Budget Billing Can Help Your Finances In The Long Run

Posted by Sha'Kreshia Terrell in BudgetingDecember 20, 2021(Last Updated July 26, 2022)4 min read
Key Takeaways
  • The budget billing program helps you save money in months when energy is used the most.
  • There are many pros and cons to budget billing.
  • There are many tips to save on your energy bills even when you are on the budget billing program.
Are you ready to make some real money moves?

What is Budget Billing?


Utility companies have created a budget billing program that helps budget your monthly utility bills. This budget billing program is a 12-month program that is an average amount that your utility company charges you based upon your energy usage. 


Budget billing, commonly known as “average billing," allows you only to pay one specified amount each month for an entire year or until your contract is terminated, no matter how much energy you use. 


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When assessing your bill, you will see “deferred balance.” If you are not set-up for average billing, this is the balance that you would pay. For example, if you are over your normal kilowatt usage, 1/12th of the amount will be added to your bill. If you are under, 1/12th of the amount will be subtracted from your account when it is averaged out.


Companies typically need 12 months of energy usage history to determine how much you would pay on the program. If you are new to the company or have recently moved, the company will average your bill based on your previous address usage.


Pros of Budget Billing


Budget billing comes with several pros. Below are a few pros as to why budget billing is beneficial:


Effective budgeting - You can budget more effectively because you know how much your utility bills will be each month without guesstimating. You can save money by being enrolled in the budget billing program.


Increase Your Credit Score - If you make timely payments for at least six months, you can request that your utility company report your payment history to the credit bureaus. A positive history will increase your credit score.


Reduce Stress - Budget billing helps reduce the amount of stress you go through when sitting down to pay your bills every month. You no longer have to predict how much you have to pay.


It is free - The best thing about budget billing is that, as long as you are qualified, it is 100% free.


Overpayment - If you have been paying too much per month and you use less energy than calculated, then your account qualifies for an overpayment refund. You can receive this overpayment in the form of a check or a credit to your account.


Cons of Budget Billing


Just as there are pros of budget billing, there are also cons. Some of the cons of budget billing are listed below:


Fees May Apply - Some companies charge administration fees to use this service and cancellation fees if you no longer want to opt into the program.


Image Credit: tommaso79 / Shutterstock.com


Elevated Prices - With budget billing, you are putting your account at risk for high pricing in the future if you have to use more energy than you would typically use. If this is the case, some companies require the extra payment per quarter, and some will wait until the end of the 12 months to bill you for any additional that you may have used. So, it is important to be wise and set aside a few extra dollars just in case.


Refund Refusal - Some companies will refuse to refund you for using less energy and will essentially not offer you credit for your usage.


Contract Termination


Budget billing can be canceled or terminated for a few options. The first reason is that if you, as the account holder, decide that you no longer want to participate in the program, you can have it removed from your account free of charge. 


If you move in the middle of your contract after the program has started, it will automatically cancel. It will also terminate automatically if the account becomes delinquent at any time. If you are thinking about changing electricity providers in the middle of your contract, any kilowatt overage or deferred balance is due in full at the time of cancellation.


Tips to Save on Your Energy Bill


Even though you may qualify for budget billing, knowing about the many other ways to save money on your utility bills could be helpful in the future. No amount is too small when it comes to saving. Try replacing your regular light bulbs with LED bulbs, investing in power strips, and replacing your thermostat with a programmable or smart thermostat.


By replacing the regular light bulbs throughout your house with LED bulbs, you could potentially save up to 75% less energy. In addition, the lifeline of LED lights also lasts three to five years longer than any other light bulb.


You may not think much of it, but investing in power strips can play a massive part in saving on your energy bill. These strips are designed to shut off power to electronics when not in use. According to research, not investing in power strips can cost you, on average, an extra $200 per year, as plugging electronics into the walls does not shut off power when not in use.


With a programmable thermostat, you can set your heat or air to turn on automatically. Having a thermostat that you can set keeps you from upgrading your HVAC system. 


It is said that this can save you on average $180 per year. You will save money and improve efficiency, which is a win-win!


Is budget billing right for you?


While the budget billing program may not be for everyone, it makes life easier. If you struggle with the thought of budgeting each month, then this program is most definitely for you. 


Before you sign any contract, always ensure that you understand what you are signing. Read the fine print and ask questions if you don’t understand. No one wants to get locked into a contract that draws them concerns. 


Ask lots of questions and verify whether or not there will be any extra fees attached for unexpected occurrences. Read over the terms and agreements, read the fine print multiple times, and ensure you know what you are signing up for before committing.


Do you think budget billing is correct for you? Share your thoughts with us in the comment section below.


Main Image Credit: Rido / Shutterstock.com

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