Residential Natural Gas Recomendations

It’s that time of year when northeast Ohio homeowners start wondering what the best deal for natural gas is. As always, the PUCO website (http://www.puco.ohio.gov/Puco/ApplesToApples/NaturalGas.cfm?id=4810) provides updated comparisons of prices. This newsletter provides my thoughts on the current available offers.

Fixed rates

Many MICA members are still with MX Energy one more year (until July of 2008) at $9.55/Mcf due to the three-year contract. Most of the present fixed rate plans are at $9.75 or higher. I think this price is unreasonably high given the large inventory of natural gas currently in storage. This, coupled with a declining NYMEX trend (October gas fell to $5.72/mmBtu briefly on 9/21) leads me to recommend, for those not currently under contract, a variable rate plan.

Variable rates

Although, there is always a degree of price risk and uncertainty with variable rates, I am of the opinion that Dominion East Ohio’s default Standard Service Offer (SSO) is presently the best available rate. Currently, their price to compare is $7.21 per Mcf through October 14. This variable rate, as would be expected in a non-heating month, is lower than the fixed rate plans available now. With a big surplus of natural gas going into winter, I would expect this rate might begin to decrease over the coming months. Many of the leading forecasters have yet to release predictions for this winter. However, if it is projected to be mild, NYMEX prices will fall much lower than the fixed pricing presently quoted for this wither. Even if there are below average temperature predictions and subsequent inclement winter weather, I find it very hard to justify the present risk premiums built into fixed rate contracts. Ultimately it comes down to how much risk you are willing to take with a variable price.

Lastly, be wary of any prices you get quoted by marketers. Often times they will only quote you on the NYMEX price for gas without factoring in taxes, transportation, and other miscellaneous charges. That is why it is so beneficial to visit the PUCO’s website when making comparisons. The table below shows a sample comparison for a customer who uses 10 Mcf of gas in a month.

Michael W. Brakey, President