Should I sign a natural gas contract?

October 18, 2005 7:17 AM

Should I sign a natural gas contract?

I live in Toronto, Ontario. I've heard a lot of news about soaring natural gas prices this winter. I spend a lot on gas as it is, for both forced air heat and hot water. The current spot market rate is about 35 cents per m^3, with a rebate of 4 cents (why can't the Ontario government just make things easy?). Anyway, while I do worry about rising prices, contacts are now in the 44 cent range for 3 to 5 years. Sure, I may (or may not) save in the long run, but I'll sure be paying more now. How do I know when it's a good time to fix my price?

posted by GuyZero to home & garden (5 answers total)

Check out RiteRate; they currently have an offer in the Enbridge regions of 38.4¢/m³ (I believe Enbridge serves Toronto). They generally have the lowest contract rates that I've seen.

I don't work for them; in fact, I work (indirectly) for a competitor. My client's rates are generally far worse, even their staff offers are rarely as competitive.

As to whether or not you can trust RiteRate with your business, I have no idea.
posted by lowlife at 7:49 AM on October 18, 2005

In the Chicago area there's been a problem recently where a gas supplier who marketed their "fixed contract rates" reneged on their deals with consumers, insisting that everyone pay the current market rates rather than their negotiated contract rates. I think the whole matter is being taken up in a lawsuit now, but that's not gonna help the folks who found their contract prices ignored.

...so maybe check the fine print to make sure your contract supplier can't back out of the deal later on because their CEO wants to make more cash.
posted by aramaic at 9:16 AM on October 18, 2005

I almost called the fraud squad on Direct Energy over their tactics to try and get me to sign up for a fixed rate contract. I have one of their water heaters (it was already in the house I bought) and the guy who came to the door was the slimiest door-to-door salesman type I've ever encountered, and the folks on the phone were just as bad.

I think the whole system is pretty much corrupt and stupid now, and probably designed to cost the home owner more money in the short and long term. The information these companies provide is sketchy at best, and the whole thing just doesn't make sense. Privatization gone awry, IMO.

For now I'm just going to keep paying Enbridge and monitor the actual rates on the bill for a while to familiarize myself with the system and maybe revisit the decision later.

If anyone knows of a company that will deal with me straight (sort of how I've heard Progressive insurance does things in the US) I'd appreciate it.
posted by mikel at 10:44 AM on October 18, 2005

FWIW, I have a friend who works in energy brokering for a major energy consumer in Northern Ontario. I asked him this same question about 6 months ago. Direct Energy was trying REALLY hard to get me to sign another contract. I was suspicious that if it was so important to them that I sign, it likely wasn't in my best interest. My friend, who is a researcher by nature, strongly advised against a contract. I am sorry, but I can't recall his exact reasoning. I will see if I can talk to him and find out again.

At any rate, based on his recommendation, I did not re-sign.
posted by Richat at 11:48 AM on October 18, 2005

It is a pure gamble, like buying insurance or going to Vegas. That said, try energyshop.

Question 4 in their natural gas FAQ is interesting:

Why would I buy from a gas marketer?

Either because you want to be sure what your gas price will be month to month, or because you think gas prices are going up. Marketers provide you with choice. You have a choice between short or long terms and sometimes are offered other incentives or extras such as rebates, credits on your bill or air miles. Utilities cannot offer fixed term gas contracts. If you choose a variable term from a gas marketer, you will likely benefit from lower overheads and operating costs. Marketers offering a variable rate often give a guarantee of a certain percent below the utility's rate. We have historical and projected gas information.

Marketers have armies of employees paid to predict what the gas price will be. You can out guess them, but I wouldn't count on it. You will also have to put a lot of your time into the question, which is a hidden cost to you. Finally, despite the claim that the marketers have less overhead, the truth is that the existence of the marketing company - and that army of employees - is more overhead in the system, and the consumer has to pay.

It is possible to do well, of course. Marketers do things like blending the cost of service contracts into the gas rate which can greatly skew the picture the consumer gets, if you refuse all the extras you might be able to do well (like best buy's bad customer thing) - catch a loss leader, or a mistake, and end up ahead.
posted by Chuckles at 1:21 PM on October 18, 2005