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Expenses and Savings – Natural Gas – Part 1 March 24, 2007

Posted by pf in Expenses and Savings.
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Next up on my quest to optimize my inflows / outflows is the cost of my natural gas.  On the surface, while you certainly remember those winter months where the bill was $200 or more, I’m not sure whether or not a lot of people really think about the overall cost and whether or not you can do anything about it.  Mostly, I think people see a big bill and then lower the thermostat. 

 For myself, heat and air conditioning are one of those things where I am a bit unwilling to sacrifice my comfort. For example, in the summer, my wife wants to open up the doors to let the fresh air in, etc…but it’s HOT.  “Air-conditioning is expensive” she says.  I realize this…but I honestly just don’t care.  Don’t get me wrong, it’s not like I’ll have it a ice-box temperatures, but nor am I willing to sit there sweating, either.  Same with the heat in the winter.  This is where the “living a life” part comes in for me.  Yes, I can save money if I use less, etc…but the misery factor is a greater cost in MY mind. 

In fact, I do care about the cost which is why I enrolled with an alternative energy supplier  when they deregulated some of the industry in the early 2000s.  The setup was fairly straightforward in that the supplier would purchase more gas for me when it was cheaper (in the summer) and whatever I didn’t use would be put into storage.  Come winter time (when gas prices are considerably higher), I would use my stored reserves and if I ran out, would just purchase more at the prevailing market rates. 

For these alternative suppliers, there are typically two kinds of programs.  A fixed rate program for some period (1-5 years) or a variable one.  There are hybrids and what not, but you get the idea.  In my particular situation, I am on a variable one (do not remember why I chose it or if I even had a choice at the time).  Anyway, I’ve been with my current supplier since I switched in 2002.

Unfortunately, I haven’t paid a lot of attention until now (5 years).  I first called up my current supplier to ask them if they could provide me with a report that shows how much I am saving versus the default supplier.  Surprisingly, the answer was yes.  I got this in the mail earlier this week and it had a month by month breakdown of both my costs and consumption for the last 12 mos.  Strangely, the time period was from May 2005 to May 2006.  Consequently, I have given them a follow-up call and again to my surprise, they are going to send me a full report since I STARTED in 2002.  Excellent!

For our immediate purposes, however, let’s look at what they already sent me.  I got the report in paper form and since it would take some time to type, I won’t show it in graphic, but will summarize:

Price Per Therm for 12 month period:

Default Supplier – $0.9489
Alternative Supplier – $0.94360

Total Cost for 12 month period:

Default Supplier – $1,110
Alternative Supplier – $1062

Gross Savings =$48
+ Ending Value of Stored Gas = $38

Net Savings = $85

Alright, an extra $85 bucks for a year…it certainly doesn’t change my life, but every little bit counts eh? Ah, but upon closer inspection of the report, I noticed some “notes” about how the costs excluded this or that.  So, I decided to call and make sure I was getting a true and fair assessment.  After talking with the customer service rep, I discovered that there is a service fee of $0.84 per month which is not included here.  So, I now have to subtract about $10.00 from my savings…now totaling $75.  Still not too shabby, but I don’t like when things are not absolutely transparent and I can trust who I’m dealing with.

Remember, however, this is only for a single 12 month period.  I will have a much more accurate picture when I get the full report.   Regardless, I still need to figure out whether I can do even better with another supplier. 

To begin my research, I thought I would start with the Citizens Utility Board in our state who mission is to monitor and protect consumers in our state.  Again, to my surprise, they had a “Gas Market Monitor” that provides an analysis of natural gas offers.  NICE.  Maybe I won’t have to do so much homework!

What I read what a little bit unsettling.  It seems that despite the potential for savings, the overwhelming majority of alternative suppliers do not save the consumer anything.  In fact, the consumer often LOSES money versus staying with the default supplier.  Ouch.  Here are some figures below:

Summary of plans offered in Default service area Average Savings|(Loss) Number of plans Percent

Plans that saved $194.35 82 9.00%

Plans that lost -$496.75 794 90.00%

Plans that defaulted 6 1.00%

 I was also able to see the analysis they had conducted for my specific supplier.  Ouch. Ouch.

Offer date Plan type Term Usage rate Monthly fee Savings (Loss)
11/15/04 Variable
Changes Monthly $3.00 -$400.48
Alternative supplier A defaulted on its fixed rate plans, because customers were saving too much money. It then switched customers to its variable rate plan.

02/21/07 Fixed 18 months $0.97 $3.00 -$26.84

02/16/07 Fixed 18 months $0.87 $3.00 -$11.84

02/09/07 Fixed 18 months $0.87 $3.00 -$11.84

02/02/07 Fixed 18 months $0.87 $3.00 -$11.84

07/11/05 Fixed 5 Years $0.86 $3.00 N/A

06/07/05 Fixed 5 Years $0.80 $3.00 N/A

05/02/05 Fixed 5 Years $0.80 $3.00 N/A

04/05/05 Fixed 5 Years $0.80 $3.00 N/A

03/23/05 Fixed 3 Years $0.76 $3.00 N/A

03/08/05 Fixed 3 Years $0.70 $3.00 N/A

This definitely has me concerned.  I also noticed the $3.00 fee listed.  When I spoke with the customer service rep, he indicated the only thing now being charged is the $0.84 I mentioned earlier.   I do not know when that changed. 

So, at this point, the warm glow of my perceived savings has diminished, only to be replaced by the concern that I may have in fact lost hundreds of dollars during my attempted money saving venture.   I will be very interested to see the full report they are sending me. 

Regardless of what has happened in my particular case, what is still smash-mouth compelling from the analysis provided is that less than 10% of the programs save you a dime…and the average losses for those who don’t are significant. 

Has anyone else done this sort of research? Once I get my report next week, I will provide an update on my findings and what I intend to do.

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