How to Negotiate an Electric Bill

Key Takeaways

• Understanding your electric bill, competitive market rates, and asking the right questions are key to successfully negotiating your electric rate.
• Deregulated energy markets provide the most opportunities to negotiate electric bills and save money.
• If negotiation fails, switching suppliers or enrolling in utility programs can help cut your electric bill.

In America, price negotiation is a way of life. We haggle over the price of everything from homes to cars. What you may not realize is that you can often negotiate your electric bill as well. States with deregulated energy typically offer the best opportunities to save. The American Coalition of Competitive Energy Suppliers provides state-by-state information on energy choice.

Negotiating rates is even more worth pursuing given recent price hikes. Double-digit increases have been the rule rather than the exception. According to the Energy Information Administration, the average residential rate is 16.4 cents per kWh. However, rates vary from a low of 13.27 cents in the East South Central region to 29.32 cents in New England.

Americans use a lot of electricity; 4.05 million kWh in 2022 alone. Electricity use is 14 times higher than it was in 1950!

Understanding Your Electric Bill

Before you can negotiate an electric bill, it is important to be able to read and understand it. Electric bills can get complicated. For example, the Public Utility Commission of Texas lists 23 different classifications on Texas utility bills.

Key Components of Your Electric Bill

Customer charges cover the costs for maintaining your account, such as billing costs, meters, and equipment. This is usually a fixed amount every month. Delivery charges cover the cost of getting the electricity from the place where it’s generated to your home. The charge is usually a fixed rate times your usage for the billing period.

Utility bills also include an array of fees. For example, there might be a charge that goes toward the cost of making repairs after storms. Or, there might be a fee that pays for the cost of smart meter programs. In most cases, residential electricity is not subject to state or local sales taxes.

What Factors Influence Your Electric Bill?

There are three key variables that affect electric bills:

• Geographical location - The price of electricity varies from state to state.
• Time of use - More electricity is used during the day than the night.
• Monthly energy usage - Consumption patterns greatly vary. For example, electricity use often soars during heat waves.

Actual cost of the electricity - More than anything else, the price of the commodity drives the size of your monthly bill.

Energy costs vary from one place to another. According to the Energy Information Administration (EIA), residential electricity rates per kWh ranged from a low of 10.79 cents in Idaho to a high of 42.26 cents in Hawaii.

When possible, you’ll want to align your usage patterns with an energy supplier's rate structure. For example, a variable rate can work to your advantage if you use relatively more energy during off-peak hours. At most utilities, the variable rate plan is the default selection. This means you have to proactively choose a fixed-rate plan if you think it will save you money. In many cases, it will.

Keep in mind that the actual cost of your electricity is the primary variable, regardless of whether it's based on a fixed or variable rate. Beware of one “dirty little secret” among certain energy suppliers. That is, when the initial rate ends, a less scrupulous supplier may dramatically raise your rate. Worse yet, they may align the rate increase with your peak season to maximize its impact. When this happens, bills soar, the supplier profits, and the consumer suffers.

The Power of Negotiation: Can You Negotiate an Electric Bill?

Yes, you can often negotiate your electric bill. Consumers generally negotiate their electric bills either to save money or to get their power from renewable sources. There are things you usually can’t negotiate. For example, transmission charges tend to be the same from one energy supplier to another. However, you can take advantage of the fact that usage rates and rate types vary from one to another.

The Reality of Negotiating Utility Bills

It is not possible to negotiate some bills, like water bills, for example. However, it is often possible to negotiate electric and natural gas bills.

The Role of Deregulated Energy Markets in Negotiation

In deregulated states, energy suppliers compete for your business. To protect consumers, states often require energy supplier certification. For example, the Public Utilities Commission of Ohio (PUCO) certifies competing suppliers.

Preparation: How to Negotiate an Electric Bill

Maximize your chance of successfully negotiating your electric bill by researching what competitors are offering. Use this information to negotiate with a goal in mind.

1. Research your options

You want to arrive at the negotiation armed with the latest offers. Do your homework by calling all the competing energy suppliers. As you do your research, pay attention to customer satisfaction ratings.

2. Leverage competitor rates

Use competitor rates as a negotiation tool. Knowledge is power. Once you know competitor rates, you can use them as leverage with your current supplier. Do more than ask your current provider to match the rate, ask them if they can beat it.

It may seem time-consuming to reduce your monthly bill. However, keep in mind that these savings accrue month after month, and year after year. Compare the time spent vs. the annual savings. One hypothetical example – would it be worth two hours of your time to save $150/yr?

Are you ready to switch providers? Learn more about how switching energy suppliers.

3. Ask the right questions

Ask open-ended questions like "What can you do to help me lower my bill?” Or, do you have any introductory rates, rebates, and other promotions? Avoid a request for a specific discount. You may actually leave money on the table if you ask for 10% off, for example.

4. Mean what you say

Don’t bluff. Only threaten to cancel your service if you are actually willing to do so. In general, you’ll get the best offers if the supplier feels that your threat to switch is sincere.

5. Be persistent

Don't give up if you encounter resistance at first. Customer service reps will often say they have no power to reduce your bill. If this happens, politely ask for their supervisor – work your way up the chain, if necessary. Be patient!

What to Do If Negotiation Fails

What if your service provider stonewalls your discount request? Don't give up! Rather, explore other ways to reduce your monthly bill. For example, you may get a discount if you switch to paperless billing and/or set up autopay. Find out whether your energy supplier will offer a discount if you enter into a 12- or 24-month contract.

Some utilities offer credits or rate reductions for reducing energy use. You might agree to cycle AC off during periods of peak demand, for example. Or, you might qualify for a credit for installing a smart home thermostat.

Finally there are services that will negotiate bills on your behalf. Experian’s BillFixer is one such company. After a 7-day free trial, the service costs $24.99 per month. Billshark is another such service. It charges a one-time fee of 40% of the negotiated savings.

Switching suppliers

If concerted efforts to negotiate an electric bill fail, consider switching to another energy supplier. Again, this is only possible in a deregulated market. Keep it simple by reviewing an online marketplace that lists the energy suppliers competing for your business.

Taking Charge of Your Electric Bill

Learn more about lowering your electric bill at PriceToCompare.com. Having trouble finding the right information on your energy bill? Email us at energyteam@pricetocompare.com!