Monday, February 13, 2006

Natural Gas - The Good, The Bad and The Ugly

The good: I still recall being somewhat suspicious of all the gas providers that came knocking in the weeks after people began moving into our new subdivision. However, with the 30% rate hike that took effect in January, I sure am glad I signed up when I did with a 3-year fixed rate plan with Select Power. This took effect just as natural gas rates rose in January by 30% and while I'm saving only a fraction of a cent per cubic meter at present, I'll definately benefit as prices rise. (Gas rates have gone up 400% in Ontario since 1999.)

The Bad: As a new consumer client, Union Gas put me on an equalized billing plan (EBM), meaning that they fix the amount I pay monthly and then reconcile any balance outstanding after 11 months. Though I like the fact my gas bill is predictable and even throughout the year, I have a $175 balance accued in my favour. The EBM rate of $150/month seems to have been applied pretty arbitrarily at the time the account was setup as no one bothered to inquire about the size of my home, number of occupants, number of gas appliances etc.

The Ugly:
As promised, Union Gas reevaluated my equalized billing rate this month based on my usage, current weather, etc. and astoundingly, they lowered my monthly billing rate by one cent. Yes folks, my new equalized billing rate is $149.99 (!) and I still have $175 in my favour!


Anonymous Stephan said...

Curious to know how your gas costs compare to our $0.2951 per cubic meter here in Sask?

2/13/2006 11:44 PM  
Blogger Humble Investor said...

Hi Stephan - our rates were similar at $0.319425/cubic meter until January, when they rose to $0.416725/cubic meter. I'm paying $0.41.

Aside from the commodity charge, we are also billed on the entire supply chain, with additional costs/cubic meter for:

- Transportation to the gas retailer (Union Gas)
- Storage
- Delivery to the consumer

I may look at some insulation upgrades or similar investments for next winter if rates continue to rise.

2/14/2006 7:20 AM  
Anonymous Canadian Capitalist said...

HI: FYI, $0.41/m^3 was set in November when the spot market for natural gas spiked. My guess is come April, the rates are going to come way down as Natural gas has plummetted from a very recent high of $15 per million BTU to as low as $7.50!

I have a couple of posts on this topic:

2/14/2006 9:05 AM  
Blogger Humble Investor said...

Thanks CC - I have to confess the whole manner in which homeowners can purchase gas scares me. Either they lock in (and risk prices dropping a la the data you cite) or ride the market price and hope things stay fairly constant. Fear is exploited by both camps.

I'm going to track my gas cost, the market price and my usage over the next 12 months to see whether or not locking in was a good idea.

2/14/2006 9:22 PM  

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