On Friday I received an email from my natural gas provider offering me an early bird “discount” of 56.9¢ per therm for a one-year contract. They may call it a discount, but it’s higher than the .40¢ or so per therm offered in years past. Since natural gas prices are at record highs, this offer still appealed to me. I want to lock it in now before cold temperatures arrive and prices rise. You should too.
Natural Gas Prices are at a 7 year high and rising as of September 2021
Source https://www.macrotrends.net/2478/natural-gas-prices-historical-chart’>Natural Gas Prices – Historical Chart
First, why are natural gas prices so high?
Natural gas is a world-wide commodity. So prices in the U.S. reflect what’s happening here and in the rest of the world. Natural gas prices are complicated, so I won’t be able to get into all the factors. But influences on prices include: investors less willing to fund long-term supply exploration due to climate change; new levels of demand from Asia’s rising middle class and China’s attempt to limit coal; increasing demand from U.S. utilities converting coal plants into natural gas; and increasing demand from Europe to avoid high carbon prices there.
The Lone Bandit – where did the money go?
Many of us in the energy industry have been handwringing as U.S. utilities invested heavily in grid reliability improvements over the past 10 years. It’s a worthy pursuit, but only within reason. So why the handwringing? Because it was clear that low natural gas prices would end. Natural gas is still a fossil fuel – it’s finite. And the climate change crisis is happening sooner than scientists predicted. It is common knowledge that this fuel source can’t go on for much longer. Industry watchers know that means prices will rise.
So instead of holding the line on rate increases, or (gasp!) reducing rates (unthinkable!) while gas prices were low, utilities chose to keep spending like drunken sailors. Huge grid investments during the era of cheap natural gas kept electricity rates from declining as they should have. Then, all that spending brought only marginal reductions in outage duration. (Oftentimes billions of dollars spent to achieve mere seconds of improvement). …All without public input on how their money was being spent.
This utility grid spending masked low natural gas costs. Now that natural gas is expensive again, that means both electricity and natural gas prices are going to climb with almost nothing to show consumers for the decade of inexpensive natural gas. Electric rates never reflected the era of reduced gas costs, but they WILL quickly reflect increasing costs. Bummer for us, and an indicator of the important role of the Georgia Public Service Commission. The PSC should be looking out for us, but instead is content to collect utility campaign contributions and keep quiet.
The downside and upside of flat rates
Natural gas is deregulated in Georgia, so you can pick your natural gas provider. The wholesale delivery of gas is still provided by Atlanta Gas Light, which charges us all a hefty monthly fee between $20 and $40. This is called a “pass through” or base charge, which they explain as you needing to pay your share of the fixed costs to deliver the gas to your home. That’s similar to how our grocery stores charge us $30/month to shop there because we need to pay their fixed costs for the building, the parking lot, the lights…wait. That doesn’t happen now? Oh – paying your share of their fixed costs instead of a rate for what you use is something utilities have been wanting for a long time, and some movement towards that has occurred in some states by state public service commissions (like in Georgia) for natural gas.
Georgia Power is trying to get there too. Their movement toward that invariable rate is the reason we pay those big monthly charges. This fixed cost paradigm was approved by the Georgia Public Service Commission (GA PSC) during deregulation. Anyway, the retailer that you choose adds its own “customer service charge” (a junk fee if there ever was one – wait, you want to CHARGE me for being YOUR customer? How crazy is that!?!?). That fee ranges from $5 to $7 a month. Then, finally, the natural gas charge per therm for the amount of gas you use is added.
All snark aside, grocery stores, airlines, movie theaters – many business have high up-front costs and we still pay just for what we use. It’s all factored into costs for each unit or item you buy (each ticket, each box of cereal). The more you buy, the more you pay. This move to high monthly fees for energy is something that picked up in 2019, but this post is too long already so that can wait for another time.
Lowering Your natural gas bill this winter by locking in now
For low natural gas users – people who have only a gas stove and no other natural gas appliances – these fixed monthly charges are quite the rip-off. (Especially if you don’t cook much, but even if you do). It’s regressive pricing, and contributes to inequality. That’s because every customer, no matter how small, is paying $30-$40 a month for practically no gas usage at all. That flat rate is no big deal if you’re wealthy, but when you’re living paycheck to paycheck like most Americans, it eats up a huge chunk of your money for nothing. Anyway, whether you live in a small apartment or a large home, locking in now – or soon – with a 12-month fixed plan can potentially save you big money, especially if winter is cold and gas prices spike. Anyone on a variable rate is at risk for some big bills this year.
A Rate You Won’t Find Anywhere Else
During the deregulation process the GA Public Service Commission took the responsibility of creating a comparison spreadsheet to make is easier to compare pricing. During my review today, I found a new competitor that is seeking to undercut the others. This provider, Xoom Energy, is offering a low .399¢/therm for 12 months. You can examine the rates here (once this loads scroll down to the bottom to the blue tab that says Fixed Rate Plans and click Download Price Chart). The lowest rates are highlighted in yellow and you’ll see Xoom there. They are legitimate – don’t hesitate to enroll. You won’t find that rate anywhere else.
For another day: if your natural gas furnace goes out or is old or you want to replace it for reasons of comfort, cost or climate change, consider a heat pump. The new generation of heat pumps are MUCH more efficient and comfortable than previous generations that blew out cold air that we all hated. More on that to come. For now, suffice it to say that there are better ways, especially for climate change, to heat your home than natural gas. We will all need to stop using natural gas in the next 10-15 years if we want to hold the line on limiting global temperatures to 1.5 degrees Celsius as scientists recommend (“below 1.5 to stay alive” for many people). The only question is, how quickly will we stop using fossil fuels, and will it be in time?
For those of you who like details
Falling natural gas prices have masked grid modernization rate increases (This one is has a subscription paywall but just ask and I can figure out a way to share it with you).
I hope this is helpful! If you have any questions or comments, please let me know. And please vote for me (Patty Durand) for Public Service Commission in 2022.