disgustingly offtopic: energy shopping

[Lennart Sorensen]

On Fri, Jan 20, 2006 at 04:25:32PM -0500, Yanni Chiu wrote:
> Christopher Browne wrote:
> >But this doesn't explain why it is beneficial to get an extra
> >middlecritter in between you and OPG, who are probably the same people
> >that were providing the power both before and after the transaction.
> 
> It isn't always beneficial. It's a *fixed* price, if the
> price goes down, you don't get a break. What you're
> effectively doing is investing in energy "futures", and
> therefore making a bet on which direction the price is
> going to go. If it goes up, you win; if it goes down, you lose.
> Since energy prices have continued to rise, few have seen
> a losing bet. So salespeople can continue to push the myth
> that their fixed price contracts are cheaper. IMO, if you
> really want to invest in energy futures, go to the financial
> markets and buy them directly - then you'll really cut out
> the middleman.

Well the contracts start out at a higher price than the current floating
price, so you are actually betting that the average price over the next
5 years will be higher than the fixed price you are signing up for.  

So far I haven't made such a bet.

I have bought a programable thermostat, and I intend to replace the
furnace in the next 6 month with a new one.  The current one is 30 years
old, and certainly not super efficient by any means.

I paid to upgrade the garage door replacement last summer to a highly
insulated one, over the default slightly insulated one the condo corp
was offering.

I am not convinced by these fixed rate deals yet, since in my opinion,
these companies have one goal in mind: Make a profit.  So they are
investing in futures and also hoping the price they lock you in at will
be higher on average than the price they can buy it at.  I remember when
the gas market was opened up for competition, some companies went around
and would sign people up for a garenteed maximum price for a certain
time period, for a $50 fee.  They also promised if the price went down,
they would match it.  Well the price went down, and they all went out of
business since they couldn't afford to pay their contracts for fixed
rates, and offer the customer the new lower average price.  The current
supply of these companies at least don't offer to match the price if it
goes down, but instead just keep showing graphs and articles about how
much the price has gone up over a certain time period.  The real
question is of course, whether the past is any indication of the future
when it comes to gas or electricity prices.

Len Sorensen
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