Cost per kWh, explained — and which rate to actually use

Most explanations of “cost per kWh” collapse into a single number, which is why so many people type the wrong figure into a calculator. These are three different things and they answer three different questions.

Ask “what does it cost to run this space heater for three hours?” and the honest answer uses the variable rate. The fixed charges are paid whether the heater runs or not, so attaching a share of them to the heater’s kWh invents a cost that the heater did not cause. Ask instead “what is my electricity actually costing me overall?” and the effective rate is exactly right, because there the fixed charges are genuinely part of what you pay.

On the worked bill above the gap is 14.5%. Estimate a 1,200 kWh-per-year appliance at the effective rate and you get $193.64 a year; at the variable rate you get $169.09. The difference is not a rounding detail — it is a fixed cost being counted twice.

Hold the tariff completely still — 14.10 ¢/kWh variable and $18.00 of fixed charges per period — and vary only how much is used. The variable rate never moves. The effective rate falls steadily, because the same fixed charges are divided over more units. This is why a low-use household can pay a much higher average price per kWh than a high-use one on the identical contract, and why an average price per kWh tells you very little about a tariff on its own.

Bills differ by country and utility, but the structure rarely does. Look for a line billed per day or per month with no kWh attached — that is the fixed charge. Look for lines multiplied by a kWh quantity — energy, and usually network or delivery, and often a per-kWh levy. Those are variable, even when they are printed separately from the energy charge. Percentage-based taxes follow the amount they are applied to: a tax charged on the energy amount rises with consumption, so it belongs in the variable part.

Two traps are worth naming. A tiered tariff charges different unit rates above a consumption threshold, so the cost of your next kWh is the rate of the tier you are currently in, not the average of the tiers you have passed through. A time-of-use tariff has several unit rates at once, and the marginal cost depends on when the appliance runs — for those, the variable rate from a single bill is an average of your own usage pattern, which is useful for planning but is not the price of any specific hour.

The U.S. Energy Information Administration reports a 2024 United States residential average of 16.48 ¢/kWh (Electric Power Annual, Table 2.4 — Average Price of Electricity to Ultimate Customers by End-Use Sector, released October 2025). Note what that figure is: Average revenue per kilowatt-hour from all residential retail electricity sales in the United States — total residential revenue ÷ total residential sales, for the total electric industry. It therefore already includes fixed customer charges spread across the sold kWh, which makes it an effective-rate figure, not a unit rate.

So it is an effective rate, national, and averaged across every tariff and every state. It is a useful sanity check on your own effective rate and a poor substitute for your variable rate. This page never prefills it into the calculation for you, because retail tariffs vary far too much between utilities, states and rate plans for a national average to stand in for yours.