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How to read an electricity bill: units, slabs and fixed charges

What kWh means, how tiered tariffs work, and how to estimate which appliance costs the most.

By Muhammed Nuhman P · Last reviewed: October 2026

Electricity is billed in kilowatt-hours (kWh), commonly called “units”. One unit is the energy used by a 1,000-watt appliance running for one hour.

The basic formula

Units = watts ÷ 1000 × hours. A 1,500-watt air conditioner running for 8 hours uses 1.5 × 8 = 12 units. At a tariff of 0.30 per unit that is 3.60 a day.

Many appliances do not draw full power all the time. An air conditioner’s compressor cycles on and off, so its real use may be around half of the number on its label. Estimates should be treated as rough.

What is on a bill

  • Energy charge: units used multiplied by the tariff.
  • Fixed or meter charge: a set amount regardless of use.
  • Taxes and surcharges: such as fuel adjustment or tax.
  • Slabs: in a tiered tariff, the first block of units costs less than the next. Only the units inside each block are charged at that block’s rate.

Slab example

Suppose the first 100 units cost 3 per unit and every unit after that costs 5. For 150 units you pay 100 × 3 + 50 × 5 = 550, not 150 × 5. Tariffs differ between Kerala, each emirate and each country, so enter your own bill’s rates.

Where the money usually goes

In hot climates, air conditioning is typically the largest share. Water heaters and clothes dryers come next. Lights and phone chargers are small by comparison.

Simple ways to cut a bill

  1. Set an air conditioner to a moderate temperature rather than the lowest.
  2. Clean filters regularly.
  3. Switch off water heaters when not needed.
  4. Use LED lamps and check star or efficiency ratings when buying appliances.

Use the electricity cost calculator to add your appliances and see an estimated daily and monthly cost.