As featured in The Wall Street Journal, Money Magazine, and more!
     

Average Billing: Is it For You?

This article was written by in Consumer. 16 comments.


My electricity provider (which is Green Mountain Energy, because I’m an aspiring hippie), offers me the ability to make the same payment each month, based on the previous six months’ usage.

Here in Dallas, people require air conditioning for roughly nine months a year, so our average monthly billing is about $300. I won’t say that’s not a lot of money, but in previous years in leakier houses, we’d sometimes see bills over $550.

For me, it’s unlikely that I’d pay close enough attention to our bills to figure out what the average amount is and then set our budget accordingly. So we’ve had instances where the joint “bills account” had overdraft problems, which is just about the dumbest way to waste money.

I’d prefer it if we could get even more of our predictable monthly expenses billed on an average basis: groceries, haircuts, gasoline, lunch, you name it. For me, one of the keys to financial stability is not having to think about how much to spend.

Do you enjoy average billing for any of your utilities? Would you ever go back?

Published or updated August 10, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦1,358
Rank: Quarter
About the author

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by .

{ 16 comments… read them below or add one }

avatar Wojciech

I’ve found that with budget billing, I got lazy and stopped caring about my daily habits because I knew they would be offset into the previous 6 mo’s – year of use.

What ends up happening is price creep upward slowly but surely and without noticing it much. So month-to-month is best for me. I can see my habits and use reflected directly in the price and adjust them immediately.

Just did this with my thermostat last month…and saved about 15% on the next month’s bill.

Reply to this comment

avatar Dedicated

Until this past winter, I was enrolled in the NICOR (gas) Budget pay system. It’s kind of a long story, so to keep it brief. NICOR was able to manipulate the numbers with budget payers, break the law with too many ‘estimated bills’ (law allows every other one to be estimated) for 5 months November – March. Then did a huge catchup. While showing to the consumer board or regulations that they weren’t making money and then got an increase approved.

Ending this long story that made me irrate, I have not sent them anymore payments – instead using up my huge budgeted balance and have started saving my ‘budget’ amount in ING Electric Orange. I do not like not being in control and to see someone benefit with an accounting proceedure – ticks me off. Especially, when they are screwing the consumer.

On an up note – calculations show NICOR was crediting my account .16% for balances and now at ING Electric Orange I am earning .25% and not commingling my dollars with other savings – just like I had prepaid the utilities.

Reply to this comment

avatar Phil

I use “average billing” whenever I can with the utility companies. I prefer this so that the bills are more predictable. After each year if I’ve used more than last year, I’ll owe them whatever wasn’t paid, but in years past, I find they usually have to end up crediting me (which sometimes is a month and a half worth of charges (no payment one month, and half a payment the next).

Each month’s bill is still itemized, and keeps a running total of whether I’ve paid more or less than my “real” bills would have been. I can still monitor usage, and I even use it as a challenge to keep things in the black.

Reply to this comment

avatar Brandon Barkley

I agree with Wojciech. It is harder to reduce usage when you are not seeing it each month (and you will not see the difference for months). It is also easy to miss how much you are ‘over’ your alloted usage if the estimate does not apply as well the next year as in the last. I would probably not do it again as a result. Lastly, if you start such a plan during the slower part of the year rather than the peak, you are giving an interest free loan to the utility.

Reply to this comment

avatar Yana

That’s called the Balanced Payment Plan by PG&E. I tried it and didn’t like it, because they gave a customer credit and I didn’t benefit from it – it was just applied to the multiple-month total. I like monthly accurate billing, but I don’t pay the bills monthly. I pay about every 6 weeks, waiting until it’s close to the time I’d get a 15-day notice. Then I pay the past due amount. When the weather is nice and my bills go very low, I catch up on the past. What cracked me up is that I recently got a notice on my bill praising me for my prompt payments. My own balancing methods serve me well.

Reply to this comment

avatar David

I personally do not see the purpose of budget billing. I set it up so whatever is used is automatically withdrawn from my account the next month.

I agree with those above, I assume I would use more energy if I was not seeing the actual usage cost each month.

For smaller bill that do not allow me to set up automatic payments I ussually just prepay for 6-12 months at a time. For example earlier this year I sent my town a $400 check for water and my bill is $30-$40 a month. I just can not be bothered paying writing a check each month.

Reply to this comment

avatar KC

When I moved in December I signed up for “equal billing” with the Power company. Huge mistake. I was using about 40% less electricity in the cold months of January and February because the furnace is gas. Even by May I was no where near caught up. I still had a credit of twice what my “equal billing” amount was. I still think at the end of the year they would have been owing me money. I can’t afford to subsidize the power company 6 months out of the year. It might work with my gas bill as I’d be over using in the cold months and underusing in the middle of the year.

Reply to this comment

avatar lrgche

Regardless of whether or not you use the average billing option, to truly evaluate your electricity usage you must actually look at the KWH, not the amount of your bill.

If you merely look at the bill you might mistakenly assume that you have increased your usage when really all that happened was that the utility company has raised rates.

If you are looking at the KWH, then it doesn’t matter if you have average billing or not, it just makes budgeting easier.

Also ambient temperatures (highs and lows) will also drastically impact your usage year over year.

Reply to this comment

avatar Annie G

I haven’t found the need for average billing. I have designed our budget to be flexible by the month, and can therefore include higher budgets for utilities in the summer months. We also live significantly below our means and save 40% or more of our take home pay, so we have a big cushion when needed (something I realize many people can’t do).

We had Green Mountain last year, but like all TX electric providers they have no interest in keeping existing customers, and will not offer deal rates after your term runs out. Reliant was the same way. So I shop for something new each year, and have actually managed to lower my rate both years I changed. We now pay 12.1 cents per kWh with Gexa, and an average of less than $200 a month ( full electric 2200 sq ft home, with Oncor delivery).

Reply to this comment

avatar SingleGuyMoney

I currently use budget billing for my electricity bill. I’ve been on it for about a year and a half. When I first signed on for budget billing, I didn’t really monitor my monthly usage. My provider, Georgia Power, does keep track of what your actual bill for the month is and calculates the difference. Every year they reasses your monthly payment. I initially started at $111 a month and I’m now at $122 a month.

Reply to this comment

avatar Doctor S

We have that set up for our energy and our water here in the Philadelphia suburbs. It seems like a reasonable thing b/c our usage is pretty consistent year round. The biggest plus is that it really helps you budget consistently every month with the fact that you know what your fixed price is going to be. Kinda like your cell phone… errr… unless you go over your allotted minutes.

Reply to this comment

avatar Kelly

We use budget billing and I love it.

It helped me find extra money during the winter months, and did not effect our usage at all. I ignore the bill except for the part that explains what we used last month, and the graphs of the last year. Our energy usage is actually down this year.

I personally prefer having a set budget amount since we have so many expenses during the winter months and that is when the majority of our spending happens (4 birthdays, holidays, etc.).

Reply to this comment

avatar Randy

Our company offers an “Equal Payment Plan” (EPP) where you pay the same amount for 11 months, slightly over one month’s worth. In theory, the 12th month your bill will be $0. I signed up in the spring, so my bill is lower and I run a deficit for the summer. In the winter when I’m using gas, it builds back up. I like this plan a lot. Even this past year when my usage went down dramatically and I ended up with a significant credit, it made budgeting easier (the bill can vary by $200 or more from summer to winter).

They also offer a “Fixed Payment Plan’ (FPP). On this plan you pay a fixed amount for 12 months that is 10-15% your last 12 month’s average. On this plan if you go over, you don’t have to worry about it. This only makes sense if you think your usage is going to increase. I’ve warned family not to confuse this with the EPP

Reply to this comment

avatar H Lee D

We have average billing on our electricity and I see no need ever to go back.

It’s based on the previous year of use and is adjusted every January as needed.

My husband and I live in Phoenix and are both teachers. So the hottest part of the year, neither of us are getting paid.

On the bill, it shows how much electricity we used for the month, what it cost, and what our payments vs. spending has been for the year. So right about now, our spending is coming close to what we’ve paid. In another couple of months, it will be over, but then in November and December, when we aren’t using the A/C (occasionally have the heat on), it balances back out.

Our bill would fluctuate between $50 and $200 otherwise. This way, we pay $125 per month and it’s easy to budget.

Reply to this comment

avatar JoeTaxpayer

I am able to use the level billing for both Gas and Electric bills. I like the fact that it’s two fewer bils that I need to touch, I take a peek and shred them. I do all my checks on line, and this lets me set that up as an automatic payment. Phone is a bit different as the bill isn’t the same each month. I looked at payment history and set a monthly payment equal to highest bill, overpaying slightly every month. After a year, I just adjusted the next payment to get back on track.

Reply to this comment

avatar s watkins

I just signed up for the “average billing” as I received my electric bill and the amount tripled from the previous month..according to their chart my usage went up considerably because of exceedingly cold temperatures in my area (I have electric heat-no gas).I try to be conservative and turn off lights,turn the thermostat down,etcetera,but my bill still was way over the norm..i picked a plan last summer that I thought would work, which obviously didn’t..the electric company sent me an e mail offering the average billing saying it would be retroactive and help my situation..i will have to wait and see as I have always paid by my usage monthly with specific plans…

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: