I cannot count the number of times an energy marketer knocked on our door and suggested that we sign up for a fixed-rate natural gas contract for heating our home. One of the arguments they use in their pitch is similar to the one quoted in this CBC article: consumers “would have been better off locking in to a long-term contract for 47 to 53 of the 60 months ending in May 2006″. That sounds great until you realise that it is only one data point and it might have been an unusually favourable situation for a fixed price contract that is unlikely to occur again.
I find it interesting that marketers are trying to convince us that it is better to buy fixed-rate natural gas when the annual gasoline bill is likely to be higher than the heating bill for most consumers (it certainly is the case for us and we don’t drive all that much). Yet, we are no hurry to sign up for gasoline contracts but marketers try to scare us that natural gas is going to skyrocket.
The Gas Supply Charge portion (which can be purchased from an energy marketer) typically makes up about 60% of the gas bill. As it costs about $1,500 to heat a typical home, the annual gas supply charge works out to about $1,000. The best 5-year rate (according to Energyshop.com) available now is 35.9 ¢/m³ compared to Enbridge’s floating rate of 22.54 ¢/m³. It would be interesting to track the floating and fixed rates going forward to see which strategy comes out ahead but my guess is that the stakes are decidedly small. If you can bear the risk of your energy bill spiking by $100 or more in the peak of the heating season, I would wager that it is better to go with the floating rate.