Should You Use Budget Billing For Your Utilities

By Rodney Parks | Budgeting

Balance Your Utility Bill

Should you use Budget Billing for your utilities? Even though this could add stability for monthly payments, you may end up owing more than what you figured. There are circumstances where this can work great for you, but careful consideration is advised.

First off, do you know what Budget Billing is? This is a program that some Utility companies offer. They offer you a set amount to pay each month to keep your bill constant. This is done by taking an average of what you spend each year on your electric bill and divide it by 12 months. Of course, the longer you are at that address, the more accurate they can make the monthly bill.

Is This Really Right For You?

Should you use Budget Billing for your utilitiesThere are things to consider when thinking about signing up for “Budget Billing”. The first thing you should look at, why would you want this type of billing? For many that live in areas that have a mild to moderate variance in temperatures throughout the year, this can help.

However, if the temperatures have an excessive range, this can hurt you. If you live in a fairly stable climate where your temperature are mostly predictable, this should work. So let’s say your annual utility bill is $2100. Divide that by 12 months and you will get your monthly payments of $175. The utility company looks at more than just one year, they do a deeper analysis of the residence history over a period of years.

If signed up and living on a tight budget, this can be nice when winter comes. It will keep you from getting slammed with a $350 electric bill you weren’t planning on. With the Budget Billing plan, getting surprises like that won’t occur. Your bill stays steady and allows you to plan your home budget easier month to month.

Budget Billing Not So Good

It seems lately, that weather is doing all sorts of strange and erratic things all across the country. However, the more eastern states seem to have the most wide range of temperature changes throughout the year.

If you are on the Budget Billing plan, and due to a longer and harder winter that wasn’t planned. You could end up spending more money than what the utility company had averaged in for you. There is a strong possibility you will get a Balloon Payment at the end of the year.

So where you were trying to avoid that big hit of a massive bill, now became more of a surprise than ever. The monthly amount the utility company set up for you, was based on months the bill was low, months it ran nominal and includes the months it ran high. So no matter if a hard long winter showed up or a hard long summer popped in, this out of the normal usage throws their averaging out the window. No matter what the reason, you exceed, you still have to pay for it.

Imagine paying your $175 a month for electric, and then at the end of the year, you get an extra bill wanting $400 more dollars. If on a tight and balanced budget, this can hurt you badly.

Budget Billing Savings

As mention above, if your area is mostly stable and you pretty much have the same bill all year round. Or the range from month to month is very little. You could potentially be putting money towards your next bill each month or onto next years billing.

If you are paying $175 a month, but for 9 months out of the year, you only used $125 a month. That is $50 dollars over 9 months, giving you an equity of $450. If the remaining 3 months usage are at the $175, you will have $450 sitting there to go towards next years bills.

On the other hand, the last three months may be colder than normal temperatures. Making actual usage be $250 a month. That would be $75 over the intended $175 a month. But due to your other months being lower, you savings will cover this expense and still leave you some change to go onto the next year.

Ask Before You Sign Up

Should you use Budget Billing for your utilitiesBefore considering signing up to a Budget Billing Plan with your utility company, there are some things you need to ask. First and foremost, will there be any fees to sign up. Also ask for a clear explanation of how the contract works.

If there are fees, then the fee itself may end up costing you more each month than if you weren’t on the plan. The fees could be a percentage of what is saved at the end of the year. You just need to make sure that the cost of signing up isn’t going to be an added expense into your home budget.

Carefully read over the contract or talk to someone that can explain the contract clearly. Utility company’s are businesses and like most businesses, they are out to make money. So ensure that your savings stay with you and not with them. In the scenario above, you want to make sure that $450 belongs to you, and not go into the utility company.

You also want to ensure there will be no penalty fees if you end up spending more than what the monthly average they set for you. If you have a few bad months that the bill exceeds a third to double the average cost, a high interest fee attached on your end total could break you. Always read the contract carefully.


So, should you use budget billing for your utilities? Only you have the answer.

Where do you live, do the temperatures throughout the year stay stable year after year? Does your utility company offer a good plan, and are they there to help you or make money off of you? Do their contracts make sense or do they make you nervous?

I would suggest you Set Up Your Own Budget and get an idea if you even need for someone else to budget your bill for you. You may find that you can work your own budget, where paying what you owe each month works better for you.


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  • Jargon says:

    Thank you 🙂

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