Natural gas contract won’t save money: Roseman
When oil prices drop, natural gas goes down too. Homeowners with gas heating can expect some relief this winter.
But there’s no relief for consumers who have signed a fixed price contract. They can’t get out of their deals unless they pay a penalty.
Ellen Robson had a five-year gas contract with Canadian RiteRate Energy, going back to 2005 and renewed in 2010. She decided to cancel in December with six months left to go.
“When I signed up, natural gas prices were very unstable and I thought it would be a smart thing to lock in. I thought it would save me money — wrong,” she said.
“I am tired of paying 26.9 cents a cubic metre for gas,” she said. “As a senior, every few cents add up.”
Robson is back with Enbridge Gas, her utility that charges 18.3 cents a cubic metre, after paying a $ 91.35 fee to break her contract.
RiteRate is one of 14 active gas marketers and electricity retailers in Ontario. They buy energy from their suppliers in advance, which means they try to deter customers from leaving prematurely.
“Let’s say the market cost of natural gas falls due to circumstances beyond our control,” the company says at its website. “Our supplier doesn’t reduce the cost of the natural gas we pre-purchased for your agreement. It’s only fair that fixed means fixed.”
Most residential customers get their energy from their utility at a price set or approved by the Ontario Energy Board (OEB). Only a small minority – 10 per cent of gas consumers and six per cent of electricity consumers – have signed fixed-price contracts with retailers.
I’ve followed the story closely — almost obsessively — since I started writing consumer columns in the Star in 1999. I’ve handled hundreds of complaints about door to door sellers using deception and misrepresentation to get people to sign fixed rate deals.
In January 2011, Ontario brought in a law (the Energy Consumer Protection Act) to curb abusive sales practices, accompanied by aggressive enforcement. Complaints to the OEB about the practices of energy retailers have dropped to 25 a week – from 110 a week in 2010.
Is Ontario doing enough? Martine Band, association general counsel at the OEB, is leading a consultation on the Energy Consumer Protection Act.
She wants to look at the effectiveness of the new rules and at a broader question: Do energy retailers provide value to residential customers?
“We’re hearing from consumers that they want clearer information and more of it,” she says. “We’ll be looking at making information as accessible as possible, such as by using infographics.”
As part of the consultation, the OEB did a survey of 1,500 consumers.
Participants included those who had retail energy contracts still in force, those who had cancelled their contracts and those who had never signed a contract.
Here are some key results:
- One third of those with a contract did not know they had one. This unaware group was less educated. Only 21 per cent had university degrees, compared to 28 per cent among current contract holders and 40 per cent in the non-contract sample.
- Among those who cancelled their contracts, 61 to 63 per cent said they were dissatisfied. The most common reason was the high cost of energy under the contract.
- Most people who heard from energy suppliers were approached at their doors. Almost half said they had a bad experience because of aggressive sales practices.
Here’s my view: You won’t benefit from a fixed price contract unless energy prices shoot up and stay up for years. Retailers add a premium to the current market price.
If you think energy prices will remain low, stick with your local gas or electric utility. Say no to any retail offers.
These contracts are a form of insurance, bringing peace of mind to those who fear a catastrophe. The only reason to sign up is if you prefer stability to saving money.
Ellen Roseman writes about personal finance and consumer issues. You can reach her at firstname.lastname@example.org or www.ellenroseman.com
TORONTO STAR | BUSINESS | PERSONAL_FINANCE