We are less than a month away from the official start of winter. With the changing of the seasons also comes a change in heating bills as many Americans will likely start to see spikes in their monthly amount owed.
By Selena Fragassi
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That’s partially because the price of natural gas has been steadily increasing this year. In light of these increases, some have wondered if budget billing might be a good idea to control costs.
According to the latest Consumer Price Index, released mid-October, utilities continue to be on the rise. Piped gas increased 2.9% in September, adding to a total increase of 33.1% year-over-year.
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If those price jumps continue on that track, heating bills this winter could hike 35% higher — or more. As an example to show the magnitude of that increase, if you paid $150 a month on average to heat your home last winter, you can expect to pay about $202 this year.
Budget Billing as an Option to Control Heating Bills
But what about budget billing? According to Experian, this is an option that utility companies like electric and gas providers offer which lets you pay a set, fixed amount each month. This way, you know exactly what you’re paying every bill as the amount stays the same for the year. The benefit of this program is it allows someone to better budget their expenses without worrying about sudden spikes in the amount owed, as can sometimes happen in peak months (ex. during the winter).
The utility company will look at the amount you typically pay in a year, divide that by 12 and set your amount. If you haven’t lived in your home for more than a year, they’ll typically look at the usage of the previous owner or tenant.
The utility company will then review the amount against your usage (either quarterly or annually) and may set a new monthly price — but will always inform you of any increase or decrease. And as long as you’re on the budget billing plan, your bill will remain predictable every month. Though it’s important to note this will not reduce what you owe, it will make your monthly bill more consistent by dividing your total usage over the year into equal monthly payments.
A big thing to know is you have to softly “apply” for the program, per Experian. Your account will need to be in good standing — and if you miss any monthly payments, there’s a chance you could be kicked out of the budget billing option.
Is Budget Billing Always a Good Idea?
While it sounds like a no-brainer, is budget billing always a good idea? Like anything regarding money matters, there are pros and cons with this program.
The benefit of course is knowing what you will pay each month without any guesswork, even as your usage increases on a seasonal basis. This can be a great stress reliever and help you stay on budget with bills.
However, the drawbacks of budget billing include the potential for under or over paying. The way the utility company estimates your bill is based on average usage from the year prior — so if their calculations are off, it’s good to know how you will be credited or debited accordingly. All utility companies operate differently, so it’s important to read through the contract they provide when enrolling in budget billing — and to ask any relevant questions. It’s also important to know that some utility companies charge fees for enrolling in the budget billing program.
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However, many find budget billing a great way to have consistency concerning utility bills throughout the year. As The Motley Fool’s Kailey Hagen wrote on Oct. 25, “I made this move a few years back, and I haven’t regretted it.”
