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Argen water billing systems4/4/2023 ![]() ![]() In a perfect world, the deferred balance should be close to zero at the end of a 12 month cycle. The deferred balance is basically the slush fund for all over-payments and under-payments as compared to your average bill. Average billing helps smooth out seasonal fluctuations in your energy bill and keeps it predictable. The key is consistent energy usage year over year. ![]() If you have lived in your home for several years and have consistent energy usage year over year, average billing could work well for you especially if you live on a fixed income. Let’s break it down: Average Billing Benefits That way you’re not left with a huge deferred credit balance (the provider owes you money), or a deferred debit balance (you owe the provider money) at the end of a 12 month cycle.Īverage billing can be a useful plan in some circumstances, but it’s far from perfect. That creates a deferred balance - money that you owe them or that they owe you.īy adding 1/12 of your deferred balance to the amount due the next month, it should, in theory, keep you from grossly over-paying or under-paying throughout the year. Each month you will be over or under-paying for the electricity you actually use. You are paying each month based on an average of last year’s usage. Your average bill will be adjusted based on the previous 12 months energy usage on a rolling basis plus or minus an adjustment for a portion (usually 1/12) of the “deferred balance”, “accumulated variance”, or “average billing plan balance”. So here’s how electricity companies calculate average billing: from the mild weather year) you would owe a boat load of money. This year it may be a scorcher, and you would use a lot more electricity than last year.Īt the end of 12 months, if they just used your average usage from last year (i.e. Last year may have been a mild summer, and you went away for 2 weeks in August. “Hey! I wanted to pay the same amount each month!”īut if they just continue to charge you based on your historical usage, you may end up over- or under-paying. You may initially think that’s a bad thing. This is where it gets a bit more complicated. Once the initial average bill is determined it is then evaluated and adjusted each month. In this example (a typical usage pattern for residents in the southern US), customers with average billing would pay more in the winter and less in the summer compared to someone who pays for actual usage monthly. If you haven’t lived in your house for the entire prior 12 months, most companies will use the historic meter data from the property combined with your current electricity rate to calculate an average bill.Īs you can see in the above example, in average monthly billing you’ll pay more for the electricity you use in some months while paying less for it in others. That average monthly electricity usage is multiplied by your current electricity rate to determine your average bill.They divide that sum by 12 to get an average monthly electricity usage.They add up the past 12 months’ historical kWh usage.The goal of average monthly billing is to have 12 bills each year that are as close to identical as possible. By using average billing, you should be able to have a predictable electric bill similar to your other monthly expenditures like rent, mortgage, or car insurance.Įlectricity companies use a formula to determine the amount you pay each month. Ideally, this should result in a predictable electricity bill each month. But is average billing for electricity worth it? It depends. Also known as budget billing, average monthly billing, or balanced billing, average billing aims to smooth out the bumps in your monthly electric bill. This also means having months where the electric bill can be as much as twice the normal amount in extreme weather.Įlectricity providers have created a system that attempts to solve this problem: average billing. No matter where you live, there will always be fluctuations in the amount of power you use and pay for each month. ![]()
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