Why is my effective electricity rate higher than my stated rate?

Your effective rate (total bill ÷ kWh) is higher than your energy rate because fixed service charges and taxes are spread across your usage. A $12 fixed charge over 900 kWh adds $0.013/kWh. This is the true cost per kWh and the accurate number to use for solar savings calculations.

Electricity Bill Calculator

Break down your electricity bill into tiered charges, fixed fees, and taxes. See your true effective rate and how much solar would save.

Your electricity usage & rates

Monthly kWh usage?

kWh

Fixed monthly charge?

$/mo

Tiered energy rates

Tier 1 rate?

$/kWh

Tier 1 limit?

kWh

Tier 2 rate?

$/kWh

Taxes & fees?

Solar offset

Solar bill offset?

Monthly electricity bill breakdown

$136.50/month total bill

Tier 1 (500 kWh × $0.12)$60.00

Tier 2 (400 kWh × $0.15)$60.00

Fixed service charge$10.00

Taxes & fees$6.50

Effective rate$0.1517/kWh

Monthly solar savings$83.48

Bill with 70% solar$53.03

Annual savings with solar$1,001.70/yr

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How to Use This Calculator

Find your rates on your utility bill

Pull out your most recent electricity bill. Look for: kWh used (monthly consumption), energy charge or rate (price per kWh), customer/service charge (fixed monthly fee), and any tiered rate breakpoints. If you have a single flat rate, set the Tier 1 limit to a large number like 9,999.

Understanding tiered rates

Many utilities (especially in California, New York, and Hawaii) charge a lower rate for a "baseline" or "Tier 1" amount of usage, then a higher "Tier 2" rate for usage above that threshold. This structure penalizes high usage and makes solar especially valuable for heavy users — your solar panels offset your most expensive Tier 2 kWh first.

Set the solar offset percentage

Enter the percentage of your usage that solar covers. A typical well-sized grid-tied system offsets 70-100% of annual usage. Note that the calculator uses the most valuable offset first (Tier 2 kWh), which is the accurate way net metering and self-consumption billing works.

The Formula

Tier 1 kWh = MIN(Total usage, Tier 1 limit) Tier 2 kWh = MAX(0, Total usage - Tier 1 limit) Energy charge = (Tier1 kWh × Tier1 rate) + (Tier2 kWh × Tier2 rate) Subtotal = Energy charge + Fixed charge Total bill = Subtotal × (1 + Tax rate) Effective rate = Total bill ÷ Total kWh Solar savings (offsets Tier 2 first, then Tier 1): Solar value = Solar kWh × applicable rate (Tier2 first) Monthly savings = Solar value × (1 + Tax rate)

Example: California PG&E Customer

High-usage household in the Bay Area

An 800 kWh/month household on PG&E's E-1 rate: Tier 1 baseline is 250 kWh at $0.32/kWh, Tier 2 above baseline at $0.44/kWh, $18 fixed charge, no taxes.

Monthly usage800 kWh

Tier 1 (0-250 kWh)$0.32/kWh

Tier 2 (250+ kWh)$0.44/kWh

Fixed charge$18/month

Result

Tier 1 cost (250 kWh)$80

Tier 2 cost (550 kWh)$242

Total monthly bill$340

Effective rate$0.425/kWh

With 70% solar offset$123/month (-$217)

Solar saving $217/month × 12 = $2,604/year. At $3/W installed (7 kW system = $21,000, minus 30% ITC = $14,700 net), payback is just 5.6 years. The high California rates make solar exceptionally valuable.

FAQ

What is the average US electricity rate in 2026? ▼

The US residential average is approximately $0.15-0.17/kWh in 2026, but rates vary enormously by state: Louisiana ~$0.10/kWh (lowest), Hawaii ~$0.35/kWh (highest), California $0.25-0.45/kWh (tiered), Texas $0.12-0.16/kWh, New York $0.18-0.25/kWh. Commercial rates average $0.12-0.14/kWh nationally. Check your actual bill for your rate — the average obscures the significant variation that affects solar economics.

What are all the charges on my electricity bill? ▼

Typical line items: (1) Customer/service charge — flat monthly fee for meter and grid access, $8-20. (2) Energy charge — per-kWh charge, may be tiered. (3) Distribution charge — local wire maintenance. (4) Transmission charge — high-voltage grid. (5) Renewable portfolio standard charge — funding state renewable programs. (6) Low-income assistance program charge. (7) State/local taxes and franchise fees. Items 1-6 may be bundled into a single "energy rate" on some bills. Solar net metering reduces items 2-5 but usually not the customer charge.

Will solar eliminate my electricity bill? ▼

Solar can reduce your bill to nearly zero, but most utilities charge a minimum monthly fee ($8-20) even for zero-usage months. A well-sized grid-tied system can offset 95-100% of your annual energy charges, leaving only the fixed customer charge. To truly eliminate all electricity costs, you'd need an off-grid system with battery storage — which costs significantly more than grid-tied solar.