One of the main value propositions for going solar is saving money. But how exactly does solar help a customer save money? To answer this question, you need to understand a homeowner's current situation with their utility company and how they are being billed for power. Your goal is to get them thinking about their utility bills, and then help them realize that they could be making smarter decisions about their spending and energy use by going solar.
Helping Customers Understand Their Electric Bill Is Important
Most people pay their electric bills without thinking twice. They simply look at the amount owed, maybe comment on its size, pay the bill without too many questions, and then repeat when next month’s bill arrives. They don’t try to understand what they are getting charged for and why.
If you hope to convince people that going solar is the right decision, you must help them understand two essential pieces of information:
- On average, utility rates have been rising for decades and are expected to continue to rise at nearly 3% each year on average.
- Realizing what goes into the average electricity bill is the first step in learning how to lower that bill.
The Rate Plan
The customer’s rate plan directly impacts how much they will pay for the electricity they use in their home. That electricity usage is measured in kilowatt-hours (kWh). To put it simply, a kWh (kilowatt-hour) is that unit of energy that measures how much energy homeowners have consumed in a given billing period.
There are four basic types of electricity rate plans:
Fixed-rate plans: Homeowners get charged the same rate for every kWh consumed for their entire contract term.
Variable-rate plans: Homeowners can get charged a different rate each month for every kWh consumed.
Time-of-use plans: The price per kWh changes depending on the time of day, and a more expensive rate is typically charged during peak hours.
Tiered-rate plans: Customers are billed in tiers based on how much energy is consumed, and homeowners will typically pay a higher rate per kWh for using more energy.
The rate plan determines what the customer will be charged depending on when and how they use electricity. This could mean that customers may pay a different amount each month even if they use the same amount of energy.
Energy Charges
The energy charge tells customers how much they are being charged for the amount of electricity they have consumed in kWh. This area of the bill will show you the price per kWh the utility is charging them based on their rate plan. The basic equation is simple:
Energy Charge = Electricity used in kWh x Rate per kWh
For example:
If you used 1,000 kWh used in one billing cycle and your rate plan charged you 10 cents per kWh, your energy charge would be $100.
1,000 kWh x 10 cents/kWh = $100
This is an area of the bill homeowners can change by going solar. The more electricity they use from their solar panels, the less they draw from the utility grid. The less they use from the utility grid, the less the utility company can charge them on their electric bill.
Other Mandatory Utility Charges
Customers will also see other charges on their electric bills. While the names and amounts of these charges vary by utility, they generally include a base charge and delivery charge. You must tell customers about these charges, as they are assessed in some form by every utility company—even after going solar.
Base Charge: Every utility has a base charge for being connected to the grid. It's usually the first one listed on any given bill. This charge doesn’t depend on how much energy is consumed and will usually remain a flat fee. The amount of the charge varies by utility, and the homeowner will still see this charge in their electric bill, even after going solar.
Customers must understand: Even if their home used 0 kWh of electricity from the utility grid in a billing cycle, the customer would still receive an electricity bill for this charge.
Delivery Charge: This charge represents the cost of transmitting and delivering electricity to the customer’s home, including maintenance for transformers, powerlines, telephone poles, electricity meters, and other aspects of the energy infrastructure. The amount of the delivery charge typically depends on the kWh of energy the home consumes, so a home that uses more energy will have a higher delivery charge.
Key Takeaways
Helping a customer understand the charges on their electricity bill is a vital step in teaching them how going solar will help them save money. Make sure you take the time to go over their bill with them, point out all the areas in which they could be saving money, and set proper expectations.
- Utility Rates are Rising: When reviewing the customer’s electric bill, tell them that electricity rates rise by an average of 3% annually and will continue to rise. This gives them no control over what they pay for power, and they can’t easily predict what they'll pay in the future.
- Going Solar Can Lower Many Charges: By powering their home with electricity from their solar panels, customers could see smaller electricity bills. The less they draw from the utility grid, the lower their bills could become.
- You Will Still Get a Utility Bill: Even if/when a customer’s solar panels produce 100% of their power needs in a billing cycle, they'll still receive a bill. Because the customer is connected to the electric grid, the utility company will assess certain fees that must be paid.
If you're a Palmetto sales member, enroll in our “Intro to Utility Bills and Net Metering” course. If you aren’t already a Palmetto sales member, learn how to become one today.
