
I'd like to try to save money on my natural-gas bill this winter. Can I lock in a price for the season?You can, but only if locking in a price is an option where you live. If you're in a state where utility companies handle both the supply and the delivery of natural gas, you can't lock in a price since utilities may offer only variable-rate plans, in which you pay the current market price.
But if you live in a state in which the supply and the delivery have been unbundled, you can shop around for the lowest price from natural-gas suppliers, aka marketers.

To determine whether this "customer choice" is available where you live, check the
Natural Gas Residential Choice Programs map from the Energy Information Administration or go to the
Web site of the public-service or public-utility commission in your state, which might include a list of reputable marketers.
Marketers offer a range of pricing options, including fixed-rate plans, in which you lock in the price for the life of your contract; variable-rate plans; and capped-variable-rate plans, in which the price floats with the market but not above a set limit. Marketers might also offer deal sweeteners to get you to sign on with them, such as 10 percent off your highest gas-use month or a $75 debit card.
"Fixed-rate plans are for the risk averse," says Steven J. Maslak, president and CEO of
Gateway Energy Services, a natural-gas marketer with 300,000 customers in eight states. Yes, you'll lose out if the price drops, but, says Maslak, "you'll be singing hallelujah if a hurricane hits the Gulf of Mexico" and prices start to climb. A colder-than-expected winter or geopolitical unrest somewhere in the world could also drive prices up suddenly. (The chart, from GES, shows the recent price drop for natural gas.)
The EIA's recent projection that average U.S. consumers who heat with natural gas will pay 12 percent less this year than they did last winter might tempt you to lock in the price with a fixed-rate plan. But, remember, the EIA's projections, which are relative to the previous year, can change. For example, in September 2008 the EIA projected a 20 percent increase in winter-heating bills. By December 2008, the EIA had projected a 2 percent decrease. So opt for a variable-rate plan if you don't mind rolling the dice and dealing with prices that fluctuate monthly.
That element of uncertainty might make the capped-variable-rate option a good middle ground. You benefit from falling prices without taking too big a hit if the cost of natural gas goes up.
Whichever way you go, consider a budget-payment option, which levels payments over 12 months and eliminates wintertime spikes. You can also save yourself some money by reading the fine print before signing a contract. For example, marketers usually charge an early-termination fee on a fixed-rate plan, so make sure you understand the terms and verify that the termination fee isn't exorbitant ($200 is average).
Also, check that the price you agree to is "to the burner tip." That means it includes any pipeline, storage, and other ancillary charges that an unscrupulous marketer might try to tack on to the price of the actual fuel.
—Daniel DiClerico |
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FacebookEssential information: The best way to save on winter heating costs is to
make your home as efficient as possible. Start by
installing a programmable thermostat and following our advice for buttoning up your home. For more information on energy pricing, read "
How to Buy Green Electricity." Stay on top of the latest news surrounding the
cash for clunkers for appliances program.