Natural Gas SCO - "Hedging"?

[zeitgeist57]

http://pickocc.org/publications/natural_gas/Comparing_Your_Energy_Choices_COH.pdf

 

I've been getting letters in the mail, enticing me to "hedge" my natty gas prices through the winter. Is anyone else doing this or looking into it?

 

For a medium-sized suburban home, I use a good amount of heat. However, current rates are around $0.41- $0.42 a CCF, and IGS Energy for example want's $0.589 per CCF??? I can't imagine the way NatGas is being extracted and inventoried in this part of the country that it's going to go THAT high.

 

Truthfully, I don't know what I'm currently paying through Columbia Gas.

[ImUrOBGYN]

Ditto, here. I get these offers constantly but I'm always hesitant to switch. It's driving me crazy.

[iwishiwascool]

Talk to DJ. He does this for a living.

[AngryBMW]

Talk to DJ. He does this for a living.

 

Truth. He will give you a great education.

-Marc

[Orion]

I do not recommend signing a contract for natural gas. Forecasts are that the cost of NG (currently trading under $3 per 50,000btu) is going to stay lower than usual throughout the winter due to the storage glut we are currently experiencing. Last years warm weather cut NG usage by more than 50% thoughout the US, and we have only added to our storage throughout this year, so much so that companies are shutting down wells as it becomes cost prohibitive to operate them (FYI, NG hit a 15 year low price of around $1.65 in the late spring)

 

Here what all that means to you. You are on a "market" rate from Columbia (most likely) currently. That means that as the market moves, your price will fluctuate. There are fixed costs built into the tariff, sure, but the majority of your cost is variable. What you are being offered is a fixed price, over a term (probably 12 months). I can't be certain, but that rate is probably higher than what you are currently paying by a small margin. What they are selling to you is more like insurance than NG. You will be gambling that the market wil rise above the rate that you have signed for. If it does, for an extended period of time, then hey, you win. If not, then you paid more than you had to. Given what I know about the NG market, and what I am being told by people far smarter than me, I am wagering that the market will stay low. My recommendation, therefore, is that you do as well.

 

Disclaimer: There are something like a hundred other pressures on the market right now, and I would be happy to chat with any of you about them over lunch, dinner, or drinks sometime, but this is the simplified version. Hope this helps!