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What is bill smoothing?

How does bill smoothing work?

Who is bill smoothing suitable for?

How do I set up bill smoothing with my provider?

What if my bill smoothing estimate is wrong?

How do I cancel my bill smoothing arrangement?

Smooth out bumps on your energy plan

Long story short

Bill smoothing spreads annual energy costs into smaller, flexible payments

Instead of dealing with one big bill each quarter, your yearly costs are estimated and split into even weekly, fortnightly, or monthly instalments.

Your bill smoothing payments are based on an estimate

Your provider looks at your past usage data to create an estimate that should fit your annual energy costs, with a six-month check-in against your current data.

Bill smoothing can help ease the financial load

Bill smoothing protects you from seasonal spikes and makes it easier to budget all your expenses in. It’s also a good set-and-forget option to pay your bills.

What is bill smoothing?

With cost-of-living stretching budgets to the max, yet another chunky bill can feel like one plate too many to juggle. That’s where energy bill smoothing can step in to help lighten that load a little bit. 

Bill smoothing is a payment plan option that spreads the estimated cost of your yearly gas or electricity bills into smaller, predictable weekly, fortnightly or monthly payments. Instead of being hit with one high bill, it’s split down into even payments year-round. 

Depending on where you live in Oz, your energy bills might usually take a jump in summer (looking at you Queensland) or they might generally be higher in winter (hello Tassie!)  Either way, with bill smoothing you won’t feel the full hit of cranking the air-con or dialling up the heater all at once. It aims to flatten out those seasonal spikes by helping you put money aside regularly, ideally landing you at a neat zero balance by the end of the year. 

How does bill smoothing work?

Bill smoothing payments work by looking at your annual energy usage and estimating your yearly cost from that. The total is then divided into regular instalments, so 12 for monthly payments, 24 for fortnightly payments, or 52 for weekly (depending on what’s on offer from your provider). 

For example, if your electricity provider estimates that your annual power costs are about $1,900 and you choose a fortnightly billing cycle, your bill smoothing plan would be set at about $79 every two weeks. 

To calculate this estimate, your energy provider will look at the size of your home and how much energy you’ve used in the past. If there’s no usage history to go off (say you’ve just moved your energy plan to a new house), they’ll usually start you on an average price mark, like $50 a month, and adjust it once they’ve got some real data. 

Once you’re set up, you’ll get a review letter generally halfway through the year. These letters show how your actual energy usage is tracking against your estimation. If your energy use is coming in below the mark, you could see your regular payment sliced down the next time you’re paying bills (and vice versa). 

Pros

• No bill shock 
• Smaller, regular bills that are easier to budget for
• Can usually cancel a bill smoothing arrangement at any time 
• Softens the impact of seasonal energy usage spikes

Cons

• Not all energy providers in Australia offer it
• Potentially miss out on earning interest by saving the money in your bank account instead
• Refunds come back as bill credits, not cash payments
• You might not be eligible if you already owe money to your provider 

Who is bill smoothing suitable for?

Bill smoothing is available to most residential or business customers who don’t have any overdue energy bills. While the criteria rules are quite broad, bill smoothing might not suit everyone equally. 

Bill smoothing could work especially well for people with irregular incomes, tighter budgets, or higher energy use who want to avoid large quarterly bills. It’s also handy if you want a set-and-forget setup (for bill smoothing a direct debit is needed). 

Helpful tip

If things tend to get tight around the holidays, or unexpected expenses throw your budget into shambles, you could ask your provider about a payment holiday. Most bill smoothing arrangements let you skip up to one month of payments each year. This skipped amount is to be spread over the remaining payment periods, so things still tie up neatly at the end of the year.

Julia Paszka

General Manager – Utilities & Credit Cards

How do I set up bill smoothing with my provider?

Setting up a bill smoothing payment option is usually pretty straightforward. While some of the steps can vary slightly among providers, it typically looks like this:

1. Logging into your account with your energy provider.
2. Head to your account or payment settings.
3. Find the ‘Bill Smoothing’ section and select edit.
4. Choose your payment frequency and save.
5. Your provider will confirm everything and send you a letter with your payment and estimate details. 

What if my bill smoothing estimate is wrong?

Hopefully at the end of the year, everything should all balance out. If it turns out you’ve underpaid, your provider will ask for a one-off top-up that tides your bills over. If you’ve overpaid, that extra amount becomes a credit that rolls over to your next bill – bonus! 

How do I cancel my bill smoothing arrangement?

If bill smoothing isn’t working for you anymore, just contact your retail provider a few business days before your next payment is due. Any outstanding payments will need to be paid first. If your account is in credit, you should be eligible for a refund. 

Smooth out bumps on your energy plan

Energy bills don’t have to swing wildly from one season to the next. If steadier payments sound easier on your wallet, it could be time to weigh up your current plan to see what other options are out there. With iSelect, we can help you compare a range of plans and providers, so getting regular bills won’t be something to dread. Head online to compare or you can also talk to our team of energy comparison experts at 1800 664 532.