Natural gas prices have been increasing in recent months, and last week they went higher. I’ve compiled some things you need to know and some advice as we head toward the calendar’s coldest stretch.
Prices are rising
The price of natural gas has been slowly inching up in recent months. On Wednesday, the price on the New York Mercantile Exchange, which trades natural gas futures and is the basis for pricing, closed at its highest level in 12 years. That’s bad news for those of us who have been on the Standard Choice Offer or SCO, through Dominion. The October SCO, which was set based on Tuesday’s price, is going to be $5.99 per thousand cubic feet (mcf). It first started creeping up past $4 in August with $4.19/mcf and then again in September at $4.52/mcf. The price had been hovering in the $3 and $2 range for several years.
The last time it broke $4 was December 2018 at $4.79/mcf, but that was temporary. You have to go back to 2014, when prices were more often in the $4 and above range.
The rise is from a number of factors, said Vicki Friscic, director of regulatory and pricing for the regulated utility, Dominion Energy Ohio.
National gas inventories are below the five-year average, which is a typical benchmark used and is what tends to make the markets nervous when inventories drop, she said. Our cold winter and warm summer (with more electric plants using natural gas) have also contributed to that lower inventory.
Remember when the shale gas boom was a great thing for us here in Ohio? We enjoyed many years of lower prices because there was an abundance of natural gas in the system due to that shale gas. Now there’s increased global demand and exporting of liquified natural gas and that drives prices up.
Natural gas rig operators will deploy fewer rigs when demand is low and market prices for gas are down, which then forces prices up, said Chuck Keiper, executive director of NOPEC, Ohio’s largest nonprofit energy aggregator providing gas to 206 communities.
“I think this is going to be the new norm as long as natural gas is king of the hill,” he said.
Projections indicate that global prices may ease after the winter, and the federal government’s Energy Information Administration is projecting an increase in U.S. production in 2022, which will cause downward pressure on prices, Friscic said.
But that doesn’t help us for this winter.
Historically, costs are still low overall
While these prices are higher, it is not something to panic about. When I first started analyzing natural gas prices 21 years ago in 2000, the “best” price was $4.91/mcf. Then there were years when $6 to $7 were good prices and even $10 to $12 were normal. Some people were paying $16/mcf rates.
“It feels like an increase to customers, but we enjoyed that period of low pricing, so I think it’s stabilizing now,” said Friscic.
Added Keiper: “if you normalize this into real terms, with $5 or $6, we’re paying on par what our parents paid as a percentage of their income in the 60s.
“We’re paying 40% or 50% more and at worst case, 100% more than the cheapest gas prices in our history,” he said. “We should be tempered by the knowledge that the world is not ending here.”
Review your current choice for natural gas suppliers; is it time for a change?
This is also not a one-size-fits all decision. There are a lot of communities that have their own aggregation, or bulk buying prices. Some of them may still be in an existing contract — and that may be a good price to get you through the winter. If you’re unsure if your community has an aggregation or want to see if the rules allow you to join outside of an enrollment period, check with your community.
Many of you have followed me in “choosing” the Standard Choice Offer, or SCO, for years. The SCO is based on a state-approved formula, which is near wholesale pricing. We’ve done very well on the SCO. During this time, I have often advised people who were also considering their community’s aggregation price that they may do better on the SCO or they could also choose their aggregation. Communities with aggregations have said they aren’t able to guarantee the “lowest price always,” but to provide some stability for residents who don’t want to research and make their own choice.
Now, I’m not going to stay on the SCO. If you have a community aggregation, check that price and terms and consider that. Most aggregations have no cancellation fee or a small $25 fee, which also gives you some leeway should prices come down and you want to go back to the SCO at some point.
The city of Akron this week is sending letters for its next aggregation term. Its current contract of $3.09/mcf fixed runs through the end of November’s billing cycle. The price will then be a variable rate from December 2021 through April 2022. The city said the variable rate will closely mirror the SCO. Then from May 2022 through the November 2024 billing cycle, the rate will be fixed at $4.06/mcf.
You must opt out by Nov. 3, or you will automatically be included in the aggregation.
Since the SCO price is rising with the market, the variable price through the winter does not impress me. So, if I lived in the city of Akron, I would consider shopping.
Impact on NOPEC aggregation customers
NOPEC is another large aggregator, with more than 430,000 gas customers in Summit County (including Cuyahoga Falls and many northern communities) as well as some communities in Medina and Portage counties. (NOPEC also aggregates electricity in some communities).
NOPEC’s standard program rate is the default for its gas customers unless they choose another program, including a variable rate which is 2 cents below the SCO and a 12-and-24-month fixed rate option.
The program price, which can change sometimes monthly — especially in the current market — is not a true variable rate. The aggregation buys in bulk to try to mitigate the peaks and valleys, said NOPEC Marketing Director Dave Jankowski.
“Our program price by design lags the market,” said Keiper. The model is more of a “stair step, then spike step up,” following it up and down, he said.
The program price was $4.30, but will be going up to $4.75 this month. Most people are on the program price, said Jankowski.
“Our program price is likely to be for at least the next year, the place that people want to be,” said Keiper.
NOPEC’s longer fixed-rate contracts will also be going up. The 12-month fixed rate will be going from $4.20/mcf to $5.50/mcf and the 24-month-rate will be going from $4.10/mcf to $5.10/mcf for any NOPEC customers who want to switch to it beginning in October. Customers who previous locked in will keep their rates.
I am comfortable with NOPEC’s program price, given what’s happening in the market, and the experts involved with the aggregation are also watching to make sure consumers are protected.
The way to get into NOPEC for gas is a little tricky based on older legislation passed by communities. You must either join during their every two-year opt-in period, which will be coming with letters at the end of November for service in January or if you are a new customer to the area or become newly eligible as a customer if you come off the SCO (and have not previously put yourself on a Do Not Market list from Dominion; I’ll get into that below). If you are unsure, call NOPEC at 855-667-3201.
Still others may want to find a public fixed rate from an energy marketer. You can do that by comparing prices at the Public Utilities Commission of Ohio’s Apples to Apples chart at www.energychoice.ohio.gov or by calling 800-686-7826 and asking them to mail you a chart for the Dominion territory or Columbia territory, if you are in Columbia. (My advice is the same for those of you in the Columbia territory, though traditionally you have had to pay higher costs due to higher infrastructure costs in Columbia.)
I chose a new fixed rate, and will explain a little further down.
Consumer beware; know your risks
As in any consumer transaction, we as consumers have to always beware. There are lawyers paid a lot of money to write the fine print in the terms and conditions to protect the company and not you. But here aew a few things I’ve learned.
Contract prices are changing rapidly for public offers, especially with the increases in pricing. But as of late last week, there were still some low prices (and some really high prices) on the PUCO’s Apples to Apples chart. It is possible that some of those prices may not reflect the current pricing once you click through to the company’s pricing.
However, the company must still honor whatever pricing is posted that day on the PUCO’s website since they are responsible for changing the pricing, said PUCO spokesman Matt Schilling. If you find yourself in a situation where you see a price listed and the price is not offered by the company, either tell the company they are obligated by the terms and conditions they agreed to with the PUCO to honor it, or contact the PUCO for help to get the company to honor the price, Schilling said.
NOPEC’s Jankowski warned of the potential for some marketers to try to have some wording in their fine print that would allow them to pass on costs in the event of a situation like the Texas electricity crisis last winter, which then made all energy costs shoot up. One marketer, Volunteer Energy Services, tried to pass some costs on to cities and individual contracts that had fixed rates. They backed off after the PUCO intervened.
Schilling said consumers can always call the PUCO to see if it can help with any billing issues.
Keiper also warned of “shiny object” or come-on rates or offers for gift cards that may turn into higher rates after your initial contract is up.
If you are going to choose a contract with a marketer on your own, it is imperative that you know about the terms and any cancellation fees and you stay on top of the contract length and write yourself a reminder about 30 to 60 days before in your calendar. That way you will be able to re-evaluate your options since most of these will auto-renew and you don’t want to be auto-renewed to something higher that you don’t want.
After reviewing the options, here’s what I decided
Natural gas is a commodity that is traded on the market, so it is unpredictable. The best we can do is take the information we have and our choices and make the best decision for us. That might not be the same for everyone.
I live in a NOPEC community and would likely join NOPEC’s program price at this time, but because I had chosen to “permanently opt out” of any marketing through Dominion when I didn’t want solicitations, there is a process that it will take me to once again become eligible, which could take four months. That’s not going to help me for the winter, so I chose a fixed rate instead.
I found a $2.49/mcf fixed rate for 11 months with a $50 cancellation fee through Ohio Gas & Electric on the Apples to Apples chart. Given the changes in pricing, I am not sure how long that rate will last, but I was still able to get it on Friday. It was a web-only offer for new customers.
I read through all seven pages of the terms and conditions, and while there is one clause that could possibly be the “catch-all” that Jankowski was referring to, with the ability to charge me more if there is another “Texas” issue, I have a feeling that clause appears in many contracts and I have to take that chance. If so, I will at least have had a nice rate that is fixed to save some money.
Moving forward, I will continue to update my online Utility Guide with the SCO price as a marker, which can be found at www.tinyurl.com/UtilityGuide and has a lot more detail about natural gas, including budget billing, and some information about electricity pricing, too.
Beacon Journal staff reporter Betty Lin-Fisher can be reached at 330-996-3724 or email@example.com. Follow her @blinfisherABJ on Twitter or www.facebook.com/BettyLinFisherABJ. To see her most recent stories and columns, go to www.tinyurl.com/bettylinfisher.