Average cost, or average cost-of-service, is a crude method of determining the gross cost of providing energy service. It is calculated by dividing the total cost of provision, including all costs for facilities, labor, fuel, etc., by the amount of energy provided. The result is the average per-unit energy cost.

This value is typically used for benchmarking costs for a group of consumers or for a utility as a whole. If average cost was used for setting prices, it could unfairly penalize customers with system-friendly usage patterns and pass undeserved savings on to customers who may be stressing the system and raising total provision costs.

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