What Is Budget Billing for Utilities?

How Does Budget Billing Work?

Budget billing is a free service that smooths out fluctuating utility bills, allowing you to pay a consistent monthly amount. To calculate your monthly payment, your utility provider averages your past usage, typically over 12 months.

Example: Your provider estimates you'll spend $1,800 over the year and assigns you a budget billing payment of $150 each month, even if your actual usage spikes during summer or winter.

If you're a new customer, the provider may estimate your utility cost based on previous customers or your home's size, or you may have to wait until you have a usage history before you can enroll. Keep in mind, your rate can change if your usage or energy prices shift. Your provider will notify you before any changes occur.

While you're enrolled, your provider tracks what you would have paid under standard billing (typically including the amount on your billing statement). This allows you to see where you're at so you'll know if you'll be charged an extra year-end amount if you use more than expected or get a credit if you use less.

Tip: To qualify for budget billing, your account generally must be in good standing and you must keep your account current to remain enrolled.

Does Budget Billing Save You Money?

Budget billing doesn't reduce your utility costs because you still pay for your actual usage. It does, however, make your monthly payments predictable, which can help you manage your household cash flow and reduce the risk of late payments if your bill is unexpectedly high.

Learn more: How to Save Money on Your Electric Bill

Budget Billing Pros and Cons

If you're considering budget billing, understanding the perks and downsides can help you decide whether it's right for you.

Learn more: Can You Pay Utilities With a Credit Card?

Is Budget Billing Worth It?

Budget billing is most beneficial for specific situations. Consider your usage patterns to decide whether it's right for you.

You Want Consistent Monthly Payments

Budget billing helps smooth out monthly bills, which is valuable if you're on a fixed income or your earnings fluctuate throughout the year. Knowing your payment amount in advance can make it easier to manage other expenses or avoid dipping into your savings.

You Need Protection From Seasonal Spikes

Budget billing averages your costs over the year, so your monthly payment doesn't spike during summer or winter. This can help you avoid the stress of unexpectedly high bills and improve your overall cash flow.

You're Not Moving Soon

If you move within the service area during the budget billing, your monthly payment may change. Your new amount is usually based on the previous customers' usage history. You'll have to cancel service and may have a balance on your final bill if you move outside the provider's service area.

Learn more: Can You Negotiate Utility Bills?

Alternatives to Budget Billing

Here are some options to consider if budget billing doesn't fit your needs.

• Prepay your utilities. You add money to your account in advance and pay for usage as you go. You can see your usage in real time and reduce usage as needed.
• Choose a time-based plan. Pay different rates depending on the time of day you use energy. Save by switching your power usage to off-peak times.
• Create a utility savings account. Set aside a fixed amount each month for utility payments. When your bills are lower, keep the extra in savings to cover high-usage months.

Tip: Making energy-efficient improvements to your home can lower your utility usage and bills.

Frequently Asked Questions

The Bottom Line

Budget billing can make utility costs more predictable and easier to manage, but it's not the best fit for every household. Weigh the pros and cons, your budget and your living situation for the foreseeable future to decide whether budget billing is right for you.