Every energy label, spec sheet and comparison chart boils down to the same three numbers. Watts, hours, price. Once you can multiply them, you can price anything with a plug.
So let's do it properly, with the arithmetic shown.
The three numbers
Watts is how fast a device draws power. It's printed on the rating label, usually near the cord or on the back. If the label shows amps and volts instead, multiply them: 12 amps at 120 volts is 1,440 watts.
Hours is how long it actually runs, not how long it's plugged in. A fridge is plugged in all day but its compressor runs only part of it.
Price is what you pay per kilowatt-hour. The U.S. Energy Information Administration put the average residential price at 18.31 cents per kWh in July 2026, up from 17.45 cents a year earlier. State averages run from 12.72 cents in Louisiana to 48.00 in Hawaii.
The formula
Annual cost = watts x hours per year / 1,000 x price per kWh.
Divide by 1,000 because a kilowatt-hour is 1,000 watt-hours, and the price is per kilowatt-hour. People forget that step more than any other. It makes the answer a thousand times too big, which is at least easy to spot.
Three worked examples
We ran each one at the national average of 18.31 cents. Swap in your own rate.
| Device | Watts | Hours per year | kWh per year | Cost per year |
|---|---|---|---|---|
| TV on 5 hours a day | 150 | 1,825 | 273.75 | $50.12 |
| Microwave, 10 minutes a day | 1,000 | 60.8 | 60.83 | $11.14 |
| Standby draw, always on | 5 | 8,760 | 43.8 | $8.02 |
Look at the microwave. A kilowatt appliance sounds expensive, yet it costs eleven dollars a year because it runs for minutes. The TV draws about a seventh of the power and costs more than four times as much. Hours beat watts.
Where the formula lies to you
Rated watts is a ceiling for most devices. A heater with a thermostat cycles. A TV draws less on a dark scene. A fridge compressor runs maybe a third of the time. The result: your real bill is often lower than the rated math, and for anything with a motor or a compressor you shouldn't trust the label alone.
The fix is cheap. A plug-in energy meter reads actual kWh. Leave a device on it for a week, multiply by 52, multiply by your rate. That's measurement, and it beats any estimate we could publish.
Another trap is the label that already did the work. Appliances sold in the US often carry a yellow EnergyGuide label with an estimated yearly kWh. Use it. It assumes a standard usage pattern, so if you run the device twice as long, double it.
Compare two products in 60 seconds
This is where the math pays off. Take two models of the same appliance. Find each one's watts or yearly kWh. Subtract. Multiply the difference by your rate. That's the yearly saving from buying the efficient one.
Then divide the extra purchase price by that saving. A $60 premium that saves $30 a year pays back in two years. A $250 premium that saves $30 pays back in more than eight, which may be longer than the thing lasts. Do you really want to wait that long for your money?
Our payback calculator does exactly this, with state rates built in, so you don't have to touch a spreadsheet. We built it for the same reason you'd want it: the premium on an "efficient" model is often the only number in the store that's easy to compare, and the saving is the number nobody prints.
Same TV, different state
The TV in our table costs $50.12 a year at the national average. In Louisiana, at 12.72 cents per kWh, the same 273.75 kWh costs $34.82. In Hawaii, at 48.00 cents, it costs $131.40. The device and the hours stayed put. Only the price per kWh changed, which is why the rate is the first number to look up and the one most reviews skip.
Standby deserves one honest paragraph
Five watts per gadget looks like nothing. Eight dollars a year per gadget looks like nothing, too. Then you count the cable box, the console, the soundbar, the router, two chargers and the printer. That's the territory where a plug-in meter and a power strip with a switch earn their price. Most homes won't find a fortune. Some find a surprise.
Reading the yearly kWh on a label
When a label gives yearly kWh, skip the watts step. Multiply that number by your price per kWh and you have the yearly cost. A label that says 400 kWh a year costs $73.24 at 18.31 cents and $192.00 at Hawaii's 48.00 cents. The label figure assumes a standard use pattern, so it already includes cycling and defrost. That's the one case where a published number is better than your own estimate, unless you run the appliance very differently from the average household.
Re-check your rate once a year. Prices moved from 17.45 to 18.31 cents in the twelve months to July 2026, and a rate that rises a few percent each year makes a payback shorter than the flat-price math suggests.
A short checklist
- Read watts from the label, or multiply amps by volts.
- Estimate hours the device really runs.
- Divide the product by 1,000 to get kWh.
- Multiply by your cents per kWh, divided by 100.
- Measure with a plug-in meter when the device cycles.
For a worked case in one room, see space heater running costs by state. Different state, different bill, same formula.