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Falling prices might mean consumers should reconsider options to save winter costs
By Betty Lin-Fisher
Published on Sunday, Sep 23, 2007
In this volatile world of natural gas price ups and downs, a week can make a difference.
Just last week, I wrote about how many municipalities and area governments that had created aggregations, or buying groups to negotiate natural gas prices in bulk for residents, were locking in decent prices below the cheapest one-year fixed rates available to shoppers in the Dominion East Ohio territory.
The aggregation groups were getting rates of $9.24 per thousand cubic feet (mcf) to $9.90/mcf the majority of which were close to, but below the cheapest $9.95/mcf and $9.99/mcf fixed one-year rates that were the best deals in August, when I last did a comparison of prices. (You can find last week's column online with this story if you missed it.)
Company executives I spoke with last week told me that while they were offering lower rates to aggregations because of group buying, they did not see their public prices coming down. A rate of $9.75/mcf from MXenergy last week was looking as if it would be the cheapest one-year fixed rate for the public.
But this week, Integrys Energy Services (formerly WPS Energy) changed the offer I planned to take a $9.99/mcf one-year fixed rate to $9.49/mcf with a $25 cancellation fee. That's a savings of $50 over the year for the average household.
Many of you are on one of Integrys' other rates. If you want the cheaper $9.49/mcf rate, you will have to call Integrys to request it. You will not be charged a fee to switch among the company's rates. (Having to ask for a published lower rate is common among all the suppliers.)
So, if you had the $10.83/mcf Integrys capped rate, which changes monthly but won't go above that cap, it renewed last month at $9.99/mcf for September and $9.75/mcf for October.
If you were on the $10.30/mcf fixed one-year rate or the $9.99/mcf one-year rate, unless you do something they both will renew at the end of this month for $9.99/mcf because those contracts expire next month. If you sign up for the cheaper rate, you'll have one more month at your current rate and then switch to the lower rate.
The new $9.49/mcf rate starts with your November usage, which will show up on your December bill. If you're a new customer who takes that rate, you'll be placed on the company's monthly variable rate its cheapest rate for one month until the November fixed rate kicks in.
Integrys Vice President Darrell Bragg said prices overall have softened in the last month, but it could be temporary.
''The market has fallen pretty strongly and bottomed out, but it went back up, so it's putting a strain on these prices a bit,'' Bragg said.
Even the folks in Wadsworth, Orrville, Dover and Doylestown, who can take advantage of the $9.24/mcf fixed one-year aggregation rate with IGS Energy and no cancellation fee, may come out even if they switch to that rate instead of the $9.49/mcf from Integrys, which has a $25 cancellation fee.
Coincidentally, the 25 cent/mcf difference would save the typical household $25 over a year, so it's pretty much a wash. But if you live in one of those communities and don't have a cancellation fee with your current supplier or are at the end of your contract, then it would be worth it.
Similarly, if you have a supplier with a higher cancellation rate than $25, you have to crunch some numbers on how much you'll save over a year with that fee to see if it's worth switching (the average household uses 100 mcf per year).
Bragg said it's possible Integrys may have to close the $9.49/mcf offer if market prices continue to rise, but he didn't see another major drop to the prices of fixed rates even after hurricane season is over.
But he also quickly pointed out that he could be wrong because things can change quickly.
We're past the peak of the June-through-November hurricane season without any major storms affecting production in the natural-gas rich Gulf of Mexico, said Jeff Murphy, director of pricing and regulatory affairs for Dominion East Ohio.
As always, weather remains the big question mark in pricing, Murphy said. While there is plenty of natural gas in storage now which could mean softening of prices if there's a lack of hurricanes there's also talk that if November and December bring normal, colder weather, that could deplete the storage and prices could spike, he said.
Last year, by comparison, there was high storage, lack of hurricanes and a warmer-than-usual November and December, which is why some prices softened in November and December.
So here's the best advice: Find a price you're comfortable with now, with a cancellation fee you're willing to pay if prices go lower and you want to switch later. I know a lot of people like the stability of knowing a price before winter, so I wouldn't recommend you wait it out, unless you're the type who is willing to ride the market.
I don't plan on doing any more comparisons for the winter months at this point, but I will always keep an eye on prices and let you know if they drop significantly.
Choose your risk
As I've said before, there's no one best rate for everyone; it depends upon your tolerance for risk. If you'd like a one-year fixed rate, find one with a good rate and cancellation fee you can live with.
If you're more willing to ride the market and possibly enjoy some savings, then choose a monthly variable rate, which will change each month along with the volatile market. If you do nothing, you will be serviced by Dominion East Ohio, which buys its gas through a monthly auction of market prices.
But just as there can be savings in monthly prices when the market is soft, as it is now, those prices can also swing the other way, and you could get caught paying high rates and finding that fixed rates have also gone up.
There are also multiyear long-term contracts and some hybrid rates that are for a year or less say, combining a fixed rate through the winter and variable rate in the summer, when your natural gas usage is lower.
The first thing you should find out when you're evaluating whether to switch to another supplier are the terms of your current contract. What rate do you pay now, when does it expire and what's the cancellation fee if you leave early? Also, ask the supplier if it will match a price you've seen, or if you can get a lower rate.
I'm going with Integrys' $9.49/mcf rate for one year. I also debated switching to Integrys' fixed winter, variable summer rate, which has a rate of $9.37/mcf for the winter months. But while I understand that I could get some savings in the summer if prices are low, I guess I still have that disaster complex in which I worry prices could go higher, too. Bragg also said that next summer's prices on the futures market are trading as high as this winter's prices, so it's possible they could stay the same or come down.
So I'm willing to stick with the one-year fixed at a price I'm comfortable with, with a low cancellation fee, while continuing to watch the market.
But maybe you feel differently that why there's the choice.
Picking a plan
Here are details of some plans: As always, I've included all of the rates available today in an accompanying chart, with contact numbers and Web sites categorized according to risk.
The chart lists only prices for customers in the Dominion East Ohio area; those of you in the Columbia Gas area also can use this information to help you shop, but your prices are set in hundred cubic feet (ccf) and tend to be slightly higher because there's a different distribution system and infrastructure costs are higher.
Both Dominion and Columbia customers can go to the Web sites of two state agencies (see accompanying story for details) to see all of the current pricing, but make sure you confirm prices because they can change.
For those in the Dominion territory:
If you're looking for the lowest one-year fixed rate: Go with Integrys' $9.49/mcf with the $25 cancellation fee.
If you're looking for a fixed rate to get you through the winter: IGS Energy has a $9.99/mcf fixed rate through April with no cancellation fee. But something to take into consideration is that the average homeowner last year used 72.77 mcf during the winter months of October through March. Using those numbers, you'll pay $36.39 more with the $9.99/mcf rate over the Integrys $9.49/mcf rate (more than Integrys' $25 cancellation fee). But you then will have the freedom to shop again after the winter months.
If you want to ride the market with short-term rates or monthly variables: Check the chart to find a company whose price seems competitive.
If you want a multiyear rate: Three companies offer contracts that range from 14 months to three years, but the prices are significantly higher than current one-year fixed rates.
Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@ thebeaconjournal.com.
In this volatile world of natural gas price ups and downs, a week can make a difference.
Just last week, I wrote about how many municipalities and area governments that had created aggregations, or buying groups to negotiate natural gas prices in bulk for residents, were locking in decent prices below the cheapest one-year fixed rates available to shoppers in the Dominion East Ohio territory.
The aggregation groups were getting rates of $9.24 per thousand cubic feet (mcf) to $9.90/mcf the majority of which were close to, but below the cheapest $9.95/mcf and $9.99/mcf fixed one-year rates that were the best deals in August, when I last did a comparison of prices. (You can find last week's column online with this story if you missed it.)
Company executives I spoke with last week told me that while they were offering lower rates to aggregations because of group buying, they did not see their public prices coming down. A rate of $9.75/mcf from MXenergy last week was looking as if it would be the cheapest one-year fixed rate for the public.
But this week, Integrys Energy Services (formerly WPS Energy) changed the offer I planned to take a $9.99/mcf one-year fixed rate to $9.49/mcf with a $25 cancellation fee. That's a savings of $50 over the year for the average household.
Many of you are on one of Integrys' other rates. If you want the cheaper $9.49/mcf rate, you will have to call Integrys to request it. You will not be charged a fee to switch among the company's rates. (Having to ask for a published lower rate is common among all the suppliers.)
So, if you had the $10.83/mcf Integrys capped rate, which changes monthly but won't go above that cap, it renewed last month at $9.99/mcf for September and $9.75/mcf for October.
If you were on the $10.30/mcf fixed one-year rate or the $9.99/mcf one-year rate, unless you do something they both will renew at the end of this month for $9.99/mcf because those contracts expire next month. If you sign up for the cheaper rate, you'll have one more month at your current rate and then switch to the lower rate.
The new $9.49/mcf rate starts with your November usage, which will show up on your December bill. If you're a new customer who takes that rate, you'll be placed on the company's monthly variable rate its cheapest rate for one month until the November fixed rate kicks in.
Integrys Vice President Darrell Bragg said prices overall have softened in the last month, but it could be temporary.
''The market has fallen pretty strongly and bottomed out, but it went back up, so it's putting a strain on these prices a bit,'' Bragg said.
Even the folks in Wadsworth, Orrville, Dover and Doylestown, who can take advantage of the $9.24/mcf fixed one-year aggregation rate with IGS Energy and no cancellation fee, may come out even if they switch to that rate instead of the $9.49/mcf from Integrys, which has a $25 cancellation fee.
Coincidentally, the 25 cent/mcf difference would save the typical household $25 over a year, so it's pretty much a wash. But if you live in one of those communities and don't have a cancellation fee with your current supplier or are at the end of your contract, then it would be worth it.
Similarly, if you have a supplier with a higher cancellation rate than $25, you have to crunch some numbers on how much you'll save over a year with that fee to see if it's worth switching (the average household uses 100 mcf per year).
Bragg said it's possible Integrys may have to close the $9.49/mcf offer if market prices continue to rise, but he didn't see another major drop to the prices of fixed rates even after hurricane season is over.
But he also quickly pointed out that he could be wrong because things can change quickly.
We're past the peak of the June-through-November hurricane season without any major storms affecting production in the natural-gas rich Gulf of Mexico, said Jeff Murphy, director of pricing and regulatory affairs for Dominion East Ohio.
As always, weather remains the big question mark in pricing, Murphy said. While there is plenty of natural gas in storage now which could mean softening of prices if there's a lack of hurricanes there's also talk that if November and December bring normal, colder weather, that could deplete the storage and prices could spike, he said.
Last year, by comparison, there was high storage, lack of hurricanes and a warmer-than-usual November and December, which is why some prices softened in November and December.
So here's the best advice: Find a price you're comfortable with now, with a cancellation fee you're willing to pay if prices go lower and you want to switch later. I know a lot of people like the stability of knowing a price before winter, so I wouldn't recommend you wait it out, unless you're the type who is willing to ride the market.
I don't plan on doing any more comparisons for the winter months at this point, but I will always keep an eye on prices and let you know if they drop significantly.
Choose your risk
As I've said before, there's no one best rate for everyone; it depends upon your tolerance for risk. If you'd like a one-year fixed rate, find one with a good rate and cancellation fee you can live with.
If you're more willing to ride the market and possibly enjoy some savings, then choose a monthly variable rate, which will change each month along with the volatile market. If you do nothing, you will be serviced by Dominion East Ohio, which buys its gas through a monthly auction of market prices.
But just as there can be savings in monthly prices when the market is soft, as it is now, those prices can also swing the other way, and you could get caught paying high rates and finding that fixed rates have also gone up.
There are also multiyear long-term contracts and some hybrid rates that are for a year or less say, combining a fixed rate through the winter and variable rate in the summer, when your natural gas usage is lower.
The first thing you should find out when you're evaluating whether to switch to another supplier are the terms of your current contract. What rate do you pay now, when does it expire and what's the cancellation fee if you leave early? Also, ask the supplier if it will match a price you've seen, or if you can get a lower rate.
I'm going with Integrys' $9.49/mcf rate for one year. I also debated switching to Integrys' fixed winter, variable summer rate, which has a rate of $9.37/mcf for the winter months. But while I understand that I could get some savings in the summer if prices are low, I guess I still have that disaster complex in which I worry prices could go higher, too. Bragg also said that next summer's prices on the futures market are trading as high as this winter's prices, so it's possible they could stay the same or come down.
So I'm willing to stick with the one-year fixed at a price I'm comfortable with, with a low cancellation fee, while continuing to watch the market.
But maybe you feel differently that why there's the choice.
Picking a plan
Here are details of some plans: As always, I've included all of the rates available today in an accompanying chart, with contact numbers and Web sites categorized according to risk.
The chart lists only prices for customers in the Dominion East Ohio area; those of you in the Columbia Gas area also can use this information to help you shop, but your prices are set in hundred cubic feet (ccf) and tend to be slightly higher because there's a different distribution system and infrastructure costs are higher.
Both Dominion and Columbia customers can go to the Web sites of two state agencies (see accompanying story for details) to see all of the current pricing, but make sure you confirm prices because they can change.
For those in the Dominion territory:
If you're looking for the lowest one-year fixed rate: Go with Integrys' $9.49/mcf with the $25 cancellation fee.
If you're looking for a fixed rate to get you through the winter: IGS Energy has a $9.99/mcf fixed rate through April with no cancellation fee. But something to take into consideration is that the average homeowner last year used 72.77 mcf during the winter months of October through March. Using those numbers, you'll pay $36.39 more with the $9.99/mcf rate over the Integrys $9.49/mcf rate (more than Integrys' $25 cancellation fee). But you then will have the freedom to shop again after the winter months.
If you want to ride the market with short-term rates or monthly variables: Check the chart to find a company whose price seems competitive.
If you want a multiyear rate: Three companies offer contracts that range from 14 months to three years, but the prices are significantly higher than current one-year fixed rates.
Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@ thebeaconjournal.com.
Comments
Click here to post your comments
Posted 08:01 AM, 09/10/2008
I missed your August article on natural gas prices. Glad to find it on line. Looking for your next article on prices. My friend and I could not make this decision without your research. Thank you for all you help.
