Budgeting conjures visions of a monthly pile of bills — the mortgage, car payments, credit card balances and, of course, utilities.
While some monthly payments are predictable, utilities like electricity, gas and water are based on usage and can swing wildly from season to season. And an unpredictable monthly payment can make it challenging to plan and stick to a budget.
Residential consumers in the United States pay on average $316 to $391 per month for essential utilities, according to an analysis by move.org. And around $538 to $613 when you add in phone, internet and streaming services.
Those averages for basic utilities vary as we water plants in the summer and run the AC, then switch to natural gas for heat in the winter. Extreme weather events, like a heatwave or snowstorm, can drive monthly energy costs above average throughout the year, too.
To help customers avoid those shifts, many utility companies offer something called budget or levelized billing where you pay the same amount every month, regardless of your usage.
How Does Budget Billing Work?
A budget billing plan allows residential customers to have a set payment amount each month for utilities like electricity or natural gas. Instead of paying $85 for electricity in the winter and $115 in the summer, you might pay $100 every month.
Most utility companies base the budget billing payment on average energy usage over the past year. If you haven’t lived at your current home for a year, the budget bill amount is based on the previous resident’s usage.
At the end of the year, if your actual energy costs are greater or less than anticipated, your final budget billing amount is adjusted to make up the difference.
You should definitely still keep a close eye on your energy usage though, especially during the first year.
“A major drawback can be if the utility company overestimates your usage and you end up paying more per month,” says Danetha Doe, chief economist at Clever…