Lower electricity prices are economic silver lining

August 19, 2011|By Jay Hancock

If you're getting fewer pitches from outfits selling electricity and natural gas these days, this may be the reason: It's more difficult for independent energy marketers to beat the standard prices from Baltimore Gas & Electric.

The expensive electricity deals that BGE signed a few years ago have just about expired. That means customers taking the utility's standard product will no longer be stuck with inflated, 2008 prices. Which means the likes of Washington Gas Energy Services and Viridian Energy can't easily undercut them.

There are still modest deals to be had. Those who have shopped for electricity already and have expiring contacts should look around to see what's available. They might save a few bucks. Look also at the increasing number of "clean energy" offers from various suppliers.

But for folks who can't be bothered to sort out a dozen household energy offers, the cost of doing nothing has gotten smaller. Starting Oct. 1, BGE's standard electricity price will sink to its lowest level since before price caps associated with deregulation were lifted in 2006 — beneath the current prices of many independent suppliers, in fact.

Whatever you do, don't sign up for a fixed-price natural gas deal. Companies such as WGES promise to save you from possible price spikes by locking you in for a year or two. (BGE's default natural-gas product floats from month to month in price, more or less with the spot market.)

But natural gas is unlikely to soar. And the lock-in price is about 10 percent higher than BGE's recent prices for natural gas. Go with BGE's standard natural gas offering or another floating-price deal.

Thanks to the miserable economy and a changing energy picture, costs for electricity and natural gas probably will stay low for at least a year or so, energy pros say.

Electricity and natural gas prices have avoided matching the soaring cost of gasoline thanks to the vast new reserves of natural gas being extracted from underground U.S. shale formations. Because natural gas powers many electricity generation plants, its cost is closely tied to that of kilowatts.

Environmental concerns over "fracking" — using pressurized water and mystery chemicals to break the shale and release the gas — will prompt regulation and increase natural gas costs eventually. But hardly anybody expects a return to 2008, when natural gas cost twice as much as it does now.

"Gas prices are going to remain real low," says Martin Proctor, senior vice president for energy policy at Constellation Energy, owner of BGE. As for electricity, he adds: "Nothing like a good old recession" to reduce demand and cost.

Electricity shopping is based on comparing prices with the "electric supply" rate found on your BGE bill. Starting Oct. 1, the default electric-supply charge for BGE household customers will be about 8.9 cents per kilowatt hour. (Everybody also pays BGE about 2.5 cents per kilowatt hour to deliver the electricity, no matter whom they buy it from.)

Two summers ago, BGE households were paying more than 12 cents for electric supply. Even in the fall and winter of 2009-10 — nonsummer prices are usually lower — BGE's standard electric supply rate was 11.5 cents.

That's 30 percent higher than it will be in two months. For a typical household, the difference between then and now is $300 on your annual bill.

You still can do a little bit better, if you want to take the trouble. Baltimore-based Castlebridge Energy will sell you electric supply for 8.5 cents per kilowatt hour for 12 months — which includes next summer, when BGE's standard price might nudge up again. (The exact summer price won't be set until this fall, when BGE buys up the rest of its supply.)

Even better: Unlike most competitors, Castlebridge doesn't charge an early-exit fee if prices drop even more and you want to leave a contract early. Early-termination charges at WGES can hit $200.

Neither does Castlebridge, run by former BGE guys, blow money on a lot of advertising, gift-card gimmicks or friends-and-family marketing shticks and pass on the cost. They just give you the low price. (Full disclosure: I'm a customer, on the same terms as everybody else. Sign up on their website: cbenergygroup.com.)

Always compare deals for electricity and natural gas on opc.state.md.us, the website of Maryland's Office of People's Counsel, which represents residential utility customers before regulators.

The best "green" electricity deal listed there is from Stream Energy, which says it will buy renewable energy credits from wind generators nationwide equal to 100 percent of your usage. Their price is 9.69 cents per kilowatt hour for 12 months (streamenergy.net).

Also check out Clean Currents' "neighbor" wind energy option, which promises to buy wind-generated kilowatts within the region. (10.56 cents for 12 months. cleancurrents.com)

Electricity prices will not fall forever. We might be close to the bottom, and the long-term trend is up.

"I'd say there isn't much potential decline left in the residential market around here," says Bert Wilson, one of Castlebridge's principals. Some higher prices already are baked in for the next several years, thanks to what kilwowatt sellers will have to pay to reserve generator time.

Unfortunately, it's hard for household electricity customers to lock in for the long term. Twenty-four months is the limit. (Castlebridge has the best 24-month contract, at 8.95 cents and no early-exit fee.)

Meanwhile, enjoy the savings. It might be the only good economic news you've heard recently.

jay.hancock@baltsun.com

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