What Is an Electricity Rate?

What an electricity rate is

A rate is the set of prices your utility charges for power. It is written down in a tariff, which is the legal price document the utility files. Homes, businesses and factories each have their own rates.

The EIA says prices reflect the cost to build, finance, maintain and run power plants and the grid. Fuel costs, weather and state rules all move them. In 2025 the US average was 17.30¢ per kWh for homes, 13.41¢ for businesses and 8.62¢ for industry.

Sources: [2]

The parts of a residential rate

How a rate turns into your bill

1. Meter → records the kWh you use (and, with solar, the kWh you send out)
2. Rate schedule → prices each kWh by tier, season or hour
3. Fixed charge and riders → added on top
4. Solar credits → applied under the utility’s export rule
5. Taxes → added last, giving the total you pay

Four common rate structures

Worked example: a 1,200 kWh month on Duke Energy Carolinas (SC)

Schedule RS, Duke Energy Carolinas’ standard residential rate in South Carolina (Docket No. 2025-172-E). Base charges only.

If solar covers 400 of those kWh, the top 200 come off the dearer tier and the next 200 off the first tier: about $56.56 less. The $11.96 stays. Your all-in price per kWh (bill ÷ kWh) is a rough guide only; savings depend on which lines solar actually reduces.

Standard vs time-of-use on one utility

Where you see your rate

Your bill prints the rate name, such as "RS" or "Rate 8". The utility website posts the full tariff for that schedule, with each charge and its effective date. Solar customers also have a rider, a short add-on with export rules.

Solar quotes often show your "current rate" as one number. Ask how it was worked out. If it is your bill divided by kWh, it includes fixed charges solar cannot remove, so savings will look too high. See the fixed charge lookup.

How each rate design helps or hurts solar owners

Limits of using a rate to predict savings

Rates change. The EIA notes prices are usually highest in summer, when more expensive plants run to meet demand. Rate cases and fuel adjustments also change prices from year to year.

Your rate may change when you add solar. Some utilities move solar customers onto time-of-use schedules or add solar riders with their own charges. Use the rate you will actually be on, not the one you have today.

Sources: [2]

How rates drive solar payback

Your rate does not change what solar costs to install, but it sets what solar saves. A higher energy charge means faster payback. A higher fixed charge means slower payback, because more of the bill stays.

Many solar proposals assume rates will rise a set percent each year. That is an assumption, not a fact. Test it with the rate escalator calculator, and see our payback period page and solar cost guide.

How to find and read your rate

1. Find the rate or schedule name printed on your bill, such as "RS" or "Rate 8".
2. Open the utility’s published tariff for that schedule. Note every charge and its effective date.
3. Note the fixed charge, each energy price, and any tiers, seasons or time periods.
4. Open the utility’s solar rider, which can move you onto a different schedule, often a time-of-use rate.
5. Price a typical month with and without solar, line by line.

Keeping your rate in check over time

Watch for rate-case notices in your bill. They can change fixed charges, energy prices and solar riders. Compare your plan once a year, especially if your use changed after adding an EV or heat pump.

If your utility offers a time-of-use plan, review your hourly data in the utility portal. If most use already falls outside peak hours, a time-of-use plan may save more.

Red flags in rate claims

Question a solar quote or bill if:

• The quote uses bill ÷ kWh as your rate without removing fixed charges.
• It assumes rates rise a fixed percent every year with no source.
• It ignores a required move to a solar or time-of-use rate.
• Your bill’s energy price does not match the published tariff. Call the utility.
• A seller claims your utility is about to "double" rates with no filing to show for it.

Rule of thumb

Who sets and approves rates

Investor-owned utilities. The state utility commission approves rates in a public case. In South Carolina that is the Public Service Commission; Duke Energy Carolinas’ R-STOU rate took effect 1 August 2026 under Docket No. 2026-131-E.

Co-ops and city utilities. Their boards or councils usually set rates. Santee Cooper, the state-owned utility, sets its own rates through its board, not the PSC.

State structure. The EIA notes some states regulate the full price, while others let generation prices float and regulate only delivery.

Sources: [2] [7]

Common misconceptions

Myth My rate is my total bill divided by kWh.

Reality That is an average that mixes fixed charges with per-kWh charges. Solar offsets only the per-kWh part.

Myth Rates only go up 3% a year.

Reality Rate changes come from approved rate cases and fuel adjustments, which vary year to year. Treat any fixed escalator in a solar proposal as an assumption.

Myth Time-of-use rates always save money with solar.

Reality Only if your use or a battery lines up with the cheaper hours. Peak hours after sunset can cost solar owners more.

Myth Every kWh my panels make saves the full retail price.

Reality Power you use yourself does. Exported power earns the export credit, which is often lower.

Rates in SC, GA and VA that change the solar math

What to do with your rate

Use your rate to decide:

• Whether solar pays: high energy charges and low fixed charges favor it.
• Which plan to pick: time-of-use if your use or a battery fits the cheap hours.
• Whether to add a battery: wide peak/off-peak gaps or low export credits favor storage.
• How big to go: size to your own use if exports earn far less than retail.

Tools and data

• Solar savings calculatorPrice your bill with and without solar
• Average electricity bill by state
• Electricity prices and solar adoption

Related terms

Demand Charge

A demand charge is the part of an electric bill priced on your highest rate of power use, measured in kilowatts, rather than on the total energy you used in kilowatt-hours.

Time-of-Use Rate

An electricity rate that charges different prices at different hours, usually highest in the late afternoon and evening. It changes what a kilowatt-hour of solar or battery output is worth.

Utility

An electric utility is the organisation that delivers electricity to your home and bills you for it.

Net Metering

Net metering is a utility billing arrangement in which the electricity your solar system sends to the grid is subtracted from the electricity you take from it, so you are billed only for the net amount over a set period.

Kilowatt-Hour

A kilowatt-hour (kWh) is a unit of energy equal to one kilowatt of power used or produced for one hour, or 1,000 watt-hours.

Export Compensation

Export compensation is the credit or payment a utility gives for electricity a solar system sends to the grid, the excess generation the home does not use at that moment.

Solar Payback Period

The solar payback period is the number of years it takes for the money a solar system saves on electricity, plus any annual incentives, to add up to what the system cost after upfront incentives.

Electric Grid

The electric grid is the connected network of power plants, high-voltage transmission lines, substations, transformers and local distribution lines that carries electricity from where it is generated to the homes and businesses that use it.

Also referenced from: Kilowatt-Hour, Megawatt-Hour, Energy Arbitrage, Peak Shaving, Electric Grid, Utility, Demand Charge, Net Metering, Net Billing, Export Compensation, Avoided Cost, Solar Buyback Rate, Solar Payback Period, Levelized Cost of Energy