Why Guaranteed Bill Plans for natural gas aren’t as good of a deal as you’d think.
Julian Kurland | April 27, 2017
Several gas companies, including Georgia Natural Gas, have introduced “Guaranteed Billing” plans, which prevent your bill from changing each month. But are these plans a good deal?
No one likes seeing a gas bill that’s higher than expected. To prevent this, several natural gas companies have begun rolling out “Guaranteed Bill” plans for their customers. These plans guarantee that your natural gas bill will remain at the exact same price for twelve months at a time, rather than fluctuate with your usage.
This is not the first attempt by gas and electric companies to come up with a way to keep bill amounts steady, however it has significant downsides over other methods, such as “Fixed Rate” plans and “Budget Billing Plans.”
To understand how these methods differ, let’s look at how each of these bill budgeting methods work for a standard gas bill.
Before we get started, a quick reference as to the units of energy we’ll be discussing. On most gas bills, you’re buying a certain number of “therms”. One therm is roughly the amount of energy you get from burning 100 cubic feet of natural gas. On your bill it may be referred to as 1 CCF. It’s also the most common method for how energy companies measure the amount of gas they’re selling you.
Now, on to the different plans.
First, the “Fixed Rate” plan.
Most gas customers will see the cost per therm on their bill change each month. Gas companies will change the price based on the overall demand for natural gas. Generally that means natural gas costs more per therm in the winter, when people are using more gas to heat their homes, and costs less per therm in the summer, when heaters are off.
A “Fixed Rate” plan is a contract that keeps the cost per therm at, as the name suggests, a fixed rate. These plans can help even out the therm price over the year, meaning you’ll pay slightly less per therm during the winter and slightly more per therm over the summer. These plans generally require you sign a contract with your gas company for a minimum of 6 months.
However, they won’t prevent your overall bill from varying, as the only thing that’s “Fixed” is the cost per therm, not the overall cost. If you use more therms, your bill will still go up.
Second, we’ll look at “Budget Billing” plans.
An example of a monthly gas bill on a budget billing plan.
With a “Budget Billing” plan, the gas company will look at your total usage over the last 12 months and then average out that total cost over the next 12 months. This means, regardless of usage, your bill will stay the same each month!
However, don’t go crazy pumping up the heat quite yet. Once a year, you’ll have to ‘settle up.’ That means that if you used way more gas than you did the year before, the gas company will make you settle up and pay for that difference. On the other hand, if you used way less usage, the gas company will reimburse you for the difference. Many also include an option to “rollover” the difference, where the gas company will credit your account for the difference and apply it to your future bills.
Because this plan is based off of your previous 12 months of usage, you may not be eligible if your home was built in the last 12 months.
Finally, the “Guaranteed Bill” plan.
This is the chart Georgia National Gas uses to sell customers on the plan.
The “Guaranteed Bill” plan is almost identical to the “Budget Billing” plan, but with one main difference – there is no yearly ‘settle up.’ The gas company will estimate your usage, determine a monthly rate, and you’ll pay that rate, regardless of your usage!
However, the catch is, of course, in the small print, which says:
“if a customer used significantly more gas than we would expect given the weather, we reserve the right to terminate you from the plan and put you on our standard Variable Select plan.”
In effect, if you use less gas than they were expecting, the gas company charges you more than they would otherwise, and pockets the difference instead of refunding you. And, if you use more gas than what they were expecting, there’s a good chance they’ll simply remove you from the plan and make you pay the full price. Really, it’s the equivalent of your gas company offering you the “Heads I win, tails you lose” bet.
This is not to say that it will always be a bad deal for you to use the “Guaranteed Bill” plan, but be wary of how that small print could effect you.
If you’re aware of any other gas or electric budgeting plans that are not included here, please reach out to [email protected] and we’ll be sure to include them in this article!