What is a utility bill: Making sense of your home utilities

Updated: May 10, 2025
10 min

Julia ZaraevaAuthor

Whether you're trying to lower your costs or create a better home budget, you first need to figure out what you're actually paying for. In this article, we’ll break down everything you need to know about utility bills – those monthly charges that keep your lights on, water flowing, and home comfortable.

Key takeaways

Utility bills account for 5-10% of monthly household spending, with electricity representing the largest portion (45-55% of utility costs), followed by gas (15-25%), water and sewer (10-20%), and additional services like internet and security systems (10-20%).
Strategic upgrades like LED lighting (70-90% savings), smart thermostats (10-15% savings), proper insulation (15-20% savings), and heat pump water heaters (60-70% savings) offer significant opportunities to reduce monthly utility expenses.

What makes up my utility bill?

For most American families, utility bills make up 5-10% of monthly spending

When you open your utility bill, you're looking at a breakdown of different services that keep your home cozy and comfortable. Each component represents a specific service you use daily, often without thinking about it, and understanding these pieces helps you spot opportunities to save money.

Electricity bill – 45-55% of total utility costs

Every time you flip a switch, run the dishwasher, charge your phone, or adjust your thermostat, you're using electricity. Many homes, especially in the South and parts of the West, use electricity for heating rather than gas, through baseboard heaters, heat pumps, or electric furnaces that can account for over 50% of winter electricity use.

The average American home uses about 900 kWh each month, with costs typically ranging from $0.10 to $0.40 per kWh depending on your location. This usually makes electricity the largest portion of your total utility expenses.

What’s in an electric bill?

Supplier Section
Generation Service Charge/Energy Usage: The main portion charged per kilowatt-hour consumed
Delivery Section
Customer Charge: Flat monthly fee for maintaining your connection to the grid regardless of usage
Distribution Charge: Cost for delivering electricity through local power lines
Transmission Charge: Cost for moving electricity from power plants to your local area
Revenue Decoupling Charge: Fee that allows utilities to recover fixed costs regardless of energy sales
Distributed Solar Charge/Renewable Energy Charge/Energy Efficiency: Support for renewable energy and energy efficiency programs
Total Charges
Total Cost of Electricity: Combined total of supplier and delivery charges
Total Current Charges: The amount due for this billing period

Gas bill – 15-25% of total utility costs

Natural gas fuels your home's warmth and comfort through heating systems like furnaces or boilers. It might also power your water heater for hot showers and baths, your range and oven for cooking meals, your clothes dryer, and even decorative fireplaces or outdoor grills and fire pits.

A typical household uses 100-200 therms monthly during winter in colder states, with average costs around $1.00-1.50 per therm. Usage often drops during warmer months if you only use gas for heating.

Water and sewer bill – 10-20% of total utility costs

Every time you take a shower, flush a toilet, run the dishwasher, do laundry, or water your lawn, you're using your water service. The same system carries waste water away from your home when you're finished using it, keeping your household sanitary and comfortable.

The average American home uses about 8,800 gallons of water monthly, though this varies based on family size, yard watering needs, and the season. Water rates typically range from $2 to $10 per 1,000 gallons.

Many water utilities use tiered pricing where rates go up as you use more water, encouraging conservation while keeping basic water service affordable. Some cities offer summer discounts on sewer charges because they know outdoor watering doesn't impact the sewer system. Typical sewer charges range from $20 to $65 monthly.

Trash and recycling bill – 5-10% of total utility costs

This service removes your household waste and recyclables on a regular schedule, keeping your property clean and helping manage materials responsibly. Most services include regular household waste collection, recycling pickup, and sometimes yard waste collection or special bulk item pickup.

Trash and recycling services usually cost between $20 and $50 per month, depending on where you live and the service level like bin size and pickup frequency. In some communities, these services are part of your property taxes rather than a separate bill. Rural homeowners might pay for private collection services or use county transfer stations directly.

Additional services and fees – 10-20% of total utility costs

Many households consider internet, cable, phone, security systems, and HOA services as utilities because they're ongoing monthly expenses. Internet typically runs $60-90 monthly for standard broadband, while cable TV packages amount from $65-150 monthly based on channel selection and premium options. Security monitoring averages $30-60 monthly, and HOA fees are highly variable but often fall between $200-500 monthly for condos and planned communities, sometimes including certain utilities in their cost.

These services usually have fixed monthly rates regardless of how much you use them, though some rural internet providers may limit data usage. Municipal service fees might also appear on your utility bills or property tax statements, including stormwater fees of $5-15 monthly, street lighting, and infrastructure improvement charges.

What's the difference between supply and delivery charges on my bill?

When you look at your energy bill, you're actually paying for two distinct services. Supply charges cover the actual electricity, gas, or water you use – the commodity itself. Delivery charges cover the infrastructure and service of bringing those utilities to your home – the poles, wires, pipes, and maintenance that ensure reliable service. Many consumers focus only on supply rates when comparing providers, overlooking delivery charges that often make up 40-60% of energy bills.

What does my bill depend on?

Your utility bills aren't fixed – they fluctuate based on factors both within and outside your control. By understanding what drives these costs up or down, you can make right decisions about your home, appliances, and daily habits that lead to lower monthly expenses.

Rate and timing factors

When you use electricity and gas matters almost as much as how much you use. Utility companies have created various pricing structures that reflect the real service costs at different times.

Seasonal changes affect most utility bills. Heating and cooling create winter and summer cost spikes, while water usage jumps during lawn-watering months.
Time-of-use billing divides days into specific rate periods, charging as much as $0.30/kWh during 2-7pm weekdays but only $0.08/kWh overnight. This approach rewards customers who shift energy-intensive activities like laundry or EV charging to cheaper time periods.

Location specifics

Your address affects your utility bills in significant ways that most people never consider. Where you live shapes both our rates and available services.

Wyoming residents pay the highest utility costs in America at a staggering $1,591 per month, largely due to remote locations and harsh winters, while New Mexicans enjoy the nation's lowest energy bills at just $376 monthly – a difference of more than 4 times.

Urban, suburban, and rural locations face different cost structures. Urban homes have lower delivery costs but higher fees. Rural customers pay more for delivery but may benefit from cooperative rates.
Regional differences across America are substantial. The Northeast and California have the highest energy costs – 30-50% above national averages, while the Southeast and the Midwest enjoy lower rates. Hawaii has the nation's highest electricity rates exceeding $0.40/kWh – nearly three times the national average.
Service availability varies by location. Service availability varies by location. Many rural areas lack natural gas, requiring expensive alternatives. Some locations use well water and septic systems instead of municipal services.

Household and lifestyle differences

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Home size, age, and insulation quality are major factors in energy costs. Older homes use 30-50% more energy than newer construction.
Appliances matter too. Energy Star models use 10-50% less energy than standard ones.
Number of people and habits drive utility costs. Each additional person increases water usage by 20-25% and electricity by 15-20%. Longer showers, different temperature preferences, and entertainment habits all affect monthly bills.
Remote workers use 10-15% more electricity and water but save on transportation costs. Home businesses see even larger increases with specialized equipment.