Tiered electricity rates: how baseline tiers work

How a tiered bill is calculated

A tiered plan, also called a block rate, splits each month’s use into blocks. The first block, say the first few hundred kWh, is billed at one price; every kWh beyond it at the next block’s price, and so on. The blocks reset at the start of every billing cycle. Nothing about the hour matters: a kWh at 3 am and one at 6 pm cost the same, and the only thing that decides the price of the next kWh is how many you have already used since the meter was last read.

From the billing side, this has one consequence people often miss. The average price on your bill (the total divided by the kWh) and the price of the next kWh are not the same number. When blocks rise, anything you add, an electric car, a heat pump, a hot tub, is priced at the top block, above your average. When blocks fall, the same addition is cheaper than your average. That is why the calculators on this site price an added load as the difference between two whole bills, with and without it, rather than at an average rate.

Some plans are tiered and time-of-use at once (14 of the 70 here): each period has its own price, and the block steps sit on top of it, usually the same number of kWh in every period. A further 10 plans have block steps smaller than 0.2¢ per kWh, typically a state kWh tax whose rate changes at a large monthly volume; they are treated as single-price plans in this guide, as on the utility pages.

Rising blocks: paying more for the last kWh

On the 48 plans whose price rises with use in July, the second block starts at a median of 625 kWh a month. The lowest threshold is 30 kWh on Pepco’s Schedule R (District of Columbia); the highest 2,000 kWh on Pacific Power’s Schedule 4 (Oregon). The median step from the first block to the second is 14%; the largest is 94%, on CMP’s A, from 12.7¢ to 24.7¢.

Whether this matters depends on where your home sits against the line. A typical home in the state, at EIA’s average July use, goes past the first block on 44 of those 48 plans; in January, on 20 of the 30 plans that still rise then. Thresholds are set for an average household, so a large home, a home with electric heat or a pool, or one that adds an EV is the one that pays the upper price on most of its extra use.

Inclining blocks exist mainly as policy. They were adopted, starting in the 1970s energy crises, to price the essential first kWh low and make heavy use pay more, encouraging conservation. California’s version, the baseline allowance, comes from the 1975 Warren-Miller Energy Lifeline Act. There, the first block is a number of kWh per day that depends on your climate zone (the “baseline territory”), the season, and whether your home has all-electric service. The 8 plans here with a daily limit are priced for the baseline region named in the plan we model; if you live in a different one, your first block is larger or smaller. Your bill states your baseline quantity.

Falling blocks: cheaper as you use more

Declining blocks are the older design: the first kWh carry more of the cost of the wires and the meter, so later kWh are cheaper. Today they survive mostly in winter. 19 plans here do not fall in July but do in January, which lowers the cost of electric heating in the months it is needed. The deepest January drop is on Evergy Missouri Metro’s RPKA (Missouri): 12.4¢ for the first 600 kWh, 7.7¢ after, 38% less. On these plans a heat pump’s winter kWh are among the cheapest the home buys; the heat pump vs gas calculator prices it on the actual blocks of your plan.

What tiers do to an electric car

An EV adds a large, steady block of kWh on top of everything else, so on a tiered plan it is priced at the margin. We added 1,000 miles a month in a Tesla Model Y Long Range AWD (275 kWh) to a typical home on each of the 56 tiered plans that are open to any household and not time-of-use, and compared the cost of those kWh with the home’s own average energy price (fixed charge left out). The EV’s kWh cost more than the home’s average on 31 plans and less on 21. The largest premium was on Anaheim Public Utilities’ Schedule D: 23.0¢ per EV kWh against 17.7¢ on average, 30% more. The largest discount was on NorthWestern Energy’s Rate 10: 11.7¢ against 15.4¢.

Where the premium is large, a time-of-use or EV plan from the same utility, which prices by the hour instead of by the block, often comes out cheaper. The EV charging cost calculator prices your car on every plan of your utility, and the rate plan comparator does the same for the whole home.

Reading the tiers on your own bill

• Find the block lines. The energy charge on a tiered bill is printed as two or more lines, each with its kWh and price. The kWh on the first line is your first block for that billing period; if it varies from month to month, the limit is daily (as in California) or seasonal.
• Check the billing days. A daily limit multiplied by the days in the cycle sets the block, so a 33-day bill has a larger first block than a 28-day one.
• Compare with your use. If most months end in the upper block, every kWh you save is worth the upper price, and every kWh you add costs it. Your utility’s page here lists every block of every plan.
• Look for discounts that change the blocks. Medical-baseline and low-income programs raise the first block or cut its price; they are not modeled here.

The full rules of the model, including how a plan with both blocks and time-of-use periods splits each period’s kWh across the blocks, are in the methodology.