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What Is Average Billing and Is It a Good Idea for Electricity?

by Garrett Faden

In this blog you’ll learn what average billing means for Texas electricity plans, how average billing works with your electricity provider, and the pros & cons of average billing so you can decide if it’s right for you.

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Average billing (sometimes known by other names like budget billing) is a billing option offered by Retail Electricity Providers (REPs) that helps customers budget their energy bill. Instead of paying a different bill amount for your specific electricity usage each month, you’d pay a similar amount each month based upon an average of your prior usage history.

Simply put, average billing helps electricity consumers avoid paying vastly different energy costs on their utility bills each month.

How Does Average Billing Work?

How is average billing calculated?

Most REPs will calculate your average billing amount based upon adding up the past 11 or 12 months of electricity usage in kilowatt-hours (kWh) and dividing it by 12 to determine your average monthly electricity usage. Your average monthly electricity usage will then be multiplied by the energy rate you pay to determine your bill amount each month. The provider then bills you an amount that remains the same or changes minimally throughout each month of the contract.

If you’re just moving into a new location, the REP can use the home’s prior usage history to determine your monthly payment amount. This might not be what you want, as it’s important to remember everybody consumes electricity differently. You don’t want your average billing based on someone else's habits do you?!

Another thing providers can do to set the amount is to adjust it as you accumulate time living in your home.

Is Average Billing Worth It?

What are the benefits of average billing?

  • The one and most important benefit to average billing is having a good idea of what your electric bill will be each month. It simplifies budgeting and helps prevent expensive bills from popping up unexpectedly.

What are the disadvantages of average billing?

  • Average billing does not save money. At the end of the day, you will always pay for the energy you consumed. There is no way around it.
  • If your average monthly bill amount is lower than your actual usage that month, the rest of what you owe will add up into what’s called a deferred balance.
  • As we all know, Texas weather can be unpredictable. These weather changes can cause you to consume more electricity than you have in the past. Hotter summer this year? More air conditioning is used to compensate. Colder winter this year? More heating is used to help out. While you may be paying a nice and cheap bill for those months, your deferred balance can quickly pile up with what you actually owe.
  • Any home maintenance or improvement plans in your future? Be careful, AC unit maintenance to heavy construction can cause your usage to skyrocket. Take this example - April may have been a low usage month for you last year, but this April you had some renovations done. Your electricity usage tripled compared to last year but you only pay your low average billing amount for the monthly electricity bill. That means several hundred dollars (possibly more) is funneled to your deferred balance.
  • Many REPs add or subtract 1/12 of your deferred balance to your average billing amount each month to keep the deferred balance from getting out of hand. However, depending on your usage, you could still be left with a surprisingly large amount due at the end of your contract.
  • Having average billing can also make consumers more carefree with their energy usage. Having a consistent manageable bill  can cause a lack of interest in conserving energy. Next thing you know, your deferred balance has built up or your REP increases your average billing amount on your next contract.

Energy Ogre’s Stance on Average Billing

Average billing can be a highly helpful tool for a homeowner that has consistent usage over long periods of time. Sometimes, you may have lower energy use than you have had in the past and at the end of the contract the provider owes YOU money. The REP will then either add the credit to your final bill or refund you what was overpaid.

On the other hand, if you have a deferred balance owed to your REP, the end of the contract may not be so smooth. Many times, Energy Ogre has had a member sign up and not even realize they had to pay over $1,000 in deferred balances to their old REP before they could switch to a better plan through Energy Ogre. You’re not legally not allowed to leave an REP without paying an owed deferred balance.

How Energy Ogre Works

Energy Ogre discourages our members from signing up for average billing with the contracts we set them up with. We do this because we don’t want our members having to pay copious amounts of money before they can switch to a new REP. However, if you’re confident average billing can work for you, we can assist you in trying to set up a plan with your current REP.

Get a Texas Electricity Plan That’s Better Than Average

Instead of struggling to find a decent electricity rates yourself, Energy Ogre can do the work for you! We enroll members into competitive plans that fit their individual needs. We evaluate all available options, finding the right solution for each member. We submit all the necessary documentation and make sure our members get enrolled successfully. Furthermore, we continue to monitor the market, and if a better option comes along, we let you know. You have the power to choose your electricity plan, and with Energy Ogre, you’ll have confidence your plan is better than just average!

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