Shopping for Natural Gas – Part 2 – Evaluating Natural Gas Offers

Part 2: Evaluating Natural Gas Offers

So you’ve found your state government’s site that helps you sort through natural gas offers. If you haven’t – you may need to call your utility company and ask how to locate the website. They will be happy to help you determine what price you have and what offers may best suit your needs.

Let’s jump into evaluating offers. Each offer is going to have a handful of moving parts that you as a consumer need to be aware of.

  1. Price to compare
  2. Price Structure – fixed or variable
  3. Term Length
  4. Fees and charges
  5. Features and benefits

1. Price to Compare
The price to compare (PTC) is the cost per CCF or THM you would pay for natural gas supply with the utility. This is the cost you want to compare to when choosing a price from another supplier. Websites like PA Gas Switch have a standard format that helps you understand what the supplier PTCs are. Remember this paragraph from yesterday:

 

It’s just like shopping at the grocery store and choosing a product based on a lower price.  However, there are reasons a company’s price may be higher – they provide you with additional benefits, like a Rewards Program, or a renewable energy source. These programs actually benefit you, so be sure to carefully weigh your options. You get what you pay for.

 

Example of where to find the Price to Compare.

 

 

Example of where to find Columbia Gas's price to compare on PA Gas Switch.

 

 

2. Price Structure - Fixed or Variable
Most suppliers offer both fixed and variable price. For this reason, we will cover these price structures here. To make matters easy, I’ll just take the definitions from PA Gas Switch, please reference the definitions for these structures in your state, but they should be very similar.

Fixed price – An all-inclusive per Ccf/Mcf/Dth price that will remain the same for at least three billing cycles or the term of the contract, whichever is longer. A fixed price will remain the same, usually for a set period of time. This will give you certainty that your price will not change during the term of the agreement. However, if market prices fall you may have to wait until your contract expires to get a lower price.

Variable Price – An all-inclusive per Ccf/Mcf/Dth price that can change, by the hour, day, month, etc., according to the terms and conditions in the supplier's disclosure statement. If you select a variable rate, the rate may change with market conditions. So if market prices increase, your rate may increase. If market prices drop, your rate may decrease.

See the difference in these prices? Fixed prices must remain the same based on the term length (we will talk about this next) that you agreed to with the supplier, while variable prices can change based on market conditions. It typically benefits BOTH the customer and supplier to be on a fixed rate: the customer has an agreed upon price for the product they will use, and the supplier can plan how they buy natural gas to provide you with this rate.

3. Term Length
When choosing a supplier offer, it is important to understand the term length that you are agreeing to. Many suppliers have standard term lengths like 6, 12, and 24 months. These allow customers to maintain a certain rate over a longer period of time. Typically the longer the term length the higher the rate – this has to do with the supplier planning for variance in the market.

Some suppliers offer promotional rates for shorter periods of time – 1, 3, or 4 months. These rates offer you a great way to try out the supplier and see if you like the features and benefits they offer. However, as a consumer you want to make sure you don’t get switched to a variable rate at the end of your short term.

Tip: It’s a great idea to put a reminder on your calendar in your phone to switch your rate before your term length runs out. But watch out for cancellation fees!

4. Fees and Charges
When enrolling with a supplier, there are a few fees you should watch out for: Monthly Fees, Cancellation Fees, and Enrollment or Deposit Fees. These vary by different offer and not all suppliers uses all these fee types. Nor are all offers from a supplier uniform – some may have different fees than others. Here they are broken out so you are aware of what they mean.

  1. Monthly Fees – these are fees you pay every month to take advantage of that specific offer.
  2. Cancellation Fees – a fee you will incur if you cancel before the term length. Some suppliers do interesting things with cancellation fees that decline over the length of the contract – by way of example the cancellation fee may be $10 a month for months remaining on contract.
  3. Enrollment or Deposit Fees – these are fees you incur up front for enrolling in the program – by way of example a setup fee.

When shopping for offers from suppliers it is good to look for plans that carry no additional fees. Many of the government website will allow you to filter and exclude the fees. But as you navigate away from the government controlled environment and shop with a supplier, always take the time to verify that the rate you are choosing doesn’t carry fees by looking in the terms and conditions.

Tip: Look for plans that don’t carry any of the fees.

5. Features and Benefits
Many suppliers these days are providing additional value to their customers by offering interesting features and benefits. From airline points or donations to your favorite charity, to cash back and rewards programs, suppliers are enticing you to sign up with them.

 

Shipley Energy Rewards Program
Shipley Energy Rewards Program

 

This is where consumers need to be careful and shop intelligently. Be wary of offers you receive in the mail by trusting but verifying your utility’s price to compare with the offer’s prices, and look at the price structure and for fees. In Part 3 we will talk about maximizing your benefit.

 



This is part two of our three part series on How to Shop for Electricity for Your Home. If you would like to read ahead, feel free to!