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THE NEW YORK TIMES: Locking in Prices No Promise to Cut Bills

Locking in Prices No Promise to Cut Bills

Published: May 18, 2006

Filed at 7:01 p.m. ET

Homeowners who signed on last winter with an energy marketer guaranteeing a fixed natural-gas price for the remainder of the year, or longer, may be kicking themselves right now.

The price of natural gas has fallen by more than 60 percent since wintertime highs above $15 per 1,000 cubic feet, and the long-term contracts available today are considerably cheaper.

For example, Columbia Gas of Ohio customers can today sign up for a one-year supply contract with Shell Energy Services and pay $12.70 per 1,000 cubic feet. Six months ago, Shell was offering a one-year fixed price of $15.60.

So is now a good time to lock-in a price for natural gas?

''As a rule of thumb, sometimes it is better to lock-in in the shoulder months,'' said Ohio Consumers' Counsel Janine Migden-Ostrander, referring to fall and spring, the off-peak seasons. ''But that theory is not foolproof.''

Indeed, many natural gas analysts believe futures prices, which settled Thursday at their lowest level since last February, could fall even further in the months ahead thanks to rising inventories.

Under fixed-price programs, the local utility is still in charge of delivering the fuel and billing, so homeowners notice no change in service. The only difference is that the price they pay for the fuel is set by an energy marketer, such as MXEnergy or Direct Energy, rather than the local utility, which charges customers a regulated rate that can change on a regular basis.

Pennsylvania's State Consumer Advocate, Irwin Popowsky, cautioned that there is no guarantee that locking in a price with a third-party supplier will result in any savings. He said fixed-price contracts may appeal, however, to consumers seeking some certainty for budgeting purposes.

Both Popowsky and Migden-Ostrander emphasized that homeowners looking for concrete ways to save money should consider reducing their energy consumption, whether by adding insulation or turning down the thermostat a few degrees. Ostrander said lowering the thermostat by 5 degrees at night during the coldest months of the year could yield 10 percent savings per month.

For those seeking less volatility in their monthly natural gas bills, consumer advocates suggested level-billing plans, which spread out estimated annual expenditures over 12 months.


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