Understanding Kilowatt-Hours (kWh) and Therms

Your energy bill contains mysterious units that seem designed to confuse you. You'll see "kWh" for electricity and "therms" for natural gas, but what do these actually mean? Understanding these units is essential for comparing energy plans and calculating your potential savings.

This guide explains exactly what these units are, how they work, and why they matter for your monthly bills.

What is a Kilowatt-Hour (kWh)?

A kilowatt-hour (kWh) is the standard unit of electrical energy in the United States. It measures how much electrical power you use over time.

Definition: 1 kWh = 1,000 watts of power consumed for 1 hour.

The key insight: kilowatt-hours measure total energy consumed, not instantaneous power demand. You could use 1 kWh by running a 1,000-watt device for 1 hour, OR by running a 100-watt device for 10 hours, OR by running a 10-watt device for 100 hours. The total energy is the same.

How Electricity Rates Use kWh

Your electricity supplier charges you a rate per kWh. This is called the "energy charge" and is separate from delivery charges.

Example Calculation:
Rate: 14.2 cents per kWh
Usage: 1,000 kWh in a month
Supply charge = 1,000 × $0.142 = $142.00

Your total electricity bill also includes delivery charges (paying for poles, wires, and grid maintenance), taxes, and other fees. But the energy charge—the part you can shop for—is based on your kWh usage multiplied by your rate.

Real-World Examples of 1 kWh

How to Estimate Your Monthly kWh Usage

The easiest way to find your usage is to check your electricity bill—it's printed right there. Look for a line that says "Usage" or "kWh consumed" or "total electricity used."

According to the U.S. Energy Information Administration (EIA), the average American household uses about 877 kWh per month (10,500 kWh per year). However, usage varies dramatically by region:

• Louisiana: ~1,100 kWh/month (air conditioning heavy use)
• Texas: ~1,050 kWh/month (hot summers)
• Pennsylvania: ~900 kWh/month (moderate climate)
• California: ~700 kWh/month (mild climate, efficiency programs)
• New York: ~750 kWh/month (moderate, compact housing)

What is a Therm?

A therm (also called a "thermal unit") is the standard unit for measuring natural gas consumption in the United States. It measures the energy content of the gas, not the volume.

Definition: 1 Therm = 100,000 BTU (British Thermal Units), which is the amount of heat energy needed to raise the temperature of 1 pound of water by 1 degree Fahrenheit.

Some utilities measure gas in different units—CCF (100 cubic feet) or MCF (1,000 cubic feet)—but they all represent roughly the same amount of energy. One therm ≈ one CCF.

How Natural Gas Rates Use Therms

Just like electricity, your natural gas supplier charges you based on therms consumed.

Example Calculation:
Rate: $1.25 per therm
Usage: 40 therms in a month
Supply charge = 40 × $1.25 = $50.00

Natural gas bills also include delivery charges, but the supply charge—the part you can shop for—is based on therms.

Real-World Examples of 1 Therm

• Gas Water Heater: About 1 therm per day of average family use (3-5 showers)
• Gas Dryer: About 0.5-1 therm per full load
• Gas Furnace: About 1-2 therms per hour on a cold winter day (depends on temperature)
• Gas Stove: About 0.1-0.2 therms per cooking session
• Average Home (Winter): 50-100 therms per month depending on temperature and climate

Seasonal Variation in Natural Gas

Natural gas usage is highly seasonal. Most U.S. households use significantly more gas in winter (for heating) than in summer:

• Winter months (Nov-Mar): 80-150 therms/month (depending on climate)
• Summer months (Jun-Aug): 10-30 therms/month (mostly for water heating)
• Average annual: ~600-1,000 therms per year

The Savings Calculator: How Small Differences Add Up

When comparing energy plans, the rate difference might seem small—just 1 or 2 cents per unit. But over a year, these small differences add up significantly.

Electricity Savings Example

Let's say you use 1,000 kWh per month (12,000 kWh/year), which is typical for a home with air conditioning.

• Plan A: 13.5 cents/kWh = $1,620 per year
• Plan B: 12.5 cents/kWh = $1,500 per year
• Annual savings: $120

A single 1 cent per kWh difference saves you $120 per year. Over a 2-year contract, that's $240 in savings.

Natural Gas Savings Example

Let's say you use 700 therms per year (about 58/month on average), which is typical for a home with gas heating.

• Plan A: $1.40 per therm = $980 per year
• Plan B: $1.25 per therm = $875 per year
• Annual savings: $105

A 15 cent per therm difference saves $105 per year.

Key Takeaways: Understanding Your Usage

• Check Your Bill: Look at your recent bills to find your actual average monthly usage in kWh (electricity) or therms (gas).
• Compare Rates, Not Just Prices: When comparing energy plans, multiply your usage by the rate to get total cost. Don't just look at the advertised rate.
• Small Differences Matter: A 1-2 cent difference per kWh or per therm adds up to $100+ in annual savings.
• Usage Varies by Season: Your electricity usage peaks in summer (air conditioning) and your gas usage peaks in winter (heating). Both can double or triple in peak seasons.
• Compare Apples to Apples: When comparing plans, ensure you're looking at the same rate period and the same contract terms. Don't compare a summer-only rate to a year-round rate.

Using Your Understanding to Save Money

Now that you understand kWh and therms, use this knowledge strategically:

1. Find Your Usage: Write down your monthly average from your last 12 bills.
2. Calculate Total Cost: For each plan you're considering, multiply your usage by the rate. Add in any base charges.
3. Account for Seasonality: If comparing fixed rates, know that plans locked in during peak season (winter for gas, summer for electricity) will be higher. Off-season locks are often cheaper.
4. Project Over Contract Length: Don't just compare 1-month costs. Multiply by 12 or 24 months to see true savings from a better rate.
5. Factor in Contract Terms: Even if a fixed rate is 1 cent more expensive per unit, it might be worth it if the competitor's variable plan has high cancellation fees.