What is Budget Billing?

Have you noticed wild swings in your utility bills lately? Natural disasters or working from home can make costs unpredictable, wreaking havoc on your bills, and sometimes leading to a situation that calls for debt relief.

Many utility providers offer budget billing, which could help make your utility payments more predictable and affordable. Budget billing lets you pay the same amount monthly, avoiding sudden bill jumps. It’s handy for tight budgets, preventing overdraft fees and surprises. In this guide, we’ll dig into:

• How budget billing works and how your cost is figured out.

• The pros and cons, including fees, refund policies, and what happens if you use more energy than planned.

What Is Budget Billing?

Budget billing is a program utility companies offer that lets you pay a set amount each month for services like electricity, gas, or water. It’s designed to smooth out the spikes in your utility bill, which could help you budget more easily throughout the year.

With budget billing, you avoid the ups and downs of seasonal use. Instead of paying more during peak times (like summer or winter) and less during lower-usage months, every monthly bill is the same amount, no matter how much or how little you use your utilities.

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How Does Budget Billing Work?

Budget billing works by averaging out your utility use over a set period, usually 12 months, to determine average monthly cost. Your provider tweaks the average for inflation or rate changes. 

Several major providers like PG&E, Duke Energy, and Dominion Energy offer this program.

Eligibility for budget billing programs

You usually need a good track record with payments to sign up for budget billing.  

• PG&E: Requires a strong history of paying on time and in full.

• Duke Energy: Must have 12 months of billing history and no past-due balance.

• Dominion Energy: Requires at least 12 months at your current address with no unpaid bills.

Fees Associated with Budget Billing

You might think budget billing comes with monthly fees, but many major utilities like PG&E, Duke Energy, and Dominion Energy offer it for no cost. Certain providers may charge small sign-up or monthly administrative fees, so double-check with your utility to avoid surprises.

Advantages of Budget Billing

Budget billing can be helpful in managing your money, with several perks:

• Predictable payments. You pay the same amount every month, making budgeting easier.

• No bill jumps. Avoid high bills during peak times.

• Financial stability. Keeps you safe from overdraft fees or late charges from unpredictable bills.

What to Consider Before Enrolling in Budget Billing

Before enrolling in a budget billing program, consider these:

• Check for fees. Make sure there are no extra costs with your provider.

• Understand the refund policy. If you use less energy than planned, will you get a cash back or credit? 

• Review the contract. Look over the terms to get your rate, fees, refund policy, how long it lasts, and what happens if you move. Check to see if there’s a fee for leaving the program early. 

• Know the overuse rules. If you use more energy than expected, your rate may adjust, or you’ll owe a bigger bill later.

What Happens if You Use More Energy than Planned?

One possible downside of budget billing is using more energy than you thought. Your provider might impose:

• Rate tweaks. Some, like PG&E, adjust your payment monthly to avoid big spikes.

• Year-end bill. Others charge any extra at the end of the year, which could hit your wallet hard if you’re not ready.

Ask your provider how they handle this to stay ready.

Disadvantages of budget billing

Budget billing has a few downsides:

• Fees. Some programs have ongoing administrative and start-up fees.

• Higher electricity usage. You might use more electricity overall because you don’t realize how much you’re spending monthly.

• Strict payment policies. Utility providers may be less tolerant of late payments on a budget billing plan compared to a standard plan.

• End-of-year catch-up bill. Budget billing may not always line up exactly with your actual usage. That could mean an unexpected lump-sum bill at the end of the year if your usage exceeds the budgeted amount.

Other Ways to Save Money on Utilities

If after reviewing the pros and cons, you determine that budget billing isn’t for you, there are other ways to lower your utility costs. Here are several suggestions.

Switch to LED bulbs 

LEDs use 70%-90% less energy and last longer than regular bulbs. They’re more expensive, but in the long run the savings exceed the upfront cost. You can find LED light bulbs online or at local hardware or home improvement stores.

Install a programmable thermostat

Believe it or not, you could save up to 10% every year on heating and cooling costs. With a programmable thermostat, you’ll be able to set the temperature based on your schedule. If you leave home, you can easily turn it down a few degrees. Just turning your thermostat back 7º-10º F for eight hours a day from its typical setting could make a noticeable difference on your bill.

Change air filters 

Change the filters on your air conditioner regularly. If they become clogged with dust, dirt, pet hair, or other substances, your unit will have to work harder, and that increases your bill. Try to change the filters in your air conditioning system every few months.

Unplug devices 

If you look around your home, there are probably appliances and devices that are plugged in even though you’re not currently using them. By simply unplugging your microwave, coffee maker, laptop, and hairdryer, you may be able to slash your utility bill by a few hundred dollars per year.