What "Average Payment" Means on Your Utility Bill
Average payment is a billing method that smooths out your monthly costs by charging you the same amount each month, based on what you spent over the past year
Instead of paying $45 one month and $180 the next, you pay roughly the same bill every month—usually around $110 in this example. The utility company calculates this by adding up your total usage charges from the past 12 months and dividing by 12. You are not paying less overall; you are spreading the cost evenly so your budget is more predictable.
Most utilities offer average payment as an option, though it goes by different names: budget billing, levelized billing, or equal payment plan. You can usually turn it on or off through your online account, by phone, or on paper. Some utilities enroll you automatically; others require you to request it.
Key Takeaways
- Average payment divides your annual bill into 12 equal monthly charges, so you pay the same amount regardless of season.
- The utility recalculates your average once or twice a year, usually in spring or fall, so your monthly payment may go up or down when usage patterns shift.
- You still owe the full amount if you use more than the average; the utility tracks the difference and settles it at the end of the year or when you close your account.
- Canceling average payment mid-year means you may owe a lump sum for the difference between what you paid and what you actually used.
- Average payment does not lower your total bill—it only redistributes the cost across months.
How the utility calculates your average payment
The utility pulls your usage data from the past 12 billing cycles and adds up all the charges—not just the usage itself, but taxes, fees, and riders that apply to your account. They divide that total by 12 to get your monthly payment. If your annual bill was $1,320, your average payment would be $110 per month.
The calculation includes only charges that vary with usage. Fixed charges—like a meter fee or customer charge that stays the same every month—are usually added on top of the average payment. So your actual bill might be $110 (average usage) plus $15 (fixed charge) = $125 per month.
Most utilities recalculate the average once a year, often in spring or fall. If your usage has changed—because you moved, added insulation, or your household size shifted—the new average reflects that. You will receive notice of the new amount before it takes effect.
What happens if you use more or less than the average
The utility tracks the difference between what you pay each month and what you actually owe. If you use less than the average, you build a credit. If you use more, you build a debt. This running balance is called your deferred balance or adjustment balance.
At the end of the year—usually during the annual recalculation—the utility settles this balance. If you have a credit, some utilities apply it to next year's payments, some refund it, and some let you choose. If you owe money, the utility adds it to your next bill or spreads it across the next few months. Check your utility's policy in your account or by calling customer service.
If you cancel average payment before the year is up, you will owe the full deferred balance immediately. For example, if you have been paying $110 per month but actually used $1,500 worth of gas over nine months, you owe the difference when you stop the plan. This can be a surprise, so think carefully before canceling mid-cycle.
When average payment helps and when it does not
Average payment works best if your income is steady but your bills swing wildly by season. Winter heating bills or summer cooling bills can spike 200% or more in some climates. Knowing your bill will be the same every month makes budgeting easier and reduces the risk of missing a payment during an expensive month.
Average payment is less useful if your usage is already stable month to month, or if you are planning to move or close your account soon. It also does not help if you are struggling to pay the average itself—it just spreads the problem across 12 months instead of concentrating it in one.
If you are behind on bills, some utilities will not let you enroll in average payment until you catch up. Others use it as a tool to help you pay down arrears more gradually. Ask your utility whether average payment is available to you given your account status.
How to enroll in or cancel average payment
Most utilities let you manage average payment through your online account. Log in, find the billing or payment settings, and look for "budget billing," "levelized billing," or "average payment." You can usually turn it on with a few clicks. Some utilities require you to call or mail a form.
When you enroll, the utility will tell you your first average payment amount and when it takes effect—usually the next billing cycle. You will see the new amount on your next bill. If you want to cancel, the same process applies: go online or call, and the utility will switch you back to standard billing. Ask when your deferred balance will be settled.
If you move or close your account, average payment ends automatically. The utility will calculate your final bill, including any deferred balance owed or owed to you. This final bill is due according to your utility's standard payment terms, usually within 15 to 30 days.
Understanding your deferred balance on your bill
Your bill statement will show your average payment amount, your fixed charges, and often a line item for your deferred balance or adjustment. This line tells you whether you are ahead or behind for the year. A negative number usually means you have a credit; a positive number means you owe.
Some utilities show this balance clearly; others bury it in the fine print or only show it during the annual recalculation. If you cannot find it, call and ask the representative to walk you through your account. Knowing your balance helps you predict whether your next recalculation will raise or lower your payment.
What to do if your average payment changes
When the utility recalculates your average, you will receive a notice with your new payment amount. Read it carefully—it will explain why the amount changed and when the new payment starts. If the change is large, it usually means your usage shifted significantly, or rates went up.
If you disagree with the new amount, call the utility and ask them to explain the calculation. Request a copy of your usage history for the past 12 months. You can review it yourself to spot errors—a misread meter, a billing mistake, or an unusual spike that does not match your actual behavior. If you find an error, the utility will recalculate.
If the new payment is unaffordable, ask whether the utility offers other programs: income-based discounts, payment plans, or weatherization assistance that could lower your actual usage. Average payment alone does not reduce your bill, but other programs might.
Frequently Asked Questions
Does average payment lower my total bill?
No. Average payment spreads your annual cost across 12 months, but you still pay the full amount you use. If your annual bill is $1,320, you pay $1,320 whether in one lump sum or $110 per month. The utility does not discount the bill for enrolling in average payment.
What happens to my deferred balance if I move?
The utility calculates your final bill, which includes your deferred balance. If you owe money, it is due before your account closes. If you have a credit, the utility will refund it or apply it to your final payment, depending on their policy. Ask before you move so you know what to expect.
Can I enroll in average payment if I am behind on my bill?
It depends on your utility. Some require you to catch up first; others use average payment as a way to help you pay down arrears gradually. Call your utility and explain your situation. They may offer a payment plan combined with average payment, or they may suggest other assistance programs.
Will my average payment go down if I use less energy?
Yes, but only at the next recalculation. If you reduce your usage significantly—by adding insulation, upgrading appliances, or changing habits—your average will be lower when the utility recalculates, usually once a year. Until then, you pay the current average and build a credit that settles at recalculation time.
What if the utility made an error in my deferred balance?
Call and ask for a detailed breakdown of your account for the past 12 months. Request your usage history and a line-by-line explanation of how they calculated your average and your deferred balance. If you spot an error—a misread meter, a duplicate charge, or a rate that was applied incorrectly—ask them to correct it and recalculate your balance.