Natural Gas/Electricity Contracts

[Bobblehead]

I had some representatives of Direct Energy at my door last night trying to get me to sign up. They were saying Enmax has requested big jumps for electricity over the next couple of months. Can anyone confirm this or have any extra information?

Generally, in the long run I find market prices to be better, but to lock in and avoid a short term hike would be nice, too.

Anyone have any knowledge of the short term trends? Can anyone offer any advice?

[GrrlGoalie33]

I generally don't like contracts. That being said, I can't see energy prices going down any time soon...

[Mr.Coffee]

I used to work for Direct Energy doing that exact thing. I know the contracts fairly well. If you can give me a few answers to these questions, I can definitely help you make the right choice.

Absolute first- what price are they giving you? Does it drop every year? Specifically how much? Look at the price on the contracts, which I believe is on page 2. Direct Energy, and well, everybody, changes their prices according to projected futures pricing into the winter, etc.

Second- Are they offering you a seasonal product, or is it full year/all year fixed rates? When I used to work for them they were offering a seasonal deal... and after a year of following what happened to prices, the people I signed up to the seasonal definitely would have saved money. No question. However the people that I signed up to the full year, possibly not- although if there was a difference... likely not a big one.

Third- What are your choices for length of term, is it still 3 and 5 yrs?

Gimme a quick reply and I can get you some good advice.

[Bring_Back_Shantz]

I had those same guys at my place a few months ago, and I didn't even realize until they were done that they were trying to sign me up right there and then, I found it a little unsettling.

They came across as trying to scare me into signing up, and if I didn't know what they were talking about I might have done it.

One of the things that really bugged me was that they said that the last time there was a change in the method companies used to buy power (this had something to do with enmax changing how they buy power I think, I can't remember), but they said that prices jumped a few hundred percent, and that that was possible again, especially with the recent increases in natural gas prices.

They had no respose when I asked them the following three questions:
1) Wasn't that huge increse you spoke about a result of the privitization of utilites, and what relevance does that have on today?
2) Aren't natural gas prices lower now than just a few months ago, and with gas storage volumes very high, what makes them believe gas prices are going to rise much soon?
3) How much relevance does gas price have to electricity prices in a province where the most common method of power generation (almost 50%) is coal power? (I realise that natural gas is #2 on the list at something like 40% and that indeed this means that gas prices affect electricity prices greatly, but it would be nice if they knew that).

They really had no answer to any of these questions, and I politley said, no thank you I'll stick with what I have.
I'm sure these guys were just run of the mill salesmen, and didn't look very old, but if the company they're trying to sell for is going to give them all of that "imformation" to give to customers, it would be nice if they actually knew what they were talking about.

[Mr.Coffee]

Originally Posted by Bring_Back_Shantz

They had no respose when I asked them the following three questions:
1) Wasn't that huge increse you spoke about a result of the privitization of utilites, and what relevance does that have on today?
2) Aren't natural gas prices lower now than just a few months ago, and with gas storage volumes very high, what makes them believe gas prices are going to rise much soon?
3) How much relevance does gas price have to electricity prices in a province where the most common method of power generation (almost 50%) is coal power?

1. The privatization of utilities was most certainly an influence. However you can't just blame a spike in the price of a commodity as to one reason, as you probably are aware of. Last winter, for example, the price of gas hit $15.00/ gigajoule and cost many Albertans a lot more to heat their homes. This price spike was blamed primarily on the deadly hurricane season wiping out many rigs in the gulf- but that wasn't the only reason. There were shorter then expected storage levels as well.

Also, weather plays a large part in the cost of natural gas. As of RECENT, your right- the price of gas has been low. However you'll probably notice that last week and again this week, the price continues to rise. Why? It is largely rumoured to be because of the extensive heat in the United States, thus increasing the air conditioning usage in major cities. This actually a ligitimate concern for natural gas users because it means that the summer storage season that was previously going so well, is not as full as we expected (last week it was down to 9BCF from 21!).

2) I kind of answered this above. But nobody really knows what the price will do, otherwise you'd be a millionaire. It's all about predictions. If you believe that the price will stay constant, or go down... you don't want to sign a contract. If you believe it will go up, you'll want to consider it. This scenario is also to be considered over the long term, because contracts like these are designed for 3 or 5 years. Like I said, there are probably about 5 or 6 good reasons why the price of natural gas varies. Supply shortages beginning to occur this summer, possible hard winter ahead, possible higher demand rates in major cities next winter are all viable reasons you could see a rise in prices.

3) That's a great question, and a tough one for the sale dude so I'm not surprised they were stumped... it's actually a lot tougher talking to people about this then you'd think. Natural gas prices ARE tied to electricity prices, but like you said- coal is a larger contributor to said price. I know that last winter, from the contracts I had signed people up to, they had saved money on gas, but actually probably lost money on electricity. That's also because Direct Energy itself doesn't usually give as good electrical rates as Enmax. Direct Energy also used to push the fact that you could "combine the utilities" into one payment, which was ridiculous- because if you stopped to think about it, you were still getting one bill from DE for gas/electric and then another from Enmax for Sewage/water. The only true combination comes from Enmax, because they have the ability to combine all utilities. If you did sign with Enmax, they'd also probably give you better electric rates (but conversely probably worse NG rates).

[arsenal]

If you like, check out EasyMax from ENMAX. I wont link to it from here, but it can be found easily on the ENMAX website.

You can select Matched, 1 year or 5 year rates, as well as get gas on the same bill. Also, you can cancel or switch your plan at anytime.

[firebug]

How about hedging yourself against commodity price increases.

Natural gas weighted juniors are very cheap right now and will likely see further softness through September. However, if Ntr Gas prices strengthen in the winter you may see a nice return to offset the increased costs of your utilities.

Talk to your financial advisor.

~bug

[V]

I have a simple rule. If utilities want you to sign a contract it isn't good for you. Sign a contract when there isn't a promotion.

These guys came to my friend's door a couple of months ago, and they said he had to sign the contract right then and there or else the deal was off. He sent them walking and then contacted me because I've had some experience dealing with energy contracts. I called up Direct Energy and found out that you can sign the contract any time.

So don't get bullied, do some research and then decide if the contract is good to sign. It could work out to be a good idea.

[Mr.Coffee]

Originally Posted by Dominicwasalreadytaken

I have a simple rule. If utilities want you to sign a contract it isn't good for you. Sign a contract when there isn't a promotion.

These guys came to my friend's door a couple of months ago, and they said he had to sign the contract right then and there or else the deal was off. He sent them walking and then contacted me because I've had some experience dealing with energy contracts. I called up Direct Energy and found out that you can sign the contract any time.

So don't get bullied, do some research and then decide if the contract is good to sign. It could work out to be a good idea.

Lots of people are just afraid to sign contracts, and rightfully so. You don't have to sign the thing, even if they try and make it sound like you do. I know that there were guys on my team that were into the pressure gig, but I definitely was not... I guess it's just two different ways of selling. Mine worked because people felt comfortable.

Dominic is right though. Don't get bullied. I should let you know though, that the moment you've signed the contract- DE has already made their money. This is because they prepurchased a crapload of gas in future markets at lower prices, and so when they sell it to you at a fixed price- or profit- that's their margin. So they don't really care where the price ends up, whereas the consumer is because it will determine whether or not money is saved.

If your going to sign up, do it through DE's website, because you get more airmiles.

You will also spend less in "administrative fees" in a contract based utility set up, although the amount probably wouldn't be anything worth partying over.

I must say though man, I just visited Direct Energy's website... and they're prices are being quoted at 10.49 and 10.89 (seasonal)!!!!!.

Those are awfully high... about two times the current price.. and considering that although last winter the price did go pretty high, it was only in a couple of the months.

Bobblehead I really don't think you should be signing at anything over 9.00... seriously. You'll probably lose money.

If you wanted to gamble the price is increasing you could do what somebody else mentioned and hedge.

[Bobblehead]

Originally Posted by Mr.Coffee

Bobblehead I really don't think you should be signing at anything over 9.00... seriously. You'll probably lose money.

If you wanted to gamble the price is increasing you could do what somebody else mentioned and hedge.

Thanks. Keep the advice coming. I view this similar to locking in my mortgage. If you can deal with the risk, you are better off putting up with the occasional spike.

I'll hear them out, find out what rates they are offering, but when they say "You can only get this rate from me tonight" I'll call them on it then send them away.

[Mr.Coffee]

Originally Posted by Bobblehead

Thanks. Keep the advice coming. I view this similar to locking in my mortgage. If you can deal with the risk, you are better off putting up with the occasional spike.

I'll hear them out, find out what rates they are offering, but when they say "You can only get this rate from me tonight" I'll call them on it then send them away.

The 'you can only get this rate from me tonight' could be a valid statement if they are selling at the end of a pricing period, and it's expected that in their next pricing period (they are usually about 3 weeks to a month) the prices are going to go up. That said, you can just go online and do it, get more airmiles- and not have to deal with said salesperson.

But again- don't sign at over 9 man. I know I wouldn't. That's a high price to fix yourself at over 5 years.

[Cheese]

Energy Shop gives you a better glimpse of market prices you can buy in your particular area...

Energy Shop

Working in the field (Electrical Engineering to be specific) I have yet to change or lock in from the Market. The rates to lock in are simply too high to benefit at this time. Same goes with Gas.
The things to watch for in the Gas market are the Transportation Rates. Fixed Transport is desirable, but you will find that you will pay more for transport or a floating range for this than what is offered in Market values. Floating ranges are dangerous as they could be 5 cents a cubic meter today and 10 cents next month....a big jump. Look at your bill for current transport costs.
Winter is always the months where these rates climb and our bills get uncomfortable....but watch the summer rates drop and in the end its still best to stay Market. It would take steady increases and holds on those increases over a period of 3 or more years to make locking in worth it.

Here in Ontario we paid Gas rates at 42 or 43 cents per cubic meter last winter with a 5 cent delivery rate I believe on top of that. Presently we are at 34 or 35 cents.

Apologies for cubic meter vs Gigajoule comparisons (Alta vs Ont).

Electricity lock-ins are simply not worth it at this point in time.

You will also PAY large penalties if you try to opt out of "most" programs before the lock expires.

[Cheese]

Originally Posted by fotze

I know someone who signed one of these years ago. The company tried to to buy out the contract for $2000.

yep there were a few ignorant companies when it all started up...it would be tough to find that same ignorance now....but if you do let us all know!