It’s mostly an educated guess. If you go into your account on their website they very likely have a section for you to fill out with how many people live in the house, what appliances you have, how many phones and computers you have, how much square footage you have, etc.
The meter outside your house constantly collects data and sends it back to the power company, which analyzes that data both in real time and historically for various purposes, and when they combine that with what you tell them *and* what they already know about typical usage for various appliances and items, they can get a pretty accurate estimate.
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