A pleasant fix, for now

Homeowners who lock in energy prices remove one risk, accept another

There will be no unpleasant surprises or scrounging for change when Paul Hietapelto opens his heating bills this winter.

Unlike most Americans, the retired machine operator from Geneva, Ohio, knows exactly how much he will pay for natural gas, and it won’t be a penny more than the year before.

Since agreeing to an energy marketer’s offer of a three-year fixed price for natural gas back in 2003, when the fuel was about half as expensive as today, Hietapelto has been immune to rising costs.

Contracts such as these may appeal to those seeking price certainty for budgeting purposes, but there is no guarantee that a roll of the dice will pay off like it did for Hietapelto, who lives on a pension and Social Security checks.

“The (fixed-price) offers in the market right now are pretty high,” said Ohio Consumers’ Counsel Janine Migden-Ostrander. That said, “nobody has a crystal ball to know where gas prices are headed, so everybody gambles whether they switch to another supplier or not.”

Consumer advocates say homeowners looking to save money should instead take concrete steps to reduce their energy consumption, whether it means adding insulation or turning down the thermostat a few degrees. Moreover, those seeking less volatility in their monthly natural gas bills should consider level-billing plans, which spread out estimated annual expenditures over 12 months.

Hietapelto is one of about 4 million consumers in 18 states and the District of Columbia who buys natural gas from a supplier other than his local utility. According to the Department of Energy, more than half of the country’s 62 million residential natural gas customers have access to so-called customer choice programs, an outgrowth of deregulation.

Under these programs, the local utility is still in charge of delivering the fuel and billing, so homeowners notice no change in service. The only difference is that the price they pay for the fuel is set by an energy marketer rather than the local utility, which charges customers a regulated rate that can change on a regular basis.

For example, natural gas supplied by Hietapelto’s local utility, Dominion East Ohio, will cost $13.779 per 1,000 cubic feet in November. That’s 47 percent higher than the $7.25 per 1,000 cubic feet Hietapelto has paid since May 2003 under the terms of his agreement with MXenergy of Stamford, Conn.

Companies like MXenergy are careful not to promise savings. Instead, they say their primary goal is to give homeowners certainty about their monthly energy costs, while capping their potential liabilities.

“Locking in today’s prices is a pretty frightening thought because prices are at all-time highs. But the problem is we don’t really know whether the price is going to go up or down,” said Irwin Popowsky, Pennsylvania’s consumer advocate.