Austin Energy – I Love it when companies make up words

I got my latest bill from Austin Energy the other day, and read the enclosed newsletter, PowerPlus(TM) as normal.

I was amused to see the heading “Levelized Billing” – Now, I know that readers here will sort of understand what this means. If you don’t I’d suggest googling it, there is just one dictionary that defines it, The Business Dictionary, and the second result is, surprise, surprise Austin Energy.

Companies mostly make up works to obfuscate, to hide something. They rarely make up words to make things clearer and more obvious.

Just for clarity, what it really mean is that you are depositing money in Austin Energy’s account, in advance. They provide you with an estimate of what it’s going to cost you for energy for the next year, based on any projected price hikes and they then divide the total by 12-months and you pay that much each month.

So, you’ll be giving them an interest free loan every month, they’ll have the money in the bank before you use the energy and at the end of the year, if they’ve screwed up on the estimate, the price hike or otherwise, they’ll pay the surplus back to you without interest, or you owe them the difference. It’s a power industry-wide scam.

This is a standard (bad) practice in the UK, especially with companies like British Gas. What they do is over estimate your usage, which puts your monthly upfront payments up. They over estimate their price hikes, whichl puts your upfront payment up even more; and then at the end of the year, they suggest that your balance really isn’t significant and it will be consumed by next years estimate, so you should leave it with them to offset your year+1 costs.

Multiply that by 20,000, 50,000 customers and bingo, the residents of Austin become one of the largest loan companies to Austin Energy on the basis you are giving money for energy you have not yet used.

Now, since Austin Energy is community owned, that may not be a bad thing. Afterall, one assumes with all these upfront loans from residents they should be able to reduce they amount they borrow at commercial banking rates and pass this cost saving onto its customers.

Just so you understand what Levelized means of course.

6 Comments so far

  1. tthomas48 on August 26th, 2009 @ 6:22 pm

    I think it’s a nice deal for month-to-month customers. The difference between January and August can be really hard when budgeting. I bet payday loan business picks up a lot in the hot months.

    And as you point out this is our government doing this. They’re providing a service that customers want and they’re making money off of it that they can use for infrastructure. We’d get the same program with a private company, and without the benefit of the profits going towards the public good.

  2. triman on August 27th, 2009 @ 11:29 am

    tthomas48, thanks for the comment. I agree, its a great service for those who are on tight budgets, especially since its enery and not something you’d want to have turned off.

    My skepticism comes from the fact they had to make up a buzzword to sell it to us rather than sell it on its merits. I’ve done 3x such programs in the past with other utility companies and while they possibly don’t start out as scams, thats ultimately what they end up being.

    When times get tough, the insiders at the power company start looking for ways to get money rather than purely increasing prices, and someone suggests updating the bills to say “heck that $180 balance in your account won’t make up the deficit predicted for next year, rather than increase your monthly payment, why not let use keep the $180 and put it towards next years payments?” – then they increase the estimate price increase by, say $1 per month per subscriber and before you know it, everyone on this program is loaning them an additional $192 per year. The people who can little afford their bills are subsidizing the power company and those of use, including me who don’t need such programs becuase they can afford to pay whatever the amount, pay as late in the billing cycle as we can, are being effectively subsidized by those with the least.

    Yes, you’d get the same program from a private company. Use the search provided above and you’ll see, many here in the US are already using it.

    The real question is if Austin Energy are using it to benefit the members, citizens/public good, assuming it happens as I’ve described. If they were not running this program, or alternatively the money went into an escrow type account and the interest(however little) was used to pay the consumers bill, then AE would have to just the money they were no longer getting as part of a price increase, or make cost savings equivalent to it and thus here it would be transparent. In this case, as per my original observation it would at least appear that they’ve used an invented word to obfuscate what they are actually doing…

  3. John Kirkpatrick (unregistered) on August 28th, 2009 @ 10:11 am

    May I suggest that you google the term levelized billing.
    I have seen the term many, many times. It is a standard practice all across the United States as well. Sometimes it is a good thing, sometimes a bad thing, but quite often helps fixed income customers cope with unusual weather patterns yielding in an astronomical bill.
    Wouldn’t touch the stuff myself.

  4. triman on August 28th, 2009 @ 11:29 am

    Thanks John, I know “levelized” is in general use, if you check the original article I included a link to a google search for it. The point is the same though, it’s a made up word for this type of program. I agree the program can indeed be valuable, it’s just the implementation I have questions about…

    Apparently, according to two Austin Energy employees I’ve been exchanging newsgroup posts with, the program isn’t new for AE. I’m hoping that a few customers that have been using it will step forward and describe how it has worked over the past 2-years in terms of balances, increases etc.

  5. Joan Demshock (unregistered) on September 21st, 2009 @ 1:50 pm

    After an accident where my husband was killed causing me to lose his SocSec, his pension, income from his business and my salary from it plus the salary from my part time job while I was off om medical for 6 months, this kind of program with my gas and electric (BGE in MD) was a lifesaver! Even now that I could afford to make the change, I haven’t. We have the option to carryover or to request a refund after we receive the balancing out bill in August, which I do.

  6. triman on September 22nd, 2009 @ 10:20 am

    Thanks for the comment Joan and I’m sorry to hear of all the troubles you’ve had. I agree, I used these plans when I had a growing family, they were a great way to budget, especially for what was one of the most important expenses.

    In hindsight thought, I can now see that it would have been better to have opened up a separate savings account to pay these bills out of. Instead of paying the company that money monthly upfront deposit it into a savings account. If I’d done that for all the things I was paying monthly for, I’d have built up a reasonable rainy day “insurance” fund.

    What made this interesting to me, in the case of Austin Energy, was the hope that they’d transparently show any positive or negative effect in their budget from such plans and that any positive effect would be returned to the people who contributed to the program, not to all customers. What you probably see as a small carry over balance, multiplied by 20-30,000 customers would exceed the operating budget of many companies. It would also attract a “useful” interest rate, or alternatively save on interest charges for Austin Energy. I think it would have been good bif in the description of the program they’d have said how they were going to use the money!

    Thanks again for your contribution.

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