For nearly 16 years, I’ve been writing about natural gas prices and helping consumers pick their suppliers.
But I get it; many people’s eyes glaze over with this subject.
Oftentimes, people went with me; sometimes they didn’t, saying they preferred the stability of a fixed price, even if it may be a little more expensive. We’re all adults.
Some, including colleagues, would admit they knew they should switch to save money, but never got around to it.
And still others may have followed me or made a different decision to later find out they had inadvertently been overpaying. I get a lot of those calls. Sometimes it was by hundreds of dollars a year because they didn’t realize their contract renewed at a higher rate or they chose a rate that stayed high while the market fell.
Others may have thought they chose Dominion’s Standard Choice Offer (SCO), the monthly variable set by a state-approved formula, which has been at historic lows. But because they didn’t specifically ask for it, were assigned to a marketer’s Monthly Variable Rate (MVR), which is not regulated and can be quite high.
Another set of customers, and a large one at that, are part of government aggregation, or buying groups. Many communities usually offer a fixed-rate that often does not beat the SCO. Community leaders say they are offering a choice for their constituents, some of whom want stability in a fixed price. One group that has one variable that beats the SCO is NOPEC, Ohio’s largest aggregation group that includes parts of northern Summit and Portage. NOPEC has a variable price guaranteed to be 2 cents below the SCO. Customers must specifically ask for this.
Confusing? I know.
So it’s not a surprise that some numbers have recently come to light that illustrate how collectively Ohioans who have shopped for gas may have been overpaying.
But the numbers are startling.
In a Public Utilities Commission of Ohio case having to do with another Ohio utility, Duke Energy, Columbia Gas of Ohio disclosed data that said customers who chose an alternative provider since 1997 have paid $1.36 billion more than those who remained with the regulated prices offered by the utility.
Dominion was not involved in that case and said they did not similarly track the differences between its SCO and marketers’ rates.
However another case may shed some light. In a 2010 case for Vectren, another utility, the Ohio Consumers’ Counsel said based on Dominion data from 2001 to 2009, while in some years customers saved money, in total, customers choosing a provider over the SCO or its predecessor GCR, overpaid by $667.50 million.
Updated numbers were not available. Dominion says it no longer collects that data because it doesn’t believe it provides an accurate measure of the program.
I wouldn’t be surprised if numbers would also show that overall, consumers not on the SCO in recent years also overpaid since the market shifted with historical low SCO prices.
A caveat before I move on: I am confident that for myself and others who have followed me over the years, we have made good decisions and saved a lot of money.
The gas market has been a roller coaster. It’s gone from huge volatile swings in the early years (when I chose low fixed rates) to more recent years, when the SCO and industry prices, because of increased gas production, including shale gas in Ohio, have plummeted to historical lows. I have been on the SCO since 2011 and there haven’t been fixed-price contracts that beat it. To read my latest column about how to get the SCO, go to www.tinyurl.com/scobetty
Jeff Murphy, Dominion East Ohio vice president and general manager, takes issue with comparisons of prices consumers have paid and the notion of “losses” or “overpayments.” Some customers choose a fixed rate for stability and are willing to pay a premium.
Murphy likens it to him locking into a fixed home mortgage rate of 3¼ percent.
“I was thrilled with the rate and still am,” he said. “I ended up with a mortgage that worked for me, and constantly comparing it to other rates isn’t particularly helpful or enlightening.”
Murphy did say that he shares my concern for those customers who may not be as informed or have not revisited their rates and are now paying high rates in the $4 to $6/mcf range when the SCO for April is at $1.85/mcf.
“A lot of people put this on autopilot and in a lot of ways, that’s the worse thing you can do for any consumer product,” he said.
What to do?
So what should be done if a competitive market, which is supposed to help consumers save money, is so complicated that they are overpaying?
Ohio Consumers’ Counsel Bruce Weston said the system needs to be fixed.
“Markets should benefit consumers, including by lowering prices. In recent years, the utilities’ ‘Standard Choice Offers’ — which result from fierce competitive bidding — have often produced the lowest natural gas prices for Ohio consumers. Unfortunately, it is difficult for consumers to know that,” he said. “Recent calculations have shown that consumers are widely accepting higher-priced offers from marketers and paying more, when they could be choosing the utility’s lower-priced offer. We are considering solutions for improving how consumers can benefit from the market.”
The agency has calculated savings for customers on Dominion’s SCO (a weighted average) over the last year ranging from $220 over someone on a fixed-rate contract (they used a $4.63/mcf contract for calculations) to $433 a year in savings over someone paying the highest monthly variable rate, MVR, ($6.75/mcf).
The agency believes “consumers who do not choose a marketer should be assigned to their utility’s natural gas service, which has generally been priced the lowest,” said OCC spokesman Dan Doron.
The agency or another party would need to file a request with the PUCO, and nothing has been filed.
Murphy doesn’t think this is a good thing.
Many customers automatically get the SCO — new customers who don’t make a choice and those who return to Dominion from an aggregation, he said.
Customers who return to the utility after having been with a marketer, and who don’t specifically ask for the SCO, will instead receive that MVR, which can be quite costly.
Murphy also said making the SCO a default for customers could cause two problems — if industry prices shift and the SCO is no longer the cheapest, then people are paying too much and by not encouraging people to research their choices, it creates what Murphy calls “lazy consumers.”
“We want customers to engage with the market,” he said.
Comparing the SCO to prices offered by retail marketers is apples and oranges, said Bryan Lee, a spokesman for the Retail Energy Supply Association, a group of 22 national gas suppliers.
It’s a misleading comparison and “doesn’t take into account the value-added products and services that competitive suppliers are offering,” such as bundled products with smart thermostats, loyalty reward points and renewable energy products, he said.
Education is key
There needs to be more education. I work to educate readers, and Dominion does so through bill inserts, letters to consumers, and a website, www.DominionGasChoice.com. But customers continue to be uncertain about choosing a supplier, officials said.
“Customer education appears to be inadequate for residential consumers to understand the risks of paying more for natural gas. Improvements in consumer protection are needed in this market where consumers are confronted with complex natural gas offers.”
Betty Lin-Fisher can be reached at 330-996-3724 or email@example.com. Follow her @blinfisherABJ on Twitter or www.facebook.com/BettyLinFisherABJ and see all her stories at www.ohio.com/betty.