What Is a Fixed Bill?

Geri Terzo

Sometimes, the unexpected in an already precarious financial situation can be alarming. By arranging with a power provider for gas and electricity services for a fixed bill, an individual can remove some of those unknowns. A fixed bill is a consistent charge, typically monthly, for energy services despite current usage patterns. Typically, the fixed amount is based on historical energy usage. It is possible that there will be adjustments at the end of the year, but certain providers remove that possibility and hold fast to the fixed amount.

Man climbing a rope
Man climbing a rope

Benefits exist for the energy provider in offering residents a fixed bill. For instance, through hedging practices, a provider can protect against the occurrence of price swings in natural resources, mainly oil and gas. An energy company can offer residents a fixed bill by getting involved in the trading of financial instruments known as weather derivatives. These contracts allow a provider to itself lock in a fixed price for oil and gas despite aberrations in demand.

For the customer, a fixed bill can support the budgeting process. Knowing what the power bill will be each month eliminates any surprises and allows an individual to plan ahead. This consistency can be especially useful during the extreme weather temperatures when gas and oil prices tend to increase as a result of higher demand. There may be some yearly charge assessed to a customer's energy bill for being provided with fixed payments.

It is also possible that if, at the end of the year, a customer used more or less power than expected, some adjustments need to be made. For instance, the following year's fixed payments may change, and there may be some credit or charge due to compensate for the unexpected difference in the current period. Some providers might even review usage patterns halfway through a fixed payment arrangement and make necessary adjustments early so that there is no need for any credits or charges after a 12-month period.

The only prerequisite for being eligible for a fixed bill may be simply to apply, but a customer is likely to remain subject to making timely payments. If a payment is received late, the customer might be at risk of losing the fixed-payment option. Also, automatic payments where the monthly expense is electronically deducted from a customer's bank account on a day determined by the customer may be a convenient option offered by the provider.

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