There are several different methods that an electrical provider may use to bill for their energy. The most common bases of billing are:

Energy Usage Cost

Energy usage costs are simple: there is a cost associated with a unit of energy. This price may vary for different times of day, different days of the week, different seasons, etc., but the basic concept is still the same.

Peak Usage Cost

Some energy providers also charge customers based on peak usage (sometimes also called a ratchet charge). This charge is actually based on power rather than energy, with the cost being based on the highest instantaneous power that the customer used during the billing cycle.