What Is Average Billing?

Ever heard of average billing or maybe budget billing? It’s a payment option some Retail Electricity Providers (REPs) offer to help you handle your energy bill without any crazy surprises. Instead of the rollercoaster of paying different amounts for electricity every month, you get to pay a similar, more predictable amount based on your usage history..

So, how does it work?

Basically, the REP looks at your last 11 – 12 months of electricity usage, adds them up, divides by 12, and boom! That’s your average monthly electricity usage. They then multiply that by your energy rate and add in the delivery charges to figure out what you owe each month. Simple, right? And the best part? Your bill stays pretty much the same each month.

If you’re moving into a new place, then they can use the previous owner’s usage average to calculate your monthly payment. Though, fair warning, that might not match how you use electricity. You’d be paying based on someone else’s habits, which may not be a good fit for you.

This leads to the big question…

Is Average Billing Worth It?

The good news is that average billing makes budgeting a breeze. No unexpected spikes in your electricity bill to stress about—it’s all about that peace of mind.

But here’s the catch: It won’t save you money. At the end of the day, you pay for what you use. If your average bill amount is ever lower than the charge for what you’ve actually used, that difference will be added to your deferred balance. And if your average bill is ever higher than that month’s actual usage, the difference will be deducted from your deferred balance. That deferred balance will accrue throughout your contract and will be owed in full at the end.

And that can snowball rather quickly.

Think about it: Texas weather is as unpredictable as it gets. Hotter summers mean cranking up the AC, while colder winters call for more heating. So, even though your bill looks nice and steady, that deferred balance might be quietly growing.

And don’t forget home improvements or repairs! Anything from fixing your AC to major renovations can cause electricity usage spikes. Last April may have been a low usage month, but this year, renovations tripled your usage. You still pay the lower average bill, but all that extra usage goes into your deferred balance, building up without you even noticing.

Some REPs try to minimize the deferred balance by tweaking your monthly average billing amount, but depending on how much electricity you end up using, there might still be a surprise waiting for you when the contract ends.

Plus, having a consistent bill might make you a bit lax on saving energy. It’s easy to forget to turn lights and appliances off when everything seems like smooth sailing, right? Before you know it, that deferred balance has grown, or your REP hikes up your bill for the next contract.

So, while average billing can be a good friend for budgeting, you have to be mindful of the deferred balance that may be accumulating.Owing a large sum at the end of a contract could diminish the benefit of paying a steady amount each month. It’s all about finding that balance between predictability and keeping an eye on your energy usage!

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