Saturday, February 25, 2006

More on Electricity and Gas

The Toronto Star reported that consumer gas rates are indeed, likely to fall this spring, according to Enbridge. While great news for the vast majority of consumers, those that signed fixed-price contracts under 'the sky is falling' pretences (um, myself included) will, at least for a while, have to pay more as the promise of higher rates and a mathematical savings remains elusive, at least for the first half of the calendar year.

On the other hand, electricity rates are likely to rise at about the same time. The Ontario Energy Board writes:
In the spring of 2006, and every six months after that, the prices you pay for your electricity may change based on an updated OEB forecast and any difference between the amount consumers paid for electricity and the amount paid to generators.
With locked in gas rates and a electricity increase nearly certain, I'm just glad the winter will be over when the double-whammy kicks in.


Anonymous Average Joe said...

I have had these salesmen come to my door in the past either trying to sell me electricity, natural gas, etc...

I have always sent them away before they even got a chance to open up their literature.

First of all, it worries me when a company has to send people door to door just to get my business. Obviously, it must not be worth my time to go to them, they have to send people to my house.

Secondly, these companies have to make money. They have to pay the going market rate to buy the commodity. Who do they buy the energy from? Probably the same company that I do. Then they have to add their profit on top.

My personal theory is that it is better to just stick with the going rate. I could be way off (and it wouldn't be the first time!), but I just don't trust the tactics that these companies use.

2/25/2006 2:39 PM  
Anonymous Anonymous said...

They're really just selling you an insurance policy. They use hedging to cap their downside, effectively setting their floor price for the commodity. Then they lock you into a contract above that price + hedging costs.

I have no patience for door to door insurance salesmen. But for some people, having the option to at least buy this insurance can be a good thing.

7/08/2006 10:16 AM  

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Disclaimer: These articles are for information only, and are not to be construed as financial advice, legal advice, or a solicitation to buy or sell securities.