Natural Gas Residential Contracts – Renewal 2

Yesterday, in Part 1, we reviewed the new offer from Direct Energy for a 5 year natural gas contract we received a few weeks ago.

Our current 5 year contract at 30.9 cents per cubic meters is ending in early September and they are offering us another 5 year contract at 35.9 cents, an increase of more than 16% when natural gas prices are the lowest in years. Back in the late summer of 2004 the price of natural gas was around $6.20 per GJ whereas currently they are around $4.50 per GJ, according to this chart.

Sure, with the depressed prices there is less production and we have had (arguably) a few warm winters in a row to create excess supply. Yet, one just can turn on or off natural gas wells like a faucet of water. If we have an increase in demand from an improving economy the old supply / demand equation would point to a quick rise in natural gas price. Yet, with the eastern Canada shale discoveries of natural gas, is there really a declining production pool?

I know I know….if you are a simply home owner like me and not a commodities professional your head probably hurts from the above paragraph.

Plus, if the commodity and stock market professionals were really all knowing, why did the stock market take such a huge tumble last fall and earlier this year to everyone’s surprise?

So, curious about the competition to Direct Energy, I went shopping to see what the competition was offering.

I found this web site, Energyshop.com, which lists the prices for Direct Energy and 7 other competitors of natural gas contracts for Ontario residential customers of Enbridge.

Here is the summary for 5 year residential natural gas contracts as of this writing (June 14, 2009) per cubic meters:

  • 31.4   Cents – Canadian RiteRate Energy
  • 31.9   Cents – FireFly Energy
  • 34.9   Cents – Tetra Gas
  • 36.35 Cents – Universal Energy
  • 33.9   Cents – Ontario Energy Savings

So, why go with Direct Energy at 35.9 cents per cubic meters, the second highest amongst the above group?

I have several weeks yet to make my decision. I’ll let you know what I find out and what we decide.

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