Monthly power bills coming

Households are set to get their utility bills on a monthly basis, to help alleviate the soaring costs of electricity and gas.

Usually charged on a quarterly basis, AGL Energy (ASX: AGK) will this week introduce monthly billing as an option for its 3.85 million customers, instead of being hit with potentially shocking (excuse the pun!) bills every three months. According to the energy retailer, a pilot program involving 5,000 customers found 94% of them saying it was a better option and allowed them to manage their budget better.

AGL’s general manager of marketing and sales Mark Browfield has told that the flexibility of payment options would help reduce the number of consumers hit with bill shock.

“It lets customers choose the day of the month they prefer their bills to be issued,” he said. “It lets people align with a financially convenient time of the month which might be when they get paid and smaller more regular payments that are easier to manage. “The feedback we’ve got is customers want to be able to see their information more freely so they can take control of what they use.”

AGL also says that monthly bills help customers better understand where their energy costs were coming from. But the energy company won’t actually be reading customers meters every month. meters will still be read every three months, but a formula will be used to determine what the bill should be at the end of each month, based on seasonal and historical data.

Origin Energy (ASX: ORG) has told that they were looking at introducing monthly billing as technological advances allow the company to perform more frequent readings.

Consumer advocate group Choice says the move is welcome, but notes that there’s a lot more things that can be done in the electricity market to improve consumers understanding and to allow flexibility with payment options.

AGL Energy recently completed its takeover of Australian Power and Gas Company (ASX: APK) to increase its share of the market, while ERM Power (ASX: EPW), the fourth largest seller of electricity in the National Electricity Market has not yet announced any options for customers to receive monthly bills instead of quarterly.

Foolish takeaway

Judging by AGL’s pilot program, customers seem to like the option of a monthly bill, and more energy retailers are likely to offer their customers similar options. Monthly billing is a win-win option, with energy companies receiving revenues earlier and more consistently throughout the year.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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