Fixed Rate Natural Gas Contract

kompyAugust 29, 2008

What do you guys think of the fixed rate and variable rate plans offered by places such as Vectren Source? My business last month paid $1.43 per ccf. VS offered me $1.29 fixed rate for a one year contract. I signed. I have 3 days to cancel.

At home, my DH signed us up with VS about a year ago on a variable plan. Last month we paid $1.15 per ccf.

Just wondering what everyone thinks before my 3 days are up. It seems like a good idea.

Kompy (from the kitchen forum!)

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These type of contracts are just like fixed rate/variable rate mortgages and we all know how those worked out.

Variable rates are gambling. For some reason everyone who signs up for a variable rate always thinks that the rate will only go down for them. You could end up paying more than if you were on a fixed rate - a lot more. When the price of something goes up, those with variable rates not only pay the increase but usually end of paying a much greater percentage to make up for the losses the company is experiencing from those still on the fixed rate contract.

You are gambling with a fixed rate contract in so far as, if the price of the product drops you are locked into the higher price.

Also check your contract carefully. Some tricky companies promote (through tricky wording) what the customer sees as a "fixed rate" but it is really a fixed payment. At the end of the contract there may be a balloon payment which the consumer is not prepared for. Of course there may be a credit given at the end of the contract too.

I have no experience with Vectren. We have similar programs offered by our suppliers. I know people who signed up for them and made out like bandits with the contract they chose (fixed rate) but there were local newscasts interviewing people who could not handle the payments when the variable rates went up, and were whining for a bailout to be handed to them.

    Bookmark   August 29, 2008 at 2:15PM
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You really need to read the contract thoroughly to be sure you know all of the terms. Anytime you have a 3 day recission requirement, can be a red flag. The 3 day recission requirement came about because of all the scams so legitimate outfits can be affected too. Also if you do cancel, read that contract thoroughly and make sure you follow it to the letter or you will be on the hook.

I have CenterPoint/Minnegasco and a few years back they offered me a contract price that didn't matter how much gas I used... until you read the fine print. It started being quite a bit higher in the first place but that year too they were taunting us with threats of huge increases so they were trying to hook people on these contracts. That contract however was conditioned that I didn't exceed a 10% increase in actual gas use over the prior year or I would be kicked off, penalized for exceeding it, pay a higher price surcharge for the term of the contract and whatever the going rate was. Needless to say I laughed at them.

You should look back at your bill history. The last few months here have really bounced around on pricing. $1.25/thm, then $1.50, then $1.25, then $1.60. So be sure you know your history to be able to compare.

This all assumes this is your normal supplier. I don't know the name. Here I only have one option for a natural gas supplier.

Contracts for propane (and oil) though are common and now is a good time to lock in if you haven't already done so. Actually it's getting kind of late but for folks who haven't, you might want to check into it quickly.

    Bookmark   August 29, 2008 at 6:10PM
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Cynic makes some good points.

Where I live the 2 day 'cooling off period' applies only to *in home sales* contracts. If you conduct business at the seller's place of business it does not apply. Nor does it apply in telemarketing if you call them first rather than them calling you out of the blue.

If this Vectren company is an in home sales type thing, with one of those contracts where you sign a contract to pay them a set amount, and they send the payments that you owe to the utility company, I would run from it.

As cynic says, READ THE FINE PRINT. It is impossible to give advice about a contract without seeing it. The example that cynic gave about a plan offered where he lives sounds exactly like one that my utility company offered. I laughed at it. I am glad that I did not sign up for it as the following winter was really harsh and I certainly would have exceeded the 10 percent increase limit they imposed in the contract.

It sounds a lot like those "unlimited dial-up" ISP plans that kick you off if you *use it too much* in their opinion.

    Bookmark   August 29, 2008 at 7:57PM
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Thanks for your feedback guys. I forgot to mention that I can cancel at any time but will be charged a $25 cancellation fee.

I just read all the fine print. There was nothing that seemed 'scamish' to me.

Thanks. I'll try to update this post later in the winter season and let everyone know how it's working out.

Out of curiousity....let's see how many people we can get here to post how much they pay for natural gas (price per ccf).

I'll start:
Dayton, Ohio (Vectren) $1.15 per ccf (Home)
My business is $1.29 per ccf

Thanks again, Kompy

    Bookmark   August 30, 2008 at 9:37AM
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Thanks for the update and I'll look forward to seeing how it worked out. Hopefully you will luck out and save money.

    Bookmark   August 30, 2008 at 1:00PM
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"I can cancel at any time but will be charged a $25 cancellation fee"

That strikes me as overly generous on the suppliers part. Are you sure? What is advanced notice period? What is the length of time that you have to have had the contract before you can cancel?

What is the duration of the contract?

Personally, I have had these type of contacts for our home the past 8 years and have not regretted it.

I would also suggest regardless of which way you go that you have a professional perform an energy audit on your establishment to ensure you are minimizing the energy consumption inefficiencies that exist. Always good to have an independant accredited professional perform this. Many local utilities provide them for free. We had one done on our home last fall and are very glad we did (link to the report we received provided in other postings in this form).

I hope that helps,

    Bookmark   September 6, 2008 at 11:40AM
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