A kilowatt, 1,000 watts, is the unit used to describe the power, the rate at which the energy is being converted. Energy is the power multiplied by the time it is used, in this case hours. Therefore a kilowatt-hour, the product of power and time, is a unit of energy. The utility company charges you for the number of kilowatt-hours of electricity you use in a month.

For example, a 100-watt light bulb uses 100 watts (or 0.1 kilowatt) of power. If that light bulb were left on for an entire month, the energy that the bulb consumed would be 0.1 kilowatts x 24 hour/days x 30 days/month, which equals 72 kilowatt-hours/month. If the energy cost is $0.12 per kilowatt-hour, the bill for that one light bulb would be $8.64 per month. Replacing the 100-watt incandescent lamp with a 23-watt compact fluorescent lamp that is equally bright would cost only $1.98 per month. An LED lamp equally bright has a power rating of only 13 watts, and therefore would cost $1.12 to light.