Many companies offer budget billing as an option for paying home utility bills, but is budget billing a wise choice for you?
What Is Budget Billing and How Does It Work?
Budget billing works like this: Utility companies (your electric, natural gas companies, etc.) add up your bills for the last twelve months and divide the total by twelve to determine a fixed amount for your bill for the next twelve months.
Based on your historical average usage, the companies are assuming you’ll use about the same amount of their products in the coming year.
At year’s end, the billing system compares the amount of energy you actually used with the amount you paid during the year. If you paid more than you used, you get a refund credit on your next bill. If you paid less than you used, you get billed for the additional amount at the end of the year.
How Much Does Budget Billing Cost?
Most companies don’t charge customers for budget billing. They see it as a way to help customers plan their budgets more easily, but they’re also reducing the chances that a customer won’t be able to pay the bill during periods of high usage.
For instance, running your furnace a lot in January can lead to a shockingly high natural gas bill. And running your central air unit constantly in July and August can lead to an expensive electricity bill.
There are some utility companies that do charge a fee to let their customers use budget billing. Paying a fee is something you’ll want to avoid.
Is Budget Billing the Right Choice for You?
The budget billing concept has its pros and cons. Let’s take a look at some of the more common discussion points about budget billing.
Budget billing makes budgeting easier.
Energy bills do tend to fluctuate — sometimes quite a bit — each month. Having a fixed utility payment aids in better budgeting for monthly expenses.
Budget billing helps people avoid super high summer or winter bills.
Cold winter weather in Northern states and piping hot summers in Southern states can result in astronomically high energy bills. Budget billing averages out your annual energy costs so that you don’t have to pay hundreds of extra dollars during peak usage months.
Budget billing can lull people into using more energy.
For all the benefits of a budget billing system, there is a downside. Knowing that your bill will be the same each month can lull you into a false sense of security. And that could cause you to forget the long-term ramifications of using too much energy.
You might be tempted to keep the heat higher or the air conditioning temperature lower, knowing that you won’t need to pay the piper until the end of the year. And if you do tend to heat or cool your house more as a result of budget billing, ultimately, you’ll be paying more.
Budget billing can result in a high year-end bill.
If you’re not meticulously keeping track of your energy use, you can end up with a big bill at the end of the year to make up the amount you didn’t pay during the year. This can put an unexpected strain on your budget for that “make-up” month.
Budget billing may work well for you, or it may not. It may help you budget better, or it could open the door to excess usage and thus higher overall energy expenses.
Tips To Save on Your Monthly Energy Bills
Almost everyone can cut down on energy use, making a positive impact on the environment and on their wallets. Here are some tips for saving money on your monthly energy bills.
Switch Out Your Light Bulbs
LED light bulbs typically cost more than traditional incandescent light bulbs, but LEDs use a great deal less energy and last much longer than traditional incandescent bulbs. Make room in your budget to switch out traditional bulbs for LED bulbs and watch your energy bill drop.
Adjust Your Thermostat by a Couple of Degrees
Even a couple of degrees can make a noticeable impact on your energy bill. In fact, for every degree you lower your thermostat during the winter or raise it during the summer, you’ll save a measurable percentage on your bill. See details here.
Learn to adapt to home temperature levels that are a bit warmer or cooler than you’re used to in order to save money on those energy bills.
Use the Crockpot Instead of the Oven
When possible, cook meals in the crockpot instead of the oven in order to use less energy. Similarly, using an outdoor grill in the summer can help you avoid heating the house unnecessarily with your oven at the same time you’re running your air conditioning.
Keep Heating and Air Conditioning Units Maintained
Improperly functioning heating and air conditioning units can result in higher energy bills. Be sure to have your local heating and air conditioning expert out annually to keep your HVAC unit in proper working order. Also be sure to replace the air filters in a timely manner. By keeping those clean, your unit will last much longer and you’ll also have a unit that runs more efficiently — resulting in lower utility bills!
Only you can decide whether or not budget billing is right for you, but reducing energy usage will benefit both your pocketbook and the environment.