You'll save on natural gas

how much is up to you

March 25, 2009|By JAY HANCOCK | JAY HANCOCK,jay.hancock@baltsun.com

Cheaper energy is the recession's solace. We all know about gasoline, which fell from $4 a gallon to less than $2 within a few weeks last year. Now prices for home energy are declining, too, giving Marylanders a chance to save hundreds of dollars on utility bills.

Saturday's column covered electricity. Independent electricity suppliers are offering packages that are moderately less expensive than BGE's and Pepco's standard offerings. But natural gas prices have fallen, too, and the 1 million Maryland households that heat and cook with gas are also getting a break.

No matter what happens, families using natural gas will probably save hundreds of dollars next winter compared with this year's bills.

BGE Home and Washington Gas Energy Services, the two main alternatives to Baltimore Gas & Electric Co.'s standard gas product, are offering their best fixed-price gas deals in a while. (BGE Home is owned by BGE parent Constellation Energy, but it's a different company from BGE.)

But unlike with electricity service, I'm not recommending that households dump BGE's default gas package just yet. No matter how the Maryland Public Service Commission decides to handle utilities' natural gas purchases for next winter, I'm betting the standard BGE gas package will still be cheaper than any of the alternatives now offered.

Wholesale natural gas prices had fallen so far last week that the PSC ordered BGE and other utilities to lock up 40 percent of what they need for next winter at today's prices.

Normally, utilities stockpile gas from April through October, paying the spot price from month to month and passing along the cost. But this year, the commissioners thought that, "given the unprecedented volatility of natural gas prices," it was safest to freeze today's price for at least some of the supply, according to an order they filed.

But gas prices popped up slightly before the utilities could buy. So Tuesday, the commission delayed the purchase pending what happens in the wholesale market, according to an article that reporter Liz Kay filed for The Baltimore Sun's Web site.

The overall story for energy prices, however, is still low and maybe lower. The biggest threat to higher prices between now and January is a hurricane. In 2005, Hurricane Katrina caused gas prices to nearly double for a few months. A strong economic recovery could also push energy costs up, but that, unfortunately, might not be in the cards.

Unlike its standard household electricity price, which changes only a few times a year, BGE's natural gas price has always floated monthly, more or less with the market. For that reason, third parties offering fixed-price deals last year had a hard time competing since spot prices began declining last fall.

The worst deal this season was BGE Home's one-year gas contract at $1.599 per therm, reflecting costs at the peak of last summer's energy boom. (This is the "commodity" price. Everybody also pays BGE a delivery fee no matter who their gas supplier is.) Anybody stuck with that bargain probably paid hundreds of dollars more for heating this year than they needed to.

BGE Home voluntarily cut that to $1.19 starting April 1, said spokesman Aaron Koos. That's an improvement, but the highest-use heating months have passed. And you can do even better, anyway.

WGES (888-884-9437) just posted a one-year offer at 72 cents per therm - 40 percent less. BGE Home (888-243-4663) is offering a 12-month deal at 99 cents.

But prices might go lower. For now in the Hancock household, we're sticking with BGE's standard commodity price, which has fallen to 84.6 cents for March from $1.05 in December. Based on what the futures market is saying, I'll be shocked if BGE's April price isn't in the 70s and if we don't hit the 60s at some point.

We're betting on a continued price slump or at least a leveling-off. And we're hoping no hurricane disrupts natural-gas supply lines in the Gulf of Mexico.

If that happens, people who bought WGES's 72-cent deal will be glad they did.

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