Paying Your Utility Bill: Pay As You Go, or Even Pay?
Leaves changing color, nights getting cooler, and football on television are all signs that fall is here. Another sign of fall is the lower number on the utility bill. Air conditioners don’t have to hum as much, but it’s not a time to turn on the heat yet. Having a boost of extra funds during the more moderate temperatures of fall and spring can be a welcome windfall. Some people opt for an even-pay program from their utility companies instead. There are advantages and disadvantages to both options.
First, let’s define what an even-pay program is. For some, opening the utility bill is a bit like a game of Russian Roulette. It may be extremely high due to a heatwave in the summer or a cold spell in the winter, but you just don’t know how high or low it may be. For even-pay programs, the utility company looks at your past 12-24 months of bills and determines your average monthly cost. You pay that amount each month regardless of how high or low your real utility usage was. The theory is that it will even out over the course of a year.
The advantage of an even-pay program is that your bill is the same each and every month. Having a constant monthly utility expense means you don’t have to reduce your allocated amount for another budget item when your bill is higher than normal. For many people, this is the way to go. They can get in a budget rhythm not having to worry about variances in their utility bill.
People on an even-pay program have to ensure they don’t change their living habits, however. Most utility companies will at the end of a year figure out whether you’ve really paid all of your utility bills. If you’ve decided to over cool your home during summer, or crank your heat in the winter, chances are at some point you’ll have to even up with the utility company.
Traditional Pay As You Go Program
The advantage of the traditional pay as you go program is the moderate temperatures during the spring and fall bring significantly lower utility bills. This gives people some extra cash to use for springtime projects or to save for the holidays in the fall.
The downside of the traditional pay as you go program is the unpredictability of your utility bill. Closing your eyes and hoping it, â€œisn’t that badâ€ in the dead of winter, or the dog days of summer isn’t a great way to ensure success in staying within your budget.
There are advantages and disadvantages to either path, and the choice is really personal preference. How do you pay your utility bill? Would you ever consider switching?
Brock is a software engineer by day and personal finance blogger at night. He is a fitness junkie and enjoys grilling and smoking meat. Married with two children, Brock strives to improve his skills as a husband and father, and is always on the lookout to stretch his family’s budget as far as he can.