Your bill for electricity is based on how much electricity you use over a period of time,.. Consuming electricity can be compared to driving a car – the more you drive the more gasoline you use.
As car owners know, the largest car expense is the purchase of the vehicle; the largest daily operating expense is for gasoline.
Similarly, the largest electricity expense is for building power plants; the largest operating expense is the fuel they need to produce electricity. Most power plants use coal, natural gas or uranium for fuel. The cost of generating electricity accounts for about 73 to 75% of a typical monthly electric bill.
In addition, as with driving and maintaining a car, there are other, non-fuel expenses in providing customers with electric energy. For example, cars need good tires, which must be well maintained and ultimately, as they wear out, replaced. Providing electricity requires wires, towers, transformers, poles, meters and other pieces of equipment which must also be maintained, operated and, ultimately, replaced. These items represent the transmission and distribution cost, which is about 19-21% of your bill.
You pay for the gasoline by the gallon; you pay for electricity by the kilowatt hour.
All that you need to know about the kilowatt hour is that it is a measure of energy used over a fixed time The longer the lights or air conditioning unit are left on, the more kilowatt hours are used and the higher the bill. This is similar to a car using more gasoline for a longer trip than for a short one.
However, unlike the car, where you pay for new tires separately from paying for gasoline, all the costs of providing electricity – constructing and maintaining power plants, fuel, wires, poles, transformers – are wrapped into the kilowatt hour charge.
So, while power plant and fuel costs to produce electricity make up most of the kilowatt hour charge, that charge also includes all the other expenses required to construct, operate and maintain the system which delivers electricity to your house. The rest of your bill is taxes and other surcharges, about 6% of the bill. Percentages will vary depending upon where you live.