Budget-billing utility plans don't save consumers money, only surprises on statements Savvy users should check utility's averaging data


For consumers who want to stay cool this summer but don't want to worry about surprises on their electric bills, many utility companies offer a way of spreading out the pain: equal payments over the course of a year.

But are such plans good deals?

The plans have many names: budget billing, level billing and so on. The goal is to even out the peaks and valleys associated with higher costs of heating in the winter and cooling in the summer.

In a typical plan, the utility takes the customer's bills for the previous 12 months and averages them. This figure is used as the monthly payment, with some regular checks on usage to see that the average payment is still appropriate.

Often the final month is used to either grant a credit, if usage has been lower than anticipated, or add a charge, if costs have been higher.

But despite the fact that they are sometimes called budget plans, enrolling in one is no way to avoid the higher costs associated with greater usage.

Like a car lease

"It's like a car lease," said Jamie Wimberly, vice president of the Consumer Energy Council of America Research Foundation, a public interest group.

"You get a certain amount of miles, and for some people that's good."

Generally, fewer than 10 percent of a utility's customers take part in such plans.

But some consumer advocates view them as valuable alternatives for customers who want predictability in their utility bills.

Likely candidates include people on fixed incomes, those with especially high seasonal usage and people who have trouble balancing their budgets.

Advocates caution, however, that consumers should educate themselves before signing on.

At least half of American utilities offer a budget billing plan, according to Edison Electric Institute, a trade association.

The basic goal of the plans is the same: to divide payments equally over the year. But there are differences in how the plans are set up.

"Read the fine print," Wimberly warned. "It is a contract."

It is important to find out what period the utility is using to calculate its average. Most companies look at a customer's historical consumption and energy costs to determine an average, said Steve Rosenstock, manager of technology policy at Edison.

Consumer advocates say it is best when the company goes back two or three years, which helps adjust for seasons that were hotter or colder than normal.

"You should look at what the utility is proposing as your usage history and think about whether it's accurate," said Edward S. Collins, a spokesman for the New York State Public Service Commission. "Pull out a couple of old bills, that sort of thing. Ask to see how the utility calculated the average."

New customer procedure

Predicting usage for new customers is trickier. In those cases, Collins said, utilities generally rely on what is typical for the site. Customers should also ask how often usage is reviewed and payment adjusted. Many companies do this every several months, to avoid a discrepancy at the end of the year.

And consumers should find out how a utility handles the $H reconciliation. Additional amounts owed may be spread across future bills or may need to be paid at once. Refunds may be paid by check or as a credit.

Budget plans do not save money. But some utilities offer a money-saving alternative during the air-conditioning season: the option of letting the company turn off a customer's air-conditioner by radio control during peak usage times. The customer gets a rebate for participating.

Consumer advocates say customers should be careful not to let level-payment plans mask inefficient usage.

Cleo A. Manuel, vice president for public affairs at the National Consumers League, told of a friend with a costly old air-conditioner who was on a budget plan.

"He was thinking, 'This fits my budget,' " she said of her friend's monthly payment. But he failed to pay attention to how much electricity he was using.

She added: "I know when I get a really high bill, I automatically think, 'What can I do to start saving energy?' With these plans you have to really be sure you aren't lulled into not re-evaluating your energy use."

Pub Date: 6/22/97

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