Natural Gas Prices Change (Again)

Written by Nickel - 12 Comments

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Barely a month after learning that our natural gas bill would be going up (WAY UP) yet again, we just received another letter from the gas company notifying us of a price change. This time, however, it was welcome news. It seems that gas prices have dropped sharply in recent weeks, and that our monthly payment under the gas company’s ‘Equal Payment Plan’ (EPP) will be dropping as a result. By more than half! That’s right, our $146 monthly bill is falling to $68. In other words, after experiencing a total of 85% in price increases since last summer, our bill will now be 14% below where it was when all of this madness started. Now I’m not one to complain about price cuts, but all of these fluctuations sort of make question why they refer to this as an EQUAL Payment Plan.

Published on February 15th, 2006 - 12 Comments
Filed under: Energy, House & Home
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About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

12 Responses to “Natural Gas Prices Change (Again)”

1
Nick Says:
February 15th, 2006 at 8:12 am
…all of these fluctuations sort of make question why they refer to this as an EQUAL Payment Plan.

Because they plan for all of those large payments you are making to equal a tidy profit for them.
2
nickel Says:
February 15th, 2006 at 8:25 am

Actually, they’ve been surprisingly close to spot on in years past, it’s just this year in particular (with Katrina, etc.) that has thrown things into chaos. I’ve actually been quite surprised that they haven’t engineered a large overage into each year’s, which would pretty much be an interest free loan to them until it was time to settle up.
3
jim Says:
February 15th, 2006 at 2:31 pm
This whole natural gas thing is insane, I’m on entirely electric so on the whole I’ve been pleased with energy prices but something had to generate that electricity…
4
nickel Says:
February 15th, 2006 at 2:40 pm

Actually, the local news has been running spots about how much the price of natural gas is DECREASING while at the same time the price of electricity is INCREASING.
5
jim Says:
February 15th, 2006 at 11:18 pm
True, natural gas is decreasing (it HAD to) so we’ll see. If electricity is generated using natural gas, you’re just getting screwed on both ends.
6
FMF Says:
February 16th, 2006 at 7:39 am
All I know is that I’m paying a LOT more than last year — for less fuel.
7
Jeremy Says:
February 16th, 2006 at 9:17 am
As with everything else, the price of natural gas is based on supply and demand. Prices have been rising in recent years due to an increased demand for electricity. While about 1/2 of our nation’s electricity is still generated by coal, natural gas is gaining in both percentage and total amount. This trend is likely to continue with the new rules promulgated by EPA to reduce fine particles. I don’t think we’ve had a new coal plant built for decades (new plants are generally natural gas.)

My guess as to the reason why prices have declined (albeit off a much higher base) is because a) the winter is mild along the East coast and b) the downtime of the wells and pipelines in the gulf was not as long as some imagined.

As FMF points out, even if prices have fallen, we’re still paying more for less. Perhaps the reason your equal payment plan is lower than when you started is because you overpaid during the high-priced period and they’ve dropped the cost to enable you to “consume” the surplus.
8
nickel Says:
February 16th, 2006 at 9:24 am

Jeremy, I think you’re exactly right… We’ve overpaid thus far this year, so the new rate actually represents an underpayment to bring things back into line.
9
Jose Anes Says:
February 16th, 2006 at 12:43 pm
Yupi!!!!

Lower gas bill!!
10
Randy Kirk Says:
February 25th, 2006 at 11:05 am
I buy LDPE by the carload. The underlying raw material is natural gas. Our pricing almost doubled last year, and is only creeping down a bit at this point. There are many componants to this whole mess, but among them:

Actual Supply and Demand
Perceived Supply and Demand
Fear by major purchasers creating hording
Greed by major suppliers creating false shortages
Unrest drives up futures markets
And my own personal touch – I think the major countries who supply energy are creating the crisis of the week to keep prices high. One week its Russia, then Venezuela, then the middle east, then Africa. I even suspect there are phone calls: “Your turn.”

No, I’m not a wacko conspiracy theorist, but check out the news over the last two years. With the exception of Katrina, the rest of the spike in pricing can be attributed to the “news” of the week spooking futures.
11
jim Says:
February 26th, 2006 at 11:10 am
Randy,
I had the same thought with regard ot the news and I felt it was a little conspiracy-ish but consider how production hasn’t falled but prices have spiked (for example, with the attack in Saudi Arabia) which equals more profit.

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