billing adjustments.

Supply and Delivery Are Not Always the Same Charge

Generation pays for producing or purchasing electricity. Transmission and distribution pay for moving it through the grid to the customer. Depending on the service arrangement, those costs may appear together or in separate sections of the bill.

Check whether a quoted USD/kWh figure is a supply-only price, a delivery-only component, or a bundled energy rate. PG&E’s B-19 tariff shows both total bundled rates and their unbundled components. Adding the component rates again to the bundled total would count the same costs twice.

The same principle applies when a separate supplier provides generation: follow the bill’s charges and credits rather than assuming every displayed generation line is an additional cost.

kW, kWh, and Billing Demand Measure Different Things

A kilowatt, or kW, measures power. A kilowatt-hour, or kWh, measures energy used over time:

[
E_{\text{kWh}}=P_{\text{kW}}\times t_{\text{hours}}
]

For example, a hypothetical load drawing a constant 2 kW for 3 hours consumes:

[
2\times3=6\text{ kWh}
]

Demand is the tariff-defined measure of power used for demand billing. It is not the month’s total kWh, and it is not necessarily an instantaneous equipment reading. PG&E’s B-19 tariff generally uses interval averages and distinguishes maximum demand from demand during specified peak periods; it also includes exceptions that require checking the actual schedule.

How Different Rate Structures Change Your Costs

These structures can overlap. PG&E’s residential time-of-use information describes plans with both time windows and baseline allowances, while its commercial B-19 tariff combines time-of-use energy prices with demand charges.

Time-of-Use Savings Depend on Your Actual Schedule

A low off-peak rate does not make a plan cheaper automatically. The result depends on how much electricity you use during every applicable price period.

For a verified California example, PG&E’s E-TOU-C plan identifies 4–9 p.m. every day as peak hours. Its E-TOU-D plan uses a different peak window. Those schedules illustrate why you must check your plan name rather than assume that every utility—or every plan from the same utility—uses identical hours.

For businesses, shifting consumption away from an expensive energy period may reduce kWh charges without reducing maximum-demand charges. PG&E’s B-19 tariff has distinct demand components tied to different periods, so a change in operating schedule must be evaluated against each applicable component.

A common mistake is to use total bill divided by kWh as the price of the next kWh. That calculation gives a blended cost for the completed billing period. It does not necessarily predict savings from reducing consumption, because fixed charges remain and demand charges follow separate rules.

Calculate Electricity Costs Without Mixing Rate Types

A Hypothetical Residential Bill

The following example represents a hypothetical US residential account. It is not a utility quote, state benchmark, or published rate.

Assumptions:

• Billing period: 30 days.
• Electricity use: 800 kWh.
• Flat bundled variable rate: USD 0.18/kWh, including supply and variable delivery.
• Fixed customer charge: USD 15.00 per billing period.
• Hypothetical tax: 5% of energy charges plus the customer charge.
• No demand charge, additional adjustment, minimum-bill adjustment, or credit.

First calculate the energy charge:

[
C_{\text{energy}}=800\times0.18=\text{USD }144.00
]

Then add the fixed charge:

[
C_{\text{before tax}}=144.00+15.00=\text{USD }159.00
]

Calculate the assumed tax:

[
C_{\text{tax}}=159.00\times0.05=\text{USD }7.95
]

The resulting bill is:

[
C_{\text{total}}=159.00+7.95=\text{USD }166.95
]

Its blended effective price is:

[
r_{\text{effective}}
=\frac{166.95}{800}
=\text{USD }0.2086875/\text{kWh}
\approx20.87\text{ cents/kWh}
]

The effective price exceeds the stated USD 0.18/kWh energy rate because it includes the fixed charge and assumed tax.

Now suppose consumption falls by 100 kWh without changing any other condition:

[
\text{Energy savings}=100\times0.18=\text{USD }18.00
]

[
\text{Tax reduction}=18.00\times0.05=\text{USD }0.90
]

[
\text{Total savings}=18.00+0.90=\text{USD }18.90
]

The fixed charge does not fall. Multiplying 100 kWh by the original blended price would therefore overstate savings in this example.

A Hypothetical Time-of-Use Comparison

Assume a hypothetical US account uses 800 kWh during the billing period:

The energy-only weighted average is:

[
r_{\text{weighted}}
=\frac{(200\times0.30)+(600\times0.12)}{800}
=\frac{132.00}{800}
=\text{USD }0.165/\text{kWh}
]

A hypothetical flat plan charging USD 0.18/kWh would produce:

[
800\times0.18=\text{USD }144.00
]

The time-of-use plan is USD 12.00 cheaper in energy charges under these assumptions. This is not yet a full-bill comparison: fixed charges, taxes, adjustments, and any demand charges must also be calculated.

If 100 kWh moves from peak to off-peak without changing total consumption:

[
\text{Energy savings}=100\times(0.30-0.12)=\text{USD }18.00
]

This demonstrates the value of timing rather than reducing energy use. Actual savings depend on the local tariff and whether the schedule change affects other charges.

A Hypothetical Commercial Demand Calculation

Assume a hypothetical US commercial tariff bills one monthly demand component using the highest 15-minute average. During the highest interval, the meter records 10 kWh:

[
15\text{ minutes}=\frac{15}{60}=0.25\text{ hour}
]

[
D=\frac{10\text{ kWh}}{0.25\text{ hour}}=40\text{ kW}
]

At an assumed demand rate of USD 12.00/kW:

[
C_{\text{demand}}=40\times12.00=\text{USD }480.00
]

That is the demand component only, not the complete bill.

Do not divide monthly kWh by total monthly hours to reconstruct peak demand. That produces average monthly power, which cannot identify the highest billing interval. Likewise, a brief startup spike does not automatically equal billed demand: the tariff’s interval and measurement rules control the calculation.

Check Your Local Rate and Reconcile the Bill

Use this process when estimating a new load, investigating a bill increase, or comparing eligible rate plans.

1. Identify the account and rate schedule. Record the utility, service address, customer class, plan name, and billing dates. Utility bill details should identify the applicable rate plan and usage period.
2. Open the official tariff for those dates. Match the exact schedule and effective date, not just a utility’s general price page. PG&E’s tariff library is one example of an official entry point for current schedules and billing rules.
3. Separate consumption from demand. Record total kWh and, where applicable, kWh by time period. For demand-metered accounts, collect the billed kW values and interval data needed to verify them.
4. Recalculate the energy charges. Multiply each applicable usage block by its rate. Apply tier thresholds, baseline credits, and seasonal divisions only as the schedule specifies.
5. Add the remaining charges once. Calculate customer charges, demand components, adjustments, taxes, and credits. Check whether a bundled rate already includes components shown elsewhere in the tariff.
6. Compare current electricity charges—not an unrelated account balance. Keep prior balances, payments, gas charges, and other account items separate from the electricity-cost calculation. PG&E’s bill guide distinguishes the account summary from detailed electric charges.
7. Compare plans using the same usage profile. Reprice the same consumption and demand data under each eligible tariff. Where seasonal rules apply, use a full year of data when available rather than assuming one month represents the year.

This approach separates three different causes of a higher bill: using more electricity, paying different rates, or incurring different non-energy charges. For example, a longer billing period can increase consumption and daily customer charges even without a change in equipment or operating habits.

Electricity Rate Calculation Checklist

• The benchmark’s year, month, geography, and customer class match the comparison.
• The local tariff matches the account’s plan and billing dates.
• Rates quoted in cents/kWh have been divided by 100 before calculating USD charges.
• Supply-only rates have not been mistaken for complete delivered rates.
• Bundled rates and their component charges have not been counted twice.
• Peak, off-peak, seasonal, and usage-block quantities follow the actual schedule.
• Demand charges use tariff-defined billing demand, not monthly average power.
• Fixed charges, adjustments, taxes, and credits are included where applicable.
• Equipment-cost estimates use the applicable incremental charges rather than automatically using the bill’s blended average.
• Hypothetical inputs remain clearly separate from official benchmarks and actual account rates.

A cost estimate can support budgeting and operating decisions, but it does not establish equipment capacity or electrical design compliance. Use the applicable tariff to determine charges; evaluate installation and service requirements separately.