How to Spend Less on Utilities

One of the easiest ways to reduce recurring costs is to take a close look at your contracts and consumption and find ways to spend less on your utilities. That’s gas, electricity and water.

Utility bills sometimes feel like a permanent chunk of cost that you can do nothing about. Water rates, gas and electricity. We’ve been paying for them forever and we can’t live without them, so we just put up with them. In fact they’re an easy place to start saving money.

How To Spend Less On UtilitiesUtilities are like a leak in your finances. We do our best to ignore them. We make sure there’s enough money in the account each month that they get paid, and we struggle with them every time we move house because somehow they’re always a pain to close and reopen at the new address.

In one of my most frustrated periods, when I felt like the universe had the destruction of my financial situation as one of its core purposes, I actually looked into off-grid living as a serious proposition. I viewed YouTube videos, calculated the cost and capacity of different solar power setups, checked out various heating and insulation techniques.

Then I came to my senses.

Off-grid living is not for me. It’s not a savings technique, it’s a lifestyle choice. One that I admire immensely but which would not be appropriate for my family.

I still look at the videos from time to time. They’re weirdly compelling.

The Deal

There are two ways to pay less for your utilities.

1. Consume less electricity, gas or water

2. Get cheaper gas, electricity and water contracts

How To Get A Cheaper Contract

The easiest way to reduce costs is to negotiate a better rate for what you currently consume. While many countries have laws that require this be easy, companies still find ways to make comparisons difficult and to make switching appear more complicated than it is.

The Problem With Utility Contracts

Utilities count on customer stickiness to create a customer base. They draw you in one way or another, by running a special offer or by appearing like the default choice when you move in. Then you stay with them because the perceived pain of switching providers is too high.

You stay with them even as your grace period expires, as your initial discount comes to an end and the prices are gradually increased every year.

You stay on the original contract despite better deals being available, even from your own provider because it’s too much effort to look into it.

After all, how much could you save? Ten bucks? Fifteen? Per month? Is it really worth all the trouble? Are you that cheap?

Yes! Yes! You absolutely are that cheap!

Ten bucks a month for a year is $120. Let me write that out… One Hundred And Twenty Dollars. Or pounds, or Euros, whatever.

From the moment you sign the contact, you’re on an upward price escalator. The utility provider is counting on the escalator being sticky enough that you won’t jump off.

Loyalty Is For Losers

That’s not true. That’s a nasty thing to say.

But when it comes to your contracts with utility companies, it actually is true.

The company is the opposite of loyal to its longstanding customers. It exploits existing clients and saves its best deals to attract new customers.

Switching is easy, and if you’re in the UK like I am, the gas or electricity you get from a different provider is actually the same gas you would have received from your previous supplier. There’s no difference.

Except for the price, obviously.

How to Switch Providers

First you have to actually have a choice.

If you’re in some monopolistic enclave that doesn’t embrace consumer choice, such as… well… most of the US states, then you won’t have much control over your energy provider. Please skip this section and see how to reduce your consumption. If you’re in the US, you can check your state energy regulations. In the European Union, energy supplier choice is guaranteed by EU directives. Canada also has energy choice, depending on where you live.

If you’re somewhere you actually have a choice, then a few simple steps is all it takes. In some cases websites are set up to help you with this – see the bottom of this section for a link or three.

First you have to understand your current bill.

Check the websites at the bottom if this section, some do this calculation for you.

There will be different components. Perhaps there’s a fixed cost and a unit cost. They might have called it “distribution” and “usage” to make it sound more legitimate. Get out the pen and paper and all your old bills and do this: Recalculate your bill. Based on your consumption, figure out how they calculated your bill.

Also check to see if there are any costs to switching. There may be contractual penalties with your previous provider and setup costs with your new provider. In many cases these can be negotiated away and some providers will sometimes pay a proportion of the penalty imposed by the previous provider.

Now you understand the math, get shopping. Figure out for each available provider and for each of the available plans, how much your last year’s consumption would have cost.

You now know which one would have been cheaper if you’d had a contract with them the previous year.

Before you make a decision, go through the next section of this article (How To Reduce Your Usage) so you can also get an idea of how your bills would change if you can reduce your consumption.

Now call your current provider and have the “I’m thinking about switching” conversation. They’ll offer you a deal. You can take it or not, but if it’s less good than the deal you can get with a new provider, don’t bother, and let them know you’ll be switching. They’ll roll out the sales pitch but just politely thank them and say you’ll think about it. Remember, it’s the same gas, the only differences are the price and contract terms. Don’t cancel your current contract before switching to someone else – they’ll often take care of the cancellation for you.

Call the company you want to contract with and ask them how you switch to them. They have an incentive to get new customers and to make it as easy for you as possible. Go through the process and you’re almost done.

Important: End of contract bills are one of those places where errors can creep in. Make sure your contract with the former supplier is properly closed. Make sure you understand the final bill.

Websites that can help:

How To Consume Less Electricity, Gas, Water

Obviously, once you’ve got the best deal out there, you can also reduce your costs by consuming less of each and any of the utilities to which you are subscribed.

There are a few rules of thumb that are true in most cases:

Reducing electricity costs

  • Power off appliances at the wall socket, don’t just leave them in standby
  • Make a habit of switching off lights you don’t need
  • Resistance devices consume the most. Don’t boil more water than you need, don’t toast bread you won’t eat, don’t overuse hotplates
  • Induction hobs are more efficient than others because they cause heat in the cookware instead of heating cookware indirectly. But bear in mind that on full power, they still consume quite a lot
  • Check to see if your provider varies the price at night and then run appliances on a timer to use the cheapest electricity available

Reducing Gas Costs

  • A small reduction in the temperature of your home in winter can save you a lot on your heating bill. You can always wear a sweater
  • An intelligent thermostat is a worthwhile investment if you figure out how to use it properly. If you don’t want one of these, check if your thermostat has a timer and reduce the temperature when you’re not at home
  • Turn off your heat when you leave for the weekend, or a holiday
  • Draughtproof your home with cheap equipment you can buy at a homewares store, or online
  • Gas hobs waste 60% of their energy by heating the room instead of the cookware. Use sparingly.

Reducing Water Costs

  • A modern dishwasher is often more water-efficient than washing by hand, especially if you load it fully
  • A shower typically consumes much less water than a bath
  • Tap water is potable (drinkable) almost everywhere. Check and then don’t waste your cash on bottled water. If you feel it tastes strange, invest in a water filter

Most of these are plain common sense. Others are perhaps a little surprising.

If you can, invest in a smart meter for your home that allows you to see the energy consumption in real time. Then you can gradually understand what drives your electricity and gas costs over time and reduce intelligently.

Do It Again

Every time January, when you’re in the mood to optimize your life a little, and every time you receive a bill, reminder or renewal letter from a utility company, you should spend a few moments thinking about these costs and whether they’re optimized. These are actually easy wins that only need to be looked at every so often.

Over time, they will increase. Sometimes it’s unavoidable because the cost of electricity or gas has increased everywhere, but over time the best deal changes. When your contract is up for renewal, it pays to vote with your wallet and get the best deal out there for the next 12 or 18 months.