Under a tiered plan, each tier corresponds with a price per kWh. Your EFL will detail your tiers and charges, but here’s an example of how a three tiered plan would work:
- Tier 1: 0 to 500 kWh
- Tier 2: 501 to 1,000 kWh
- Tier 3: 1,001 kWh and over
Under this pricing system, if you use 400 kWh, your usage falls only within tier 1, so you would be billed for the tier 1 price for all of your usage.
If you use 800 kWh, you’ve exceeded the tier 1 limit, so you would have some charges on tier 2 as well. In this case, your first 500 kWh would be billed at the tier 1 price, and then the remaining 300 kWh would be billed on tier 2.
If you use 1,200 kWh, your usage now covers all three tiers. So you would be billed for 500 kWh on tier 1 and 500 kWh on tier 2, and the remaining 200 kWh would be billed on your tier 3 price.
Keep in mind some plans have a base charge as well as tiers.