Do you think locking in you natural gas rates for the next 7 years is a good thi

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   flacoinohioposted 11 years ago

   Do you think locking in you natural gas rates for the next 7 years is a good thing to do?
   
   The three major natural gas companies in my area created an unregulated affiliate company that is now offering a 7 year "locked" in rate.  The first two years there will be no savings, the savings will begin in 2015.  Once a 7 year contract is agreed to if a customer terminates the contract, there is a $300 termination fee.  My concern would be that if I were to go with this contract and the gas rates go down I don't want to be locked into a 7 year contract that does nothing but profit the gas companies.  If this is legal why was a new unregulated company formed to make this offer?

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   Wesley Clarkposted 11 years ago

   flacoinohio,  I will answer the question as if I was in an identical situation as yours.  First, I would want to be absolutely sure that I would not be moving for the next seven years.  If I thought I might, then I would try to surmize to the best of my ability, where I would possibly move, then determine if the three major companies also serviced that area as well.  If they didn't, that might cause me personally to hesitate.  Let's now assume, that I have determined that I am planning on staying in my home, rental, whatever for the next 7 years and if I move it will be serviced by same company.  I personally would take the 7 year "locked" rate in a heartbeat.  Reason, I would have looked at the 10 year chart of natural gas prices (do a google search for 10 year chart of prices).
   I would note that Natural gas is at a low price due to economic conditions, warmer than normal weather, etc.  When the economy does pick up, I can safely surmize that natural gas demand will increase due to factory production demands.  I would also surmize that within the next two years or three, the federal reserve would possibly increase interest rates due to concerns about inflation, due to their previous rate policies.  Therefore, I would be concerned about inflation and due to inflation all commodity prices would increase.  I personally am not concerned about Natural Gas prices going down, but rather them going up within the next 7 years.  Therefore, after considering everything, I do the lock and sleep well at night with no worries.  I personally would believe over the next seven years I would more likely benefit from the lock, than not doing so.  That's what I would do if it were me.  I would also understand that the company understands they will have competition and that locking me in as a customer, guaranteeing them 7 years of uninterrupted revenue is better than having me as a client, and then losing me in a year.  Like a cell phone company does now with high churn rates.  Just an opinion to offer you.  Best of luck in your decision.

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   Larry Wallposted 11 years ago

   I would run with all deliberate haste. Anyone who knows anything about the natural gas market would not try to lock in a rate for seven years. Several decades ago, when natural gas sold for 25 cents per mcf, there were long term contracts. When the natural gas policy act was enacted during Carter or Reagan years, not sure, natural gas regulation ended and prices increased, decreased, increased, etc.
   
   My guess is your rates would boost one year,pretty soon, they grab the $300 termination fee, plus whatever you own. Secondly, in most places, natural gas is sold either by the city or a private utility that has an exclusive franchise and has rates that are controlled by some governing authority. In Louisiana it is the Public Service Commission. Such a scheme would not be allowed in this state.
   
   I would need a lot more information about what rate you were locking in and were there hidden clauses.

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