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Anyone ever buy their natural gas from a "Choice" company???

1K views 16 replies 7 participants last post by  84Scrambler 
#1 ·
I just contracted my natural gas for heating my home at $0.88/ccu for the winter. Michcon is currently charging me $1.14 and trying to raise their rates...as the market comes down.

The companies in the choice program (listed on the link below) are the actual suppliers of the natural gas to Michcon. Michcon adds margin and resells to you.

If you are with Michcon and want to save a few bucks, check out the Choice programs on the web.

http://www.dleg.state.mi.us/mpsc/gas/choiceceaddress.htm

I went with a contracted price from My Choice Energy. If you are willing to gamble a bit you could save even more by trying a variable rate (called NYMEX PLUS @ $0.68/ccu) from one of the other companies (Michigan Gas and Electric had the best variable rates and no contracts).

I did a week of research in to this "choice" program. If there is any interest in this I will be happy to share more of the research.

If you want to change your service for the month of November, you will have to get a call to one of the suppliers by October 15th.
 
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#2 ·
Um wow..... prepare to get raped this year on your gas bills. I news station did a story on them because they were raping people on the gas prices. There was something in the fine print that allowed them to get away with it. Let me guess, they came to your door?
 
#7 ·
I would not recommend a variable rate natural gas contract for retail supply. One random storm thru the GOM and your variable rate just bent you over dry. Natgas prices are down currently, as they are just about every year at this time. There is no heating demand and there is no A/C demand on the electric grid at this point, thus no natgas peakers running. Last year was unusual as we had record heat in the first week of October. Just know your risks... Even really experienced commodity traders have been having a rough time with the current market volatility.
 
#13 ·
These are very wise words. I did a bunch of research in to the history of variability of rates over the last 6 years. In that time the highest change in pricing was +$.25 per ccu in the winter months. I believe that was in the winter of 2005/2006. Generally the prices don't change very much but if you choose a variable rate over a good fixed offer like I feel I received, in essence you are betting that you know more about the futures/commodities market than the people setting the fixed rate. I certainly don't feel that I know more than they do which is why I chose the fixed rate.
 
#15 · (Edited)
When Consumers/Michcon purchases their gas they buy in large quantities according to a forecast for a fixed amount of time. They then store this gas and “deliver” it to the pipeline as it is needed. Where Michcon went wrong is they bought a substantial amount of natural gas at a high point in the market. They are now stuck with that high priced natural gas while the suppliers (people with the wells) are pumping natural gas today at $.675 per ccu. The suppliers can deliver on a weekly basis to the pipeline and cut the cost of the consumer. Last winter was the complete opposite. The market trended up while Michcon had a large reserve well below market value. Michcon sold through the winter at the lower rate while the suppliers were selling much higher.

What is going to shock customers of Michcon/Consumers this year is the 40% increase in the ccu charge of natural gas. This is only a portion of the total charges you receive (others include delivery/maintenance @$.19/ccu and local government fees @ .012/ccu) so your bill will not rise 40% but as you can see the gas is the majority of the price you see on your bill.
 
#14 ·
i have thought about this but am very weary as i am sure most people are. I cannot get my head around the fact that they can supply gas to the supplier who then supplies to you for cheaper than DTE can.

But then i think of a service such as internet service. AT&T owns all the lines. We used to have t1's with AT&T. I started price shopping and AT&T was twice as expensive as other providers even though all the lines are owned by AT&T.

I switched to a different carrier and had 4 T1's installed. AT&T showed up to do the install because they are all AT&T's lines. It does at some point go back to a different central office but i could not believe AT&T could not match the price of the provider i switched to.

Somehow this other ISP i switched to is able to lease the lines from AT&T and provide me with service and still do it cheaper than AT&T. A lot cheaper.
 
#16 ·
i have thought about this but am very weary as i am sure most people are. I cannot get my head around the fact that they can supply gas to the supplier who then supplies to you for cheaper than DTE can.
It all boils down to fixed and variable cost. I am more familiar with electricity, so I will use that as an example. If you are a retail rate electricity customer in the DTE service territory, they are basing their retail rate for you on their fixed cost +variable cost +whatever margin the MPSC allows them to charge. These rates are basically set by the MPSC. As a retail customer, you are paying for the power plant, the wires to distribute the power, the people working there, the fuel cost to generate it, etc...

But, as power companies built power plants to meet their customers' needs, they had to build extra units to cover for maintenance outages, breakdowns, unexpected demand increases, abnormally hot or cold weather, etc... All the captive customers within the DTE territory have to pay for this as it insures that their is adequate power when you need it most.

Power companies can then sell this excess reserve power on the wholesale market to help offset some of their fixed costs. But, since it is a sunk cost, they only have to price this power high enough to cover the variable cost to produce it. Basically, it would just be the extra fuel costs and a small amount of variable employee costs to support the sale. So, when you see a "choice" company offering energy (gas or electricity) for less than the local utility, this is how they can do it. They are paying the wholesale price, the utility is utilizing spare capacity, and you get a slightly better deal.

But, you run the risk of the small "choice" company going out of business, legislation changing that rebalances the market, or any other of a multitude of things that can go wrong. Many of these companies are fly-by-night operations with very little capital behind them. They make money by betting they know more than you do and that they can buy gas/electricity cheaper than you bought it for long enough to fund their operations. Many have gone under when they sold deals for a fixed price, then tried to supply those contracts through short term market purchases. One little hurricane later, gas prices go through the roof, and they run out of money.

Weigh the risks, as there are many...
 
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