Personal Finances

Locking in Natural Gas Rates

It’s that time of the year when offers to lock in natural gas rates show up in my mailbox. The offers usually employ fear driven marketing, preying upon consumers’ fear of paying too much in utilities and of “unexpected” charges. The offers typically refer to the local utility with terms like “unpredictable”, “unexpected”, “gambling” and “volatile”, while they referring to themselves with phrases like “risk-free”, “consistent”, “affordable”, “eco-friendly”, “simplify”, “competitive”, and so on.

I typically ignore these pitches. I’ve assumed that they would probably end up either being mostly a wash (best case) or a bad deal (worse case). But this year I decided to calculate the “savings” that I was walking away from by not locking in my natural gas rate into an annual contract.

The Art of a Bad Deal

The first offer of the season is from Deca Energy Inc, a self-proclaimed “eco-friendly energy marketer”. I can choose from either a 1-year agreement for $111 per month, or 2-years for $109 per month. They have no enrollment or cancellation fees. They give me a “promo code” for me to use, but no word on what the rates would be without the promo code. And they have a deadline, the final tool in the marketing toolkit.

What’s missing from the offer is that they give me no idea of how they came to their proposed rates. No clue on what I’m currently paying for my natural gas, nor how much their proposal is going to save me. Is it based off of average consumption in the area? Did they peek at my current usage? No clue.

What’s in it For Me?

Luckily, I keep track of everything in Quicken so I can quickly tell whether this is a good or bad deal. In 2019, we paid on average $79/month in natural gas. The previous years were pretty much the same: $78/month in both 2017 and 2018, $59/month in 2016 and $86/month in 2015. Yes, there is wide variance between the highs and the lows. The highest bill was $239 in February 2017, and the low of was $17 in August 2015. But seasonal variance balanced each other out.

For me, this turns out to be a horrendously bad deal. Using the last five years as a guide, I’d be paying about 45% more than normal. I’d have to seriously up my heating to come out even. Do we really want to encourage people to waste like this?

I suspect that many who sign up for deals like this don’t track their heating costs. The scary language and the idea of a constant cost sounds good but they don’t understand the cost. So they pay more.

A Modest Proposal

To make an informed decision, homeowners need to know how much their energy costs have been in the past. While many track their utility bill, many others do not. However, the gas company tracks it and could provide this data to the energy marketers. Imagine if the marketer was required to disclose to consumers the past 5 years of average monthly energy costs for homes in their neighborhood, or maybe even for that address. This proposal could encourage energy marketers do what they purportedly do best, provide natural gas as cheap as possible and enable utilities to focus on the distribution of the gas.

I’d love to hear your thoughts.

Hasta luego!

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