"Balanced Bill" offer for electric bill

[poundwise]

Today, I received a second offer from my energy provider to switch to "Balanced Bill" for my electric service.

Just in case someone is not familiar with this sort of thing, "Balanced Bill" is touted thusly: "You pay the same amount, month after month, for one full year. No more unexpected expenses..."

As I reviewed the offer, I was told some statistics regarding my previous usage and billing --

Current highest monthly amount: $142.79
Current lowest monthly amount: $58.93
Current average monthly amount: $98.90

Then, as I am encouraged to have "a more balanced future" and "eliminate those surprises", I am offered a new amount --

Your new Balanced Bill monthly amount: $121.09


While the numbers may work out better for someone else, or similar offers elsewhere in the country may be good, it seems to me that Balanced Bill is pretty well pointless.

Why would I, a person who has an average bill of $98.90, agree to pay $121.09 per month? Just so I'm not "surprised" by the "unexpected"? Frankly, I am not surprised as I know when to expect my bill to vary according to the season and the weather.

I know, rates go up, etc. However, this is simply a bad offer and a bad program IMO.

This offer went right into the shredder. No thanks.

As I said, it may work differently for other folks and/or elsewhere, however, I would caution that I expect it would be a safe assumption that no energy company is going to lose money off of their "easier" deal. Right?

[Ima saver]

I budget for my highest bill, which is $160, so I put away $40 a week. When my bill is lower than $160, i put the rest into my savings. (right now that is in my $20 challenge)

[rduell]

Originally Posted by Ima saver

I budget for my highest bill, which is $160, so I put away $40 a week. When my bill is lower than $160, i put the rest into my savings. (right now that is in my $20 challenge)

That's a really good idea, Ima! I think I'll do that when I get the CCs paid off and there's extra money in the budget.

[Jacklad]

Originally Posted by poundwise

As I said, it may work differently for other folks and/or elsewhere, however, I would caution that I expect it would be a safe assumption that no energy company is going to lose money off of their "easier" deal. Right?

Depends on the utility and on the offer. Our equalized billing is good for eleven months, then the account is zeroed in the twelfth. The billing year starts in September; we normally hit April owing quite a bit (as that's our cold period and we have forced-air electric heat) and end up about $50 ahead in August (taken off our September bill). With this setup, they are actually lending me money interest free.

The important thing is to read every offer carefully to see if it works for you.

Jackie

[poundwise]

Originally Posted by Jacklad

Depends on the utility and on the offer. Our equalized billing is good for eleven months, then the account is zeroed in the twelfth. The billing year starts in September; we normally hit April owing quite a bit (as that's our cold period and we have forced-air electric heat) and end up about $50 ahead in August (taken off our September bill). With this setup, they are actually lending me money interest free.

Perhaps so. However, I expect that the utility's 'equalized' payment amount will change for the next billing period (11/12 months) and that it takes into consideration more than enough to make up for their 'interest free' loan to you.

You may be right, however. As I said, I'm sure it works out well for some people in some places. In the case I outlined above, I think the 'offer' is nothing more than a gimmick that appeals to people who can't, or don't, budget and who think having a regular amount, though higher, is better.

[Jacklad]

Originally Posted by poundwise

Perhaps so. However, I expect that the utility's 'equalized' payment amount will change for the next billing period (11/12 months) and that it takes into consideration more than enough to make up for their 'interest free' loan to you.

You'd be wrong - this is the same plan we've been with for 12 years, and every year the only increases have been tied to rate increases, the same as we would be paying if we just paid a metred bill each month. In fact, after the first year the adjustment was down due to lower utilization than they had expected. I can't complain - they've been more than fair.

Originally Posted by poundwise

You may be right, however. As I said, I'm sure it works out well for some people in some places. In the case I outlined above, I think the 'offer' is nothing more than a gimmick that appeals to people who can't, or don't, budget and who think having a regular amount, though higher, is better.

For some people, it may be. People's inability to budget never ceases to amaze me.

Jackie

[disneysteve]

Originally Posted by poundwise

I think the 'offer' is nothing more than a gimmick that appeals to people who can't, or don't, budget and who think having a regular amount, though higher, is better.

I wouldn't agree to a plan that was charging $22/month above my average bills, unless there was an anticipated rate increase that would account for that difference.

We use the equal payment plan for our gas and electric bills (they are billed together from the same company). Even though I am very good with money management, I still appreciate the convenience of not having to think about what the bill will be this month. The potential amount of interest I lose by paying a little more than I need to in the warm months is minimal and balanced by the fact that I don't get hit with huge bills in the cold months when the heater is running.

As for the equal payment plan amount, I learned a few years ago that the monthly amount was negotiable. At the end of my billing year, I had a credit of about $150, meaning I had paid in that much more than I had used. I got a notice saying for the next 12 months, my monthly payment was going UP by 20-some dollars. I called and asked them to explain why they were raising the charge if my average was lower than the existing charge. I was told that a computer spits out those notices and I could make the monthly charge lower if I wanted to. So I dropped it to $5 less than the past year. Worked out about even for the following 12 months.

[poundwise]

Originally Posted by Jacklad

You'd be wrong...

As I said I could be... Or, rather, I said, "You may be right." Anyway, I'm ok with being wrong. It's happened before and I'm sure it will happen again.

Then again, your plan doesn't sound like the "Balanced Bill" arrangement (as I was offered) anyway. Just seems like they spread out your payments to make things more even throughout the year, rather than project a year in advance. That makes more sense.

[Jacklad]

Originally Posted by poundwise

As I said I could be... Or, rather, I said, "You may be right." Anyway, I'm ok with being wrong. It's happened before and I'm sure it will happen again.

Nah, my fault for being terse - comes of trying to multitask posting with giving out Halloween goodies.

Originally Posted by poundwise

Then again, your plan doesn't sound like the "Balanced Bill" arrangement (as I was offered) anyway. Just seems like they spread out your payments to make things more even throughout the year, rather than project a year in advance. That makes more sense.

They do project - that's why the first year was too high (they were going off the bills from the last owner, and the first thing we had done was to replace all the windows with energy saving units). But they're good about adjusting, and after that first year their estimates have generally been between $20 and $50 over my useage for the year. Pretty close calculating, but I can't complain so far.

Steve had a good point, though - if you have a good customer history with them, you could probably bring the monthly payment down. And you also have to look at your useage cycle - for us it makes sense because of the start date being in the fall and electric heat being our major use. For our neighbours, with gas heat and their major use being the A/C, it's not so tempting.

[sweeps]

A question I would ask is why the utility pushes these balanced bill plans so hard. I get probably 3 or 4 solicitations from them a year asking me to switch to balanced billing. They must benefit from them somehow.

[tinapbeana]

Originally Posted by Sweepsplayer

A question I would ask is why the utility pushes these balanced bill plans so hard. I get probably 3 or 4 solicitations from them a year asking me to switch to balanced billing. They must benefit from them somehow.

let's see... extra $60 per household * 200,000 housholds = $12,000,000 extra per month * 6 months = $72,000,000 sitting around earning interest.

yeah, i'd say they got a lot out of it! if they're earning 5% compounded daily, they're making $1,822,562.28 (give or take) in interest in 6 months.

on a slightly less pessimistic side: the company may also get a larger number of customer bills paid in a timely fashion if they offer stable bills month over month.

[poundwise]

Well, the bottom-line for me (and the purpose of posting about this) is that the offer I've received is made to sound so good, while the offer itself is actually poor.

So, to restate, it may work out well for some, however, I would caution that it may just as well be a bad decision to go with a "Balanced Bill" type plan. As I suggested, and Sweeps also indicated, the companies are pushing these things for some reason.

There is no way I would go from a 98.90 average bill to a fixed bill of 121.09. In fact, I think to do so would be absolutely foolish.

[disneysteve]

Originally Posted by Sweepsplayer

A question I would ask is why the utility pushes these balanced bill plans so hard. I get probably 3 or 4 solicitations from them a year asking me to switch to balanced billing. They must benefit from them somehow.

There is the interest on the float, but there is also the cash flow issue. All of us know how important a steady cash flow is. Talk to anyone who works on straight commission and you'll see what I mean. Just as we like to have a steady income to cover our fixed expenses, so does a business. They have to meet payroll, fuel their vehicles, pay rent and utilities, insurance premiums, etc. I'm sure any business owner, large or small, would like to know exactly how much is coming in each month rather than having to deal with widely varying income.

huh? what?


sorry, I was mesmerized by the "high" electric bill of $142.





I'm far too cynical for something like that, just tell me what I owe you and you'll get it.

I actively work to manage my bill throughout the month making temperature adjustments here, there, and so forth (currently adjusting to a 68 degree thermostat for the heat). I'd be concerned that an equalized bill might take some of my focus away from that. I guess that's in the same vein as the spend more when you use credit cards thing (which we all know is absolute nonsense! )

[disneysteve]

Originally Posted by rexdart

I'd be concerned that an equalized bill might take some of my focus away from that.

I'm just the opposite. I consider it a challenge to get my actual charges to come in under the equal payment amount.

[Broken Arrow]

I used to use the equalizing plan. As far as I know, I didn't end up paying any more or less than it would have costed me without the equalizing plan. So, I wouldn't go so far as to call it a gimmick... just makes things easier to budget IMHO.

Right now though, I don't use it. I'm in a new place and I am still trying to figure out how much my utilies are. However, last month's gas and electric came out at a combined $40, and I am loving it!

[disneysteve]

Originally Posted by Broken Arrow

I used to use the equalizing plan. As far as I know, I didn't end up paying any more or less than I it would have costed me without the equalizing plan.

You definitely don't pay any more. You just pay it in equal installments, rather than having a big electric bill during the heat of the summer and a small one during the winter (unless you have electric heat).

What you do need to realize, however, is on the equal plan, if your usage exceeds your payments, in the 12th month, you can get a large bill so you need to keep track of your actual usage. Of course, the flip side is if your usage is less than your payments, you can end the year with a credit and owe nothing in that 12th month which is always nice.

[sweeps]

Originally Posted by disneysteve

There is the interest on the float, but there is also the cash flow issue. All of us know how important a steady cash flow is. Talk to anyone who works on straight commission and you'll see what I mean. Just as we like to have a steady income to cover our fixed expenses, so does a business. They have to meet payroll, fuel their vehicles, pay rent and utilities, insurance premiums, etc. I'm sure any business owner, large or small, would like to know exactly how much is coming in each month rather than having to deal with widely varying income.

I agree. I think that's probably even more valuable to them than the float. I'm getting solicitations right now in the fall, which would allow me to pay LESS for several months -- so actually the company would take a hit, at least in the short term.

[poundwise]

Originally Posted by disneysteve

You definitely don't pay any more. You just pay it in equal installments, rather than having a big electric bill during the heat of the summer and a small one during the winter (unless you have electric heat).

What you do need to realize, however, is on the equal plan, if your usage exceeds your payments, in the 12th month, you can get a large bill so you need to keep track of your actual usage. Of course, the flip side is if your usage is less than your payments, you can end the year with a credit and owe nothing in that 12th month which is always nice.

I think everyone needs to realize that there are clearly different types of plans called balanced or equal payments, etc.

With the plan I am offered, the statement "you definitely don't pay more" is incorrect. The 12th month is not a balance month. I would pay the 121.09 a month for 12 months, then, unless I choose to opt out of the "Balanced Bill," I would be assessed a new value for the next 12 months and that would become my new fixed payment.

The only definite thing here is that "Balanced Bill" or other equal payment offers should be closely scrutinized.

I'll stick with paying for what I use. I have enjoyed watching my bill come down as I have taken steps to reduce it. I know it will be higher in the middle of July and in January. That's just not difficult to manage.

As a side comment: I also think Ima's idea earlier is a good one.

[disneysteve]

Originally Posted by poundwise

I think everyone needs to realize that there are clearly different types of plans called balanced or equal payments, etc.

With the plan I am offered, the statement "you definitely don't pay more" is incorrect. The 12th month is not a balance month. I would pay the 121.09 a month for 12 months, then, unless I choose to opt out of the "Balanced Bill," I would be assessed a new value for the next 12 months and that would become my new fixed payment.

My apologies. That is not at all how our plan works.

poundwise - On that plan, do they only adjust once each year? I think our plan can adjust every 6 months.
The one advantage to the plan you are being offered is you can't get hit with a large bill in the balance month so you avoid that surprise.