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Understanding budget billing

The budget billing feature in nGenue allows utilities to estimate and allocate a fixed monthly charge for each end user based on their historical consumption data. This approach helps customers manage their monthly utility expenses by avoiding significant fluctuations in their bills due to seasonal usage changes.

Budget billing refers to the practice of establishing a predetermined monthly budget for end users based on their anticipated commodity consumption. Instead of billing customers for their actual usage every month, the system calculates an average expected usage over a specified period (usually 12 months) and divides it into equal monthly payments.

This method ensures consistency in billing, improves financial planning for both customers and utility providers, and minimizes billing disputes due to irregular usage spikes.

Key benefits and objectives

Key benefits

  • Predictable billing cycle for customers.
  • Reduced customer complaints about unexpected high bills.
  • Improved retention rates due to transparent billing.
  • Enhanced financial planning for utilities and marketers.

Key objectives

  • Stabilize customer bills: Avoid large bill variations caused by weather or seasonal demand changes.
  • Enhance customer satisfaction: Provide predictable monthly payments and simplify budgeting.
  • Improve cash flow: Ensure steady and predictable revenue collection for the utility provider.
  • Facilitate consumption tracking: Allow better forecasting and adjustment of budgets based on consumption patterns.

How budget billing works

  1. Historical usage analysis:
    The system reviews a customer's consumption data (typically for the last 12 months) to determine an average monthly usage value.

  2. Budget calculation:
    Based on the average consumption and current commodity rates, a budget amount is calculated to represent an even monthly payment.

  3. Billing setup:
    The fixed amount is applied to the customer's account each month, regardless of actual consumption.

  4. Periodic review and reconciliation:
    At the end of the budget cycle, the system compares the budgeted amount against the actual usage charges.

  5. If the customer used less, they may receive a credit.
  6. If they used more, an adjustment or true-up charge is applied.

Example scenario

A residential customer has consumed 1200 therms of natural gas over the past 12 months.

  • Average monthly usage = 100 therms.
  • Current gas rate = $0.90 per therm.
  • Estimated monthly charge = 100 × $0.90 = $90 per month.

The customer is placed on a 12-month budget billing plan paying $90 per month.
At the end of the 12 months, the system compares the actual consumption with the estimated total (1200 therms). If the customer used 1300 therms, an adjustment for the additional 100 therms is billed.