Nstar fixed gas price

[duffless2323.livejournal.com]

So I got a letter from Nstar offering me, for a limited time, to lock in a gas rate of 0.9999 per therm from November -April 30. If I lock in this price, if rates go up, I win, if rates go down I lose, there is no opting out early.

Currently gas rates are 0.9799 per therm. I looked at my September bill and it was .87260 per therm.

I assume other people got this offer, I've never locked in gas prices before. I have a small/medium sized 1 bedroom. My cooking and heat are gas.

Any advice/thoughts?

Comments

[chenoameg.livejournal.com]

What were your rates per therm last winter? How many therms did you use? Can you pay your energy bill if the rate goes up to $1.50 a therm? What about $1.75?

The weekly forecast for energy prices expects them to be lower:
http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp

But the annual report expects them to be higher than last year:

http://www.eia.doe.gov/emeu/steo/pub/contents.html

[duffless2323.livejournal.com]

Well, I mean I can pay my bill, but especially as the sole renter, I like to keep my bills as low as possible. I don't have my records from last year as my previous apartment had free gas, I only paid electric. Prior to that I was with roommates and frankly didn't pay much attention.

I'd pass

[mattdm.livejournal.com]

Would NSTAR offer this if it averaged out to be a good deal for anyone but *them*?

Re: I'd pass

[ron_newman]

They may be required by state law to offer this. Not sure.

Re: I'd pass

[mattdm.livejournal.com]

I don't think so. See this article from last year:

http://www.boston.com/business/articles/2006/08/23/pilot_program/

Where, by the way, they mention that if they'd had the option the year before that, the average customer would have paid $178 more under the fixed plan.

But they do also mention that any extra that people pay will be "returned to all of the utility's customers the following year" -- in other words, they're not taking it as profit but rather using the extra money to reduce everyone else's cost.

Re: I'd pass

[chenoameg.livejournal.com]

It's possible they can hedge the cost to them by buying futures. All I know is that the high I paid for gas last year was almost $1.50 per therm, so the $1 per therm is looking pretty good.

If you can afford this risk, don't go with the fixed rate

[gruene.livejournal.com]

It's sort of like buying an insurance policy, on average, you'll lose money with the fixed rate, which is why NSTAR is offering. If you're on a tight budget and really can't afford an unexpected spike in prices, then maybe it's worth it. (Of course, prices could also go sharply down, if there's a mild winter...) Otherwise, I'd recommend just staying with the market price.

[rikchik.livejournal.com]

It's a gamble. I did it for last year and will again - .9999 and .9799 aren't that different, and it could go up much more than that.

Bear in mind that once you're signed up for it, they'll send you a letter the next year that says "tell us if you DON'T want to be signed up for it again".

[dreamgirly19.livejournal.com]

I got the letter last week and I checked my therms prices for last winter. For January/February last yr the prices were around 1.0599 and March was less with April being .085ish. So it looked as though for last yr and the yr before we really didnt go too high and the end of winter for us looked like it was less. We made the decision not to go with it...the amount saved wasnt that much in our eyes to lock in something.

[themotionsick.livejournal.com]

The tone of the letter pushed the consumer to go for it. That indicates to me that it's a bad idea. I think if NStar thought it was not in their benefit, there would have been much more cautionary language included. Of course, as everyone has said, you are taking a risk by not going for it.

[librarybrandy.livejournal.com]

We got that letter, too, and did a little hunting for information. Two late-September articles from the Globe, though, suggest that natural gas prixes will be lower this year (http://www.boston.com/business/articles/2007/09/18/heating_with_gas_likely_to_cost_less/) and it's pretty much a crap shoot anyway (http://www.boston.com/business/personalfinance/articles/2007/09/23/cold_comfort/).

quote from that second article

[mattdm.livejournal.com]

Hmmm. I know this is a little late, but seemed worth posting anyway. I just got around to reading that second article you linked (thanks), and actually it talks about it being a complete gamble for oil, but basically a likely bad bet for natural gas. Relevant excerpt from the second page:

[...] The fixed-price protection plan costs an extra 2 cents per therm, or a total of $18 to $25 depending on the customer's winter gas consumption.

The cost of the protection is relatively cheap, but the odds of it saving you much money are slim. NStar already hedges against price volatility by buying in advance two-thirds of the natural gas it thinks it will sell during the winter.

Only a third of the gas it expects to sell is purchased on spot markets, meaning the spot market price has to fluctuate a lot to trigger a change in the overall price customers pay. The utility is required to adjust its customer gas price when its overall gas cost rises or falls by more than 5 percent during the winter.

Paul Fleming, director of power and gas at Energy Security Analysis, said he doesn't expect wild gyrations in natural gas markets this winter, barring any unforeseen incidents.

Last year, NStar never had to adjust its initial winter price and the 13,590 customers who signed up for fixed-price protection saw no benefit. Since gas utilities are not allowed to earn a profit on gas they purchase for their customers, the extra money consumers paid for price protection last winter was used to purchase gas for all of the utility's customers this winter.

[icecreamempress.livejournal.com]

They just called me (well, a machine just called me) on the phone about it.

That smacks of desperation to me on their end. Those of you who did select this option are allowed to snicker at me if you prove to be right, and I prove to be wrong.

[an-art-worker.livejournal.com]

I got it too and thought (cynical mode == ON) why would they offer a lock in if they didn't think they would benefit? My Rodney King side ("can't we all just get along") cries out in pain: why do we have to "shop" for basic needs? I would opt for state control of energy, health care and food. Let the marketing shills plays games on the SUVs and other unnecessary items.

But I digress... ;-)

I only use gas for hot water/cooking so it is not a major expense here.

[ellf.livejournal.com]

I would opt for state control of energy, health care and food.

Ah, so, it would be better if our energy, health care, and food were all equally shitty, delivered late, and cost 3x as much as it would on the open market? :)

[mattdm.livejournal.com]

Right now, there's a state-sanctioned monopoly, so I'm not actually sure just having the state do it directly would be much worse.

[chumbolly.livejournal.com]

Yeah, I was going to say, gas utilities have to get their rates approved through a regulatory rule-making process (I'm working on one today, how fun!). Essentially, the state says, you get to make X, so you may charge Y, which equals costs plus X). On an individual basis, this fixed-price deal may cost a particular consumer more or less, but the gas company won't be keeping a windfall. I'm sure that the driver on this is not a profit motive, but a response to consumer demand to level out prices. I would not be surprised if the state required NStar to provide this option. Given the volatility of the natural gas markets, it seems like a consumer-friendly hedge to me, but I'm taking my chances and not taking the deal.

[an-art-worker.livejournal.com]

I also support wrestling to decide the fate of the world..

UN/WWF merger!

[braingeyser.livejournal.com]

I just assumed they chose to distribute the offer now a result of some price spike due to the Turkey situation. I could swear there were drops of saliva on my letter where someone had been drooling over the possibility of getting us to lock in the highest rates we could possibly get (barring when we start a new war). But I didn't look back to my pre-war bills to reference it, so I can't say.