Judging by the volume of email and phone questions I’ve been getting, consumers need reminders and advice about their choices of natural gas and electricity offers.
For those who were looking for the large, annual chart comparing natural gas offers about this time of year, you didn’t miss it.
There was no reason to compare offers this year since I continue to recommend accepting what is called the Standard Choice Offer (SCO) from the assigned provider through Dominion. Fixed prices aren’t looking competitive enough to make anyone switch.
This will be the second winter that we have been on the SCO. Last winter was mild, and prices were already low, so the SCO worked out very well. While we won’t know how the weather plays out this winter, wholesale natural gas prices continue to be low. Expectations are they will remain steady since storage inventories are high and production of shale gas is coming. That should mean a winter of relatively low prices, said Jeff Murphy, Dominion East Ohio managing director of commercial operations.
The SCO price is set by a state-approved formula (the settlement price for the previous month, plus a 60-cent-per-thousand cubic feet (mcf) charge called an “adder”). Wholesale prices are at historical lows, too.
The price for October is $3.62/mcf. The price since last fall has ranged from a high of $4.86/mcf last September to a low of $2.64/mcf in May. This September’s rate was $3.23/mcf and a year ago, the October price was $4.76/mcf. The SCO prices are still much lower than any fixed rate or variable rate offers from marketers. As of this week, the public fixed rates offered by competitors ranged from $4.75/mcf to $5.99/mcf, all with at least a $75 cancellation fee.
It’s understood that a variable rate can have ups and downs. But keep in mind that there is a difference between the SCO, which is based on a state-approved formula, and a marketer’s own variable rates, which don’t follow any public formulas and can change at any time.
Before shale gas came on the scene, natural gas markets relied heavily on the Gulf of Mexico-area production. It is a part of the country susceptible to hurricane season. In 2005 after Hurricane Katrina, natural gas prices jumped 15 percent in the span of a few days, said Murphy.
When Hurricane Isaac came through this summer, prices only nudged 2 percent, Murphy said.
If you haven’t switched to the SCO, check your bill and see how much you are paying. If you are still on a fixed rate, or higher than the current SCO, find out how much time is left on your contract and if there is a cancellation fee. Some fees can be hefty, which is why I was always leery of choosing companies that had a high fee. But you will save money even after taking the cancellation fee hit with the SCO.
The average household uses about 100 mcf a year on gas. Take the difference between the prices and multiply by 100 to see the savings.
To switch to the SCO, call Dominion at 800-362-7557. Tell them you want to cancel your current provider and switch. You have to ask for the SCO, or Dominion will move you to what’s called the Monthly Variable Rate (MVR) by the third month instead of the SCO, and that is whatever price the provider wants to charge you and not the state-approved formula.
It will take up to two billing cycles for you to see the switch, first to what is called an “SSO” (which is the same price as the SCO). Then by the third month, you should see “SCO” on your bill with a provider’s name. If you see “MVR,” call Dominion.
If you are on the SCO, make sure that you opt out of aggregation offers negotiated on your behalf for bulk prices for your community. Usually, the aggregation offers will automatically include you, if you do not opt out.
I’m not able to give consumers the same clear-cut answer on this decision. It requires some comparison shopping on your own. You can stay with your current supplier and do nothing. In most cases, a majority of people are already on an aggregation deal for electricity through their community and with FirstEnergy Solutions or you can stay on Ohio Edison’s default service price.
For electricity, everyone has an individualized “price to compare” figure each month that is calculated based on usage. That “price to compare” wording can be found on your bill on the left side under “messages.” It is the price that you would have to beat to save money.
What is best for you might not work for someone else. You have to assess risk and consider the wild card of energy prices in general.
I don’t face a choice because I live in a community served by municipal power and am not an Ohio Edison customer.
A few things to keep in mind: The “price to compare” changes monthly. There are summer and non-summer rates for Ohio Edison. So take a look at a few different months’ figures.
Only part of an electric bill, called the generation portion, is “shoppable.” That’s about 55 percent of your bill. The other 45 percent is set by regulators and cannot change.
If you are currently on an aggregation with FirstEnergy Solutions, you are getting 6 percent off your “price to compare” through May 2015 with a $25 cancellation fee. People with that offer are actually in the third year of a nine-year deal through 2018. You will have the 6 percent off for the remainder of the term. The aggregation has an opt-out policy, meaning you were automatically included unless you opted out. So by law, you are allowed to leave for free every three years. That’s why the 2015 date is in place.
There are a lot of other competitive offers available and comparison shopping can be done online at the Public Utilities Commission of Ohio’s Apples to Apples chart at www.puco.ohio.gov or call 800-686-7826 and ask for it to be mailed to you.
One offer I have been asked a lot about is a seven-year plan from First Energy Solutions. You can read online a previous detailed article about these offers at http://tinyurl.com/bettyelectricity.
The cancellation fee is in the $300 range.
Seven years is certainly a long time to lock into anything but a mortgage and there’s really no way to know whether it was a good deal until after the contract is up.
Advice varies about what will happen to electricity prices over time.
The bottom line is after years of no competition among electricity providers, now there is competition.