Fixed charges on your electric bill: what they are and why they matter

It goes by many names: customer charge, basic service charge, service availability charge, facilities charge, meter charge, minimum bill. They all describe the same thing — a fee for having a working connection, whether you draw a hundred kilowatt-hours through it or none.

Why utilities want them

A large share of what a utility spends is genuinely fixed: poles, wires, transformers, substations, meters, the crews who repair them after a storm. Those costs do not fall when you use less electricity. If all of that were recovered through a per-kilowatt-hour price, then every efficient customer and every solar installation would shift cost onto everyone else. Utilities argue — with some justification — that a fixed charge assigns fixed costs to the people creating them.

Consumer advocates argue the opposite side with equal justification: a high fixed charge removes the incentive to conserve, since a bigger share of the bill cannot be reduced by any action at all, and it is regressive, because low-income households use less electricity on average and therefore pay a higher effective rate. Both things are true, which is why this is one of the most persistently contested items in rate cases.

How much varies enormously

The extremes are instructive. Rural electric cooperatives and island utilities often charge several times the median, and for a defensible reason: they have far fewer customers per mile of line, so the fixed cost per household is genuinely higher. An island cooperative charging $50 a month is not gouging anyone; it is describing its geography.

The comparison trap

Here is the part that costs people money. Suppose two plans:

• Plan A — 14¢/kWh, $8/month fixed
• Plan B — 12¢/kWh, $25/month fixed

Plan B has the better rate, and it is worse for anyone using under about 850 kWh a month. At 400 kWh — a small apartment — Plan A costs $64 and Plan B costs $73. At 1,500 kWh — a large all-electric house — Plan A costs $218 and Plan B costs $205. The crossover point is entirely determined by the fixed charge, and no amount of comparing cents will surface it.

This is why every rate page on this site shows an effective cents-per-kWh alongside the annual dollar figure, for three household sizes. The effective figure includes the fixed charge divided across actual usage, which is the only version of the number that answers the question you are asking.

What you can do about it

Less than you would like, but not nothing:

• Choose a plan whose fixed charge suits your size. Within a single utility, fixed charges often differ substantially between schedules. Our utility pages show the range across all of a utility’s plans.
• Check whether yours is daily or monthly. A daily charge means a 31-day billing cycle costs more than a 28-day one before you have used anything. It also means February is quietly your cheapest month.
• Do not close a seasonal account casually. Reconnection fees usually exceed a few months of standing charges.