Posted on 09/30/2005 4:12:55 PM PDT by babyface00
I recently received an offer from Dominion East Ohio to lock in my natural gas pricing at $12.75/mcf (million cubic feet) for the next three years. I'm paying $9.79 right now.
It seems like a good deal, based on what the buzz in the MSM is about gas prices this winter, but I'm just a consumer and don't know all that much about NG markets.
Long term, I can cancel the agreement if gas prices drop for a $50 charge. If I move, I can transfer it to my new place at their discretion. If I move out of the service area, I can terminate with no charge.
Any knowledgeable FReeper advice on this?
I know NOTHING about the Natural Gas markets, but this seems to be the wrong time to lock in ANY long-term fossil fuel price. Prices are WAY UP! Sounds like the company is betting that prices will fall.
How could you make out ?
I think its a great deal. I own some overrides on some of Dominion's gas wells.
Get your gas for free. Eat beans. [Sorry, couldn't help it. =]
"Long term, I can cancel the agreement if gas prices drop for a $50 charge."
How long term? How much do you have to buy?
Say you lock in, due to conservation and more supply coming in that prices plunge. All you have to do is pay $50 to get out? Do you have to buy a certain amount at the locked in price before you get out?
If there is no minimum it would seem like you could put a ceiling on your cost but keep your floor price open for $50.That would seem like a good deal if it works that way.
Maybe you could take the $3 difference, keep your current provider and buy call options on natural gas to hedge against increases. Prices go up, you lose on heating your home but you make money on your option contracts. If prices go down, you only lose what your option contract cost but save on your gas costs. It's like financial magic.
Buckeye here.
I got nailed on this last year.
Here's the deal - Dominion shed its distribution company (same name with slight difference) a couple of years ago, and now distributes directly. This Dominion distribution company is allowed to keep the name and compete with the ones who actually deliver the product.
Before you sign anything, call your actual provider, tell them what you received, and ask them if they have an alternate price choice.
We signed up, received a call and were told the story, and the offer from the utility was better than the distribution company. I hope this makes sense.
I can't believe a pain-in-the-ass phone call from last year has provided relevant information today.
Don't ask me to explain how that works, because I don't want to write a term paper here, but essentially what they're doing is allowing you to hedge at that cost which protects you from price increases.
Unfortunately, it also locks you into that price if prices fall.
I'd do it.
I'm in the oil and gas business and you only have to look at the futures prices on the commodity market to see what prices are likely to be this winter.
If that's correct regarding only a $50 penalty for getting out of the deal, I'd snatch that up.
I didn't check today, but January gas prices were over $14 per mcf earlier this week.
It's going to be several years before we can build the LNG plants this nation needs to import natural gas, and it may be longer than that if the Californians and Floridians continue their environmental opposition.
All I can say is this. If that offer was extended to me, I'd take it. Otherwise, you might well be paying $15/mcf in a couple of years.
The October natural gas contract shot up by $1.25 to a new high of $13.91/MMbtu Sept. 28 on the New York Mercantile Exchange. So that means it went up by 9% in one day.
You gotta expect they offered the deal expecting to make money, that, is, they are likely hedged out a year or so, so that they can not be hurt too badly.
Still, when you calc the difference between bulk wholesale and your retail rate you are likely to see some saving later this winter.
Even if your distributor is hedged as far as his costs are concerned, you are not guaranteed he will not charge what the traffic will bear to you. (In fact, you can rest assured he will charge what the traffic will bear, and that might be quite high if the other suppliers in the area are not as well hedged as your supplier.)
He locks in about a 30% increase, but allows you an out for $50. Compare that to your heating bill for one month.
Sure they will. But first they are going to rise.
So if he can save $50 in the near term (this winter) before they start coming down again, the deal pays for itself, because it only costs him $50 to get out of the deal.
This thing works fantastic and heats up to 800 square feet.
I use one and it has cut my gas bill by over half and made my electric bill go up by only 35 bucks in the coldest part of winter.
These heaters are extremely safe and opperate for pennies a day.
I live in Ohio and have had one for over 5 years.
I won't be without one ever again.
In my opinion they wouldn't be making such an offer unless they were pretty sure of it.
Ventless fireplaces (even those claiming no open flame) are inherantly stupid. You will not the website is down for that company.
I have some Nigerian faxes you should read too.
bump (be right back with a chart).
1. Price Outlook - High and rising. Some see another 50% higher.
2. Fundamentals - lots of gas in Canada. But successive wells much smaller. US toying with LNG. But none of this near term enough to stem prices.
3. Fossil fuel price impacts - put enough spikes into energy prices, and you will see same thing that CA energy markets did in 2000-2001. Meaning: high prices ($300+), followed by sharp drops ($7).
4. Bottom line - a lot depends on your exposure to high prices. If it is just to heat your home, consider locking in some of your exposure (assuming you could cover half). Let the rest float. However, if this is just a home heating strategy, find other ways to make enough money to offset your 'pain' somewhere else.
Take the deal.
May not be a bad move to do so. The green Nazis are insisting on all new electric power plans be gas fired, yet, they will not allow LNG offshore terminals to be built.
Domestic NG supplies are severely limited, without LNG ships from abroad allowed to offload, supply will only get tighter thanks to Greens creating competition betwixt home heating and electrical power generation.
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