Buying Natural Gas Wholesale

May 17, 2010

Government boards regulate the utility market price.  Although, the state utility regulator is required to pass market savings onto the consumer, local providers buy natural gas on the wholesale market and bill their customers’ retail. We put our clients in a wholesale position because brokers/marketers have the flexibility to buy gas when rates are lower and pass the savings onto their clients.

Comparing and deciding among the various offers.

In the new deregulated industry, buying natural gas is like getting a home loan. You can select between:

  • Contract terms of 1 to 5 years
  • Lock in at a fixed rate for an extended period of time
  • Choose variable rates and rely on an experienced gas manager to get you the lowest price

Why switch?

Most consumers switch to brokers/marketers to save money.  Together you can determine your comfort level.

Ø    Security – if the utility price makes you feel more secure, choose an option that offers a percentage less than the utility for guaranteed savings.

Ø    Lowest Price – if you want to have a knowledgeable gas company managing your gas supply, select the variable rate and let a gas supplier manage it for you.

Ø    Fixed Price – if you think prices are going to continue to rise and you want to be sure of your bills, choose a fixed price.

Regulated rates are not fixed rates.

Each province or state has an agency that regulates utility rates. Utilities can and do apply changes to rates.  They are not allowed to offer fixed contracts. By signing up with an energy marketer you can avoid these unexpected rate changes. We competitively tender your natural gas needs to deregulated natural gas marketers.

If you choose to buy from a gas broker/ marketer, your gas service won’t change.

You will continue to receive a bill from your distributing utility authority indicating their regulated delivery charge (about half of your bill) and a gas supply charge that goes to the gas supplier. If you also have rental equipment or a service contract, these will appear on your bill, as usual.

It’s important to remember these cost splits when comparing prices. The suppliers, brokers and/or marketers are offering rates on only half of your bill. As previously stated, the distribution charge and monthly service charge is fixed.  It is strictly regulated by an Energy Board or Public Service Commission. As a result, when a promotional message claims a 10% saving, it is ONLY referring to that 10% controlled by all energy brokers.

You do the math.

To qualify in the deregulated market, your company must spend a minimum of $5,000.00/ month ($60,000.00/year) on natural gas. Half of that monthly fee ($2,500.00) is a regulated transportation and delivery charge. The remainder is the gas supply charge.

A gas marketer offering a 10% savings is offering a savings of $250.00/ month, 10% of the $2,500.00 gas supply charge. Your annual savings would be $3,000.00.

Saving is parity to how much you spend. The above example applies only to minimum qualifications.  The more you use, the more you save.

Hutchinson Business Solutions (HBS) is an independent energy management consultant. We have been providing deregulated energy solutions to our clients for over 10 years. HBS clients are saving from 10% to 20% on their natural gas supply bills.

Large market swings offer you big savings.

If you have been following market prices for natural gas, over the past couple of years, you have probably noticed the large market swings. ie: In 2008, PSEG prices ranged from $1.07 per therm in February to $1.64 per therm in July. In 2009, prices dropped and we saw $.889 cents per therm in January with a low of $.496 cents a therm in September.  With so much market fluctuation, we have been advising our clients to float their accounts, based on the market index.  In this way, our clients can save anywhere between, 8% up to 20%, depending on whom their local provider is.

Choosing to float the market index does not preclude you “locking in” on a fixed price at any time during the term of the contract. Conversely, if you choose a fixed price, you are unable to change to a float when market prices go down.

Want to learn more about opportunities to save in the deregulated natural gas market email george@hbsadvantage.com or call 856-857-1230.

Visit us on the web www.hutchinsonbusinesssolutions.com

2 Responses to “Buying Natural Gas Wholesale”

  1. […] This post was mentioned on Twitter by BidURenergy.com. BidURenergy.com said: Why Switch? « $$$ Smart Solutions $$$ http://bit.ly/c2BHlQ […]

  2. As the world economy has grown, demand has pushed wholesale gas prices through the roof. Call Contracts Wholesale

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