Base Charges on Energy Bills: Understanding Fixed Fees

You find a supplier with a rate 2¢/kWh lower than your current provider. You calculate the savings and think you'll save $20 per month. Then you read the fine print: they charge a $5 monthly base charge. Now your actual savings dropped to $15. But where does that base charge come from, and is it avoidable?

This guide explains what base charges are, why suppliers charge them, how they affect your total bill, and how to factor them into rate shopping decisions.

What Is a Base Charge?

A base charge (also called a "customer charge," "monthly charge," "fixed charge," or "facility fee") is a flat monthly fee you pay simply for being connected to the electricity grid. It's independent of how much electricity you use.

Base Charge = Fixed monthly fee paid regardless of usage

Simple Example

• Your utility charges: 12¢/kWh + $10/month base charge
• You use 500 kWh: (500 × $0.12) + $10 = $70
• You use 1,500 kWh: (1,500 × $0.12) + $10 = $190
• Even if you used 0 kWh, you'd still owe: $10

The base charge is that $10 every month, no matter what.

Where Do Base Charges Appear on Your Bill?

Base charges are typically listed as:

• "Customer Charge" (most common in regulated utilities)
• "Monthly Service Charge"
• "Base Charge" (more common in competitive suppliers)
• "Account Maintenance Fee"
• "Facility Charge" (less common)

Location on bill: Usually in the "Fixed Charges" or "Delivery Charges" section, separate from usage-based charges.

Real Bill Examples

Important Distinction: Delivery Charge vs. Supply Base Charge

This is critical for shopping. Your bill has TWO types of base charges:

Delivery Company Base Charge (Not Shoppable)

This is charged by your local utility for maintaining the grid. You CANNOT avoid this by switching suppliers.

• Typical amount: $8-20/month
• Paid to: Local utility (monopoly provider)
• Can you reduce it? No, it's regulated
• Example: Verizon Energy or National Grid delivery charge

Supply Company Base Charge (Shoppable)

This is charged by your competitive electricity supplier (the company you choose for price). You CAN avoid this by switching suppliers.

• Typical amount: $0-8/month (varies widely)
• Paid to: Competitive supplier
• Can you reduce it? Yes, switch to a supplier with no base charge
• Example: A retail supplier like Constellation Energy, Ambit, etc.

Critical point: When comparing suppliers in deregulated markets, many charge NO supply base charge. So if you find a competitor with a low rate but a $5+ base charge, shop more—you might find someone with the same rate and $0 base charge.

Why Do Utilities Charge Base Charges?

Official Reason: Service Cost Recovery

Utilities claim base charges cover fixed costs of serving your account, including:

• Meter installation and maintenance: $200-500 equipment per customer
• Customer service: Billing, phone support, account management
• Grid infrastructure: Poles, wires, transformers (partially)
• Administrative costs: Regulatory compliance, paperwork, etc.

Actual Revenue Reason

Base charges guarantee revenue regardless of usage. If a customer uses very little electricity (or installs solar and uses zero), the utility still makes money. This is important to utilities because:

• Fixed revenue: Investor confidence; utilities can promise stable returns
• Discourages solar: Even if you generate your own power, you still pay the base charge
• Spreads costs fairly (their argument): High-usage customers shouldn't subsidize low-usage ones

How Base Charges Vary Across States

Base charges differ significantly by region:

How Base Charges Affect Your Rate Shopping

The Hidden Cost of Low Rates

Many competitive suppliers advertise low rates but have high base charges. Example:

Current supplier: 12¢/kWh + $2/month base

Competitor A: 10¢/kWh + $8/month base

Competitor B: 10.5¢/kWh + $0/month base

Which is cheapest for 1,000 kWh/month?

• Current: (1,000 × $0.12) + $2 = $122/month
• Competitor A: (1,000 × $0.10) + $8 = $108/month (saves $14)
• Competitor B: (1,000 × $0.105) + $0 = $105/month (saves $17)

Competitor B is actually better despite the higher per-kWh rate.

How Base Charges Reduce Savings

The lower your usage, the more impact base charges have:

High usage (1,500 kWh/month): Base charge is 2% of bill

Medium usage (800 kWh/month): Base charge is 3% of bill

Low usage (300 kWh/month): Base charge is 7% of bill

Very low usage (100 kWh/month): Base charge is 20% of bill

This is why low-usage customers and solar users should prioritize finding suppliers with no or low base charges.

Calculating Total Annual Cost with Base Charges

The Right Formula

Annual cost = (Monthly usage × Rate × 12) + (Base charge × 12)

Worked Example

Your usage: 900 kWh/month average

Competitor A: 11.5¢/kWh + $4/month base

Annual cost:

• (900 × $0.115 × 12) + ($4 × 12)
• = $1,242 + $48
• = $1,290/year

Competitor B: 12.1¢/kWh + $0/month base

Annual cost:

• (900 × $0.121 × 12) + ($0 × 12)
• = $1,306.80 + $0
• = $1,306.80/year

Even though Competitor B has a 0.6¢ higher rate, Competitor A wins by saving $16.80/year due to no base charge.

Can You Avoid Base Charges?

Delivery Base Charge: No (Mandatory)

You cannot avoid the delivery company's base charge. It's regulated and mandatory. Everyone in your service area pays it (approximately).

Supply Base Charge: Sometimes (Shop for $0 Options)

In deregulated markets, many suppliers charge NO supply base charge. Always look for "no base charge" or "$0 customer charge" options.

Strategy: When shopping, filter for suppliers with $0 supply base charges first. Then compare rates. You'll often find competitive rates with zero base charges in mature deregulated markets.

Base Charges and the Solar/Renewable Movement

Base charges have become controversial because they penalize solar and efficiency:

The Problem

A customer installs 5 kW solar, reducing their grid usage to nearly zero. But they still pay:

• Delivery base charge: $12/month = $144/year
• Supply base charge: $4/month = $48/year
• Total fixed charges: $192/year for using almost no electricity

Utility Perspective

Utilities argue the grid still serves as a backup (batteries fail, solar produces zero at night), so customers should pay for grid availability.

Consumer Perspective

Customers argue high base charges unfairly penalize efficiency and solar adoption, which most policies want to encourage.

2025 Trend: Some states (California, Hawaii) are debating alternative fee structures. Most still use base charges, but may phase in alternatives like "demand charges" based on peak usage rather than flat fees.

Shopping Tips: How to Use Base Charges in Your Strategy

• Always calculate total annual cost: Don't just compare rates. Include (Usage × Rate × 12) + (Base charge × 12)
• Prefer zero-base suppliers: When multiple suppliers have similar rates, choose the one with no base charge
• Be skeptical of "lowest rate" ads: If they advertise the lowest rate but hide base charges, they might not be cheapest overall
• Use official comparison tools: State-approved shopping portals often let you sort by total annual cost including all fees
• Low-usage customers: prioritize $0 base charge: The impact is proportionally larger on your bill
• Solar customers: ask about demand charges: Some suppliers charge based on peak usage instead of a flat base—this can be better for solar homes

Next Steps

• Ready to shop? Check How to Choose an Electricity Supplier for supplier comparison tools in your state
• Want to calculate your exact bill? See How to Calculate Your Electricity Rate including all fee components
• Want to understand your full bill? Read Common Energy Bill Fees Explained for a complete breakdown