Natural gas rate offers could hold traps
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In recent weeks, customers of local natural gas utility Equitable Gas have received an offer in the mail for an "end of summer natural gas sale."
According to the letter, Dominion Energy Resources will provide natural gas for the next year at a "low, stable" price of $8.99 per thousand cubic feet, or mcf.
While a price that is locked in for a year is certainly stable, whether or not it is low is open to interpretation. An online shopping guide published by the state Office of Consumer Advocate suggests that is not.
The guide, available at www.oca.state.pa.us/Industry/Natural_Gas/gascomp/GasShoppingGuide.pdf, says that Equitable's "price to compare," which is the price that consumers should use, is $7.21 per mcf -- $1.78 less than Dominion's offer.
But the lower price is good only through Thursday. Next Friday, Equitable, along with Peoples Natural Gas and Columbia Gas, will reset its rates.
For Equitable customers, the question becomes, "Do I expect Equitable's rate to rise high enough over the next year to make Dominion's offer a deal?"
While natural gas prices traditionally have risen in the fall and winter -- the rates reset again on Jan. 1 -- as consumers use more of the commodity to heat their homes, they don't always go up then.
In October, all three utilities lowered their rates, reflecting a plunge in wholesale prices for natural gas.
That could happen again this year. In January, wholesale prices for near-term natural gas contracts topped $6 per million British Thermal Units (a measure roughly equivalent to mcfs). But since then they have mostly been below $5. On Thursday, the October contract closed at $4.01.
In the wake of that downward trend, utilities that change prices quarterly lately have offered a price advantage over competitive suppliers such as Dominion Energy Services or MxEnergy that offer yearly contracts.
In the current edition of the state's Office of Consumer Advocate shopping guide, which is updated monthly, Peoples Natural Gas has a price to compare of $5.31 per mcf, and competitive suppliers offer prices from $5.49 to $10.10 per mcf.
Columbia Gas, which bills customers per hundred cubic feet of gas, or ccf, has a price to compare of 49.4 cents per ccf. Competitive suppliers for Columbia customers are offering from 47 cents to 79.9 cents per ccf.
Robust supplies may continue to exert downward pressure on prices. The U.S. Department of Energy reported Thursday that gas in storage is 3,340 billion cubic feet (bcf), 195 bcf above the five-year average.
On the other hand, natural gas pricing can swing quickly, and a single late-season hurricane could send prices soaring. So for consumers who want to avoid price swings, the competitive suppliers' fixed-rate contracts may be the way to go.
Consumer Advocate head Sonny Popowsky said that while utilities have the obligation to "get the lowest cost they can for all their customers," independent marketers may sometimes be able to beat their prices.
First Published September 24, 2010 12:16 am
