If you’ve ever had your budget upheaved by a larger-than-expected utility bill, especially during/after the winter and summer months – you’ve most likely investigated different billing options to see if there are any routes that may be more stable. One solution can be budget billing plans with your utility company/companies.
While this can take the guesswork out of your utility payments by allowing you to pay a set bill each month, be sure to read ahead to learn if this type of payment plan is right for you and what budget billing plans mean for you as a consumer.
What are Budget Billing Plans?
Budget billing plans mean that your utility company (such as natural gas or power companies) will offer a set amount due each month for a certain utility, based on the amount you’ve used in the last 12 or 24-month span plus the average monthly cost and anticipated energy prices. This is all added up to determine a new monthly bill plan for you.
This service can help make costs more predictable for you as a consumer, despite fluctuating energy usage costs during the season changes. If the information is unavailable from your last 12-24 months, they will base it on the previous occupant’s energy usage.
Ask Your Utility Company Questions
Don’t be shy to ask questions of your utility company when it comes to billing and budget billing plans. A few key questions to keep in mind when inquiring about energy rate billing changes are:
- Will you be charged extra if your usage goes over the planned estimate?
- Will you be reimbursed, or will any overages be rolled over to next month’s plan if you end up using less electricity, natural gas, etc. than they estimate?
- Are there any monthly fees or other costs besides the planned utility bill?
Pros and Cons of Budget Billing Plans
Pros
- Less stress and anxiety every month: With your utility bills being a set amount each month, it takes the stress and anxiety out of wondering what your next bill amount will be. If you know the cost, you can plan instead of being caught off guard or worried. It might not cut the costs of your bill, but it can take the stress out of changing seasons and higher bills otherwise.
- More predictable bills and cycles: This point blends with the first one. Having a more predictable billing cycle is a plus. It makes monthly budgeting simpler and is one less issue on your plate in regard to bills and budgets.
- Avoid steep increases: Naturally, your power and gas bills go up as the seasons change. Using air conditioning in the summer and having the heat on during the long winter months impact your energy bills every year. With budget billing plans, your bill won’t sharply spike upwards as the temperatures drop or rise. Be prepared to pay later though if the usage is much higher than planned or intended – as extra consumption does add up.
- Potential for saving money: Budget billing plans do not offer reduced rates or cost less, but they can help you save money on your utilities. Since the bill is predictable and any changes will be noted ahead of time, you’ll know how much you will be paying each month ahead of time. It makes it easier to set aside the money you’ll need and that alone will reduce any potential late fees, reconnection charges if it gets disconnected, or other unfortunate situations that can arise from regular bills that can be erratic.
Cons
- Extra Fees: Budget billing plans do have extra fees. Not all utility companies charge these, but some do. Keep in mind to check whether yours do and what they may entail. Most don’t when you avail of the service. Administration fees, maintenance, and cancellation fees are a few of what they can charge. Other companies may charge extra fees if your usage is more than anticipated. Even if they are minimal, if it keeps happening and adds up it can become a costly expense.
- Risks of future elevations: With bills being predictable and set each month, it can become easy to go overboard and not realize that you’re using more than the predicted amount and use even more energy, resulting in a very high end-of-the-year bill for extra usage. Take care to keep an eye on your usage throughout the months and ensure that you’re not going to pay for it later.
- Over or underpayment: It’s important to ask your utility company what happens if there are over, or underpayments compared to their estimates. If you end up using less energy than what they’ve predicted, can you be reimbursed, or can it be rolled over into the next month? If you use more energy than they predicted by the end of the year, will you owe an exorbitant amount or fees on top of your bill?
- This can result in a very high year-end bill: As each month’s bill is set, you may not notice or realize the extra usage that climbs during the year. You may unintentionally use more energy than you would normally – such as leaving the air conditioning on while you’re not home since you don’t see the extra usage on the bill each month, leading to a rise in payments later on when the year is over.
Is Budget Billing For You?
It can be, depending on your energy usage, budget each month, and what you’re comfortable with. Look into the pros and cons, take your own usage each month into account and plan out whether budget billing would be right for you.
There is also the option of taking budget billing into your own hands by planning each month and measuring your own usage and bill estimates. There are ways to measure your usage and check other fixed-bill energy plans that are not just budget billing plans with your utility service directly. You may even find other types of plans that will provide you with some level of predictability, like fixed-rate plans.
You can potentially save money by switching to budget billing plans, as mentioned earlier but it will not be upfront, and you will not be getting offered a lower price upfront by your utility company. One of the largest detriments to budget billing is users accidentally using extra energy and getting hit by an exorbitant bill at the end of the year. If you are diligent about your energy consumption, then a budget billing plan may be worth the switch.
Ultimately it is up to you what is best for your budget, time, and energy usage whether it’s electricity or gas power.
Questions and Answers About Budget Billing
My retailer increased my budget payment plan – why?
While budget payment plans are great for remaining consistent month to month, they can and may change if you’re not careful. There are a few possible reasons that a retailer has increased your budget payment plan:
- A noticeably significant change to your energy usage may cause a review and adjustment to your current set plan.
- Your budget billing settlement month may be sooner than you think. It is easy to forget when your settlement month is, especially after a full 365-day cycle. Be sure to check when your month is settled in your contract to ensure that there are no surprise major bills at the end of the cycle year.
- Any past due payments or currently unsettled payments from any previous payment dates may contribute to a higher bill or a change in your budget payment plan.
