The Pros and Cons of Utility Budget Plans

The weather in Connecticut has been pretty nice over the past few days. I’ve turned off the heat and opened the windows. Spring is on the way and with it, lower gas bills. Spikes in utility bills can make budgeting really tough, but is a budget plan through your utility companies the right move for you?

A budget plan allows you to pay the same amount each month based on your prior 12 months of usage. The utility company charges you the same amount each month and at the end of the year, reconciles your account. At that time, you’ll either receive a bill for the additional amount or receive a credit for the overpayment.

The positives:

  1. It’s easier to budget since your bill will be the same amount each month.
  2. You avoid the large upswings in your electricity and gas bills due to heating and air conditioning buy paying an equal amount each month.

The negatives:

  1. If your bill changes because of increased rates or usage, you’ll end up with a large amount due at the end of the year.
  2. If you have electricity for your air conditioning and oil heat, you’ll still have large oil bills in the winter and have larger electricity bills at the same time because of the payment plan on your electricity bills.
  3. If you are working to cut your electricity or gas bills, you won’t realize the savings until the end of the year.
  4. Most people pay less attention to their utility usage when on a payment plan. When I see my electric bill increase, I start searching for ways to cut the bill.
  5. When you are prepaying your bills to build up for the big usage months, you don’t have access to that money. You also aren’t earning interest on that money.

I, personally, don’t use a utility budget plan. My gas bill is highest in the winter, with my electricity bill highest in the summer. My maximum utility bills are about $350 a month during the winter, which usually lasts about two months. In the summer, my bill peaks at about $300 a month. That, too lasts about two months. My lowest months, in the spring and fall, are generally about $150 a month. I budget $350 a month all year long. When my utilities are lowest, I’ve got an extra $200 to throw at debt or savings. When they are highest, I’ve got the money budgeted so we are fine.

If you are struggling to make your payments and an equal payment would help you budget, the plan might be right for you. I think the plan only works if you have heat and air conditioning that you can put on the plan. If you have oil heat and cannot put that on a payment plan, it’s going to be even harder to make those payments if your electricity is on a budget plan.

You have to look at your own situation and see what works best for you.