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Shopping for electricity: Why did I get a deposit?

by My Journey to Millions

The cheaper you can get electricity services, the better. Some companies charge a deposit to provide electricity to you. Here are some facts to know before making your choice, such as what is a KwH and what is the average usage for a home vs. an apartment.

Shopping for a new electricity provider?

There are several reasons to shop for a new electricity provider, especially if you want a better deal. To make the best choice there are a few things that one should know when starting to shop and compare.

  • What is a kWh and what is my average kWh usage?

A kWh is a unit of energy. kWh means kilowatt-hour. It’s the unit of measurement electricity providers use to calculate your energy consumption and bills. A 1,000-watt appliance consumes 1,000 watts or 1 kWh of power per hour. It’s important to know your kWh usage because rates tend to fluctuate depending on your usage. You might see a rate of 11.0 for 2,000 kWh but the rate might be 8.9 for 1,000 kWh or if you are living in an apartment you may use as little as 400 kWh. While the apartment usage is typically a lot less than a home the rate may be more expensive, so make sure to double-check before you start shopping for a new provider. Understanding how much energy you typically use will help you better estimate what your monthly energy bills will be.

  • Time of year

In southern states, like Texas, homes consume more electricity in summer than winter. Summers in Texas can get extremely hot and people use their air conditioners more to keep their homes refreshingly cool. Since winter isn’t that cold in the south, people use less electricity to keep warm.

  • Type of rate

Fixed or Variable rate. It is important to know if the plan is a fixed or variable rate. A fixed-rate has a locked-in price for the length of the contract while a variable rate can change from month to month. You might get lucky with a variable rate if the rate happens to be lower but, in most cases, variable rates can cause your bill to soar, so most consumers opt to play it safe with a fixed rate.

Shopping for electricity: why was I given a deposit

When shopping for electricity, you’ll want a provider that’s reliable and offers the most cost-effective service. A cost-effective service means the rates will be lower and you won’t need to pay a deposit before you can get service.

Collecting a deposit protects the power company’s interests if you fail to make monthly payments.

While not all light companies require a deposit, those that do may ask you for a deposit if you fall under any of these categories:

  • Poor Credit History: If your credit score is low or if you have no credit history, a power company will likely ask for a deposit.
  • Late Payments: If you have a history of late or non-payment of bills, you’ll likely have to pay a deposit.
  • Previous disconnection: If you have had your power turned off in the past this could also be a reason as to why a provider is requiring a deposit.

Power companies typically avoid providing services to customers that fall under the above categories. But paying a deposit will make the company more amenable to providing you with services.

It’s good to have options…

Since electricity deposits can run into hundreds of dollars, most will want to avoid it. Good thing there are options

Some light companies have no deposit requirements. Most of these companies offer pre-paid electric plans that allow you to pay in advance for the electricity you intend on consuming.

It eliminates the need for a deposit or credit check, and, you’ll only be paying for the electricity you need when you need it. You’ll receive alerts regarding daily usage and when your credits are running low.

  • Waiving the deposit

Some electricity providers waive deposits for customers that are above 65 years old. However, senior citizens with a bad history of defaulting on payments may not qualify for this.

You can also get your deposit waived if you can provide proof of on-time past electricity payments or a letter of credit from your current electricity provider.

  • Installment payments

If you have no choice but to pay a deposit, at the very least, the electricity provider might give you the option to pay it in installments. But note that if you miss any payments, you will be disconnected.

These are all options that are beneficial to look into.

Steps toward financial freedom

While no deposit electricity, prepaid electricity plans, and installment payments are great options if your finances and credit scores are not in the best shape it might be of interest to start assessing your finances and see what changes can be made

Check out these small steps

  • Prioritize expenses and look into where your money is going; you’d be surprised how much money you spend on going out to eat and daily coffee trips
  • Make a budget and stick to it
  • Limit credit cards, and make monthly on-time payments
  • Shop smart – stick to the grocery list, have a special event – check the racks at goodwill or places like Plato’s closet, shop and compare electricity providers, internet and cable providers

Rebuilding your finances and credit score will take some time but implementing these small changes will help you get you to your goal faster.

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