Today’s post is about utility companies, one of the constant expenses that many aspiring early retirees will continue to have, and therefore one worth trying to minimise if you can.
I think that most people dislike utility companies in Australia, but they dislike them for a lot of reasons that aren’t always the same. Some of those reasons that spring to mind for me include:
- The price of utilities;
- The silly contract system that they have (why does everyone need to be on a plan, or locked in for two years?);
- The explosion in the number of retailers that all offer the same product (they’re all selling units of the same thing after all); and
- Service issues.
Now all of the above are perfectly good reasons to hate utility companies in my opinion, and the first one really is the big one in my view, given that most of us around here are trying to reduce expenses so that we can maximise quality of life and retire early. Price has become more of an issue in Australia in the last decade or so because of the insane price increases seen in this time, and to illustrate just how much the price of utilities has risen since the mid-2000s, I came across this research from the Australian Bureau of Statistics and the Institute of Public Affairs. If you can’t be bothered reading the link, the following table gives a summary of just how much electricity prices have increased from 2005 to 2010:
As you can see, those increases are way above inflation, so everyone should be scrambling for whatever discounts they can get! Unfortunately when I speak to many people (including work colleagues) they are completely none-the-wiser about these discounts though, so I wonder if people let their hatred of these businesses blind them to the ways in which they could reduce the amount of money that they have to shell out.
Here come the discounts
Now if people can get over their hatred of utility companies and take some time to investigate them further they would find a number of ways to reduce their utility bills, with the main ones listed below.
1. The plan discount
For perhaps the last 5-8 years, electricity and gas companies have actually offered a discount to customers, if only they all knew to actually ask for it. You see, the rate per kWh of electricity or kJ of gas is actually regulated by the government, so the starting point for what the companies are selling is essentially the same. However, each company will actually offer a different rate of discount when you sign up to your new plan.
Now if you’re not on a plan already, chances are that they are just charging you the standard rates, but you could actually get a discount (sometimes up to 18%) on your electricity or gas usage charges just by making a telephone call.
Admittedly it locks you into that service provider for something like 24 months, but if you move house they just transfer the service there, and if they don’t supply the new area then you can break the contract free of charge. So there’s no real downside to this issue (other than that they get to think that they own your arse), unless you believe that you will be going off-grid in the next two years!
2. The pay on time discount
Utility companies must also have a huge problem with people paying their bills late, as most of them actually offer you a discount for paying on time.
Now if you’re reading this blog you’re obviously very financially responsible (aren’t you?) and would never pay your bills late, but on the odd chance that you haven’t quite made the transition into a financially responsible adult yet, you really do need to check this out.
One example is Origin Energy, one of Australia’s largest electricity and gas retailers, whose website currently lists the following pay on time discounts for NSW (Australia’s most-populated state):
- 13% off electricity usage charges when you pay on time; and
- 10% off gas usage charges when you pay on time
Now you should note that these discounts are only on usage charges (rather than the whole bill, which also includes a charge to supply the service), which I think is a bit of scam really. There’s nothing you can do about it though (it’s the same scam for all of them), but at least it’s money you can save!
These pay on time discounts are really just part of the general discounts listed in point one above, but what they really mean is that to get the plan discount, you must also pay on time in the first place. It’s seriously not that hard to pay on time, so there really is no excuse for saving coin in this area!
Side note: This issue actually reminds me of something really strange that I found when I lived in the UK, which was that our studio flat didn’t require an electricity connection in our own name, but we instead had to pre-pay for electricity recharges at a local supermarket. You had to take a small “key” down to the supermarket and it recharged the electricity credits on to it. You then took it home to your flat, entered the key to charge your electricity back up, and away you went. The system was quite smart, but it just seemed strange that it was even necessary. Perhaps this is where we will get to if too many people can’t pay their electricity bills on time!
3. The pay by direct debit discount
I know that many people (who don’t even have a minimal amount of cash in their everyday banking account) prefer to avoid direct debits, but this is usually for fear of having their account go into overdraft, which can then attract fees.
Some time back, I thought about how I could save time by automating and modernising myfinances and decided to change most of my bills to direct debit. At the same time I switched all of the bills to be emailed to me, so it wasn’t like I couldn’t still keep an eye on them, plus I was locking in the pay on time discount. There really hasn’t been any downside to this, but there obviously would be if you weren’t disciplined with your money and couldn’t keep enough cash in your account (or room on your credit card) at all times to cover the direct debits!
In addition to the time saving benefits of direct debits, many utility companies will also offer you a discount for effectively locking in your payment by direct debit. In the case of Origin Energy, this discount is actually an extra 2% on the usage charges.
4. Avoid paying by credit card to avoid surcharges
Continuing with the Origin Energy example, anyone paying by credit card will incur an additional 0.6% surcharge for the privilege. Now I know that our PF blogging community loves to hack credit cards for reward points, but when the value of the rewards is less than the cost of obtaining them (e.g. this surcharge) then it makes no sense to use your credit card. Instead of paying with plastic I chose to set up a direct debit from my everyday banking account.
A nasty trick that the utility companies have is to put you on a discount for 12 months, but to then just let the discount lapse without saying anything at the end of the term. Many people get so sick of being on the phone to set the stupid plans up in the first place that when the plan expires they can’t bring themselves to go through that drama again.
Fortunately there is actually a solution, which is to just renew your discount via their website instead. I wondered why the electricity companies even made a website renewal possible, but perhaps they just don’t want to pay call centre staff (fair enough I guess), and they may have been losing customers by not offering the discounts automatically. Whatever the reason, renewing your discount is actually very quick and painless (almost sounds like a euthanasia description doesn’t it), so there really is no reason to dread the whole thing.
So there you have it, a handful of basic ways to reduce the amount that you have to pay those thieving utility companies, and that’s before we even get into how you can reduce utility costs through energy-efficient design.
Do you have any tips for how to get discounts out of utility companies? If so, we’d love to hear them!