Until recently, power demand had flattened across much of the nation, driven in part by more efficient light bulbs and appliances. The Covid-19 pandemic exacerbated the slowdown, idling factories and restricting activities. However, consumption rebounded this year with the economic recovery and a heat wave that led people to crank up their air conditioners.
In addition, with Europe scrambling to secure alternative sources of energy as Russia wages war on Ukraine, US providers have responded by sending vast amounts of liquefied natural gas overseas, limiting the amount being funneled into storage for the peak winter heating period. Gas production growth hasn’t kept pace with demand.
Since natural gas is the No. 1 driver of electricity rates, the result has been a sticker shock, making for thorny decisions come contract renewal time.
It’s made utility customers like Ramona Sandro, 51, de facto natural-gas forecasters.
Sandro is gambling that the US will remain in its current energy funk for a while. So she locked in a two-year term with her natural gas provider, Gas South, even though her rate is more than 60% higher than her previous contract.
Accustomed to paying up to $225 a month in winter, she’ll have to adjust her budget to pay over $350. If necessary, Sandro, her husband and two high-school children may have to add an extra layer of clothing this winter to keep their heating bill down.
“Both me and my husband are hard-working people,” Sandro said. “But a budget is a budget.”
Millions of Americans have some choice to select their electricity or gas provider, or both. It’s difficult to pinpoint how many exactly due to patchwork records across the country.
More than 20 states offer at least some competition, according to trade group Retail Energy Supply Association. In Texas, which has been deregulated since 2002, just shy of 7 million households can choose from retail energy companies, according to data provided by the state’s Alliance for Retail Markets. In Georgia, roughly 1.6 million customers participate in the competitive natural-gas market to heat their homes, according to the American Gas Association.
Ohio allows millions of customers to choose for both electric and gas, and also offers a hybrid approach whereby some local governments negotiate with retail providers on behalf of consumers. In the Northeast, people can choose among local heating-oil companies.
Typically, retail energy marketers will let people escape from bad contracts if, say, the wholesale price of natural gas plummets and the retail prices of gas or electricity drop well below their locked-in rate — with an early-termination fee.
At Houston-based Champion Energy Services, it costs $250 to exit short-term contracts or as much $450 for long ones, said Vice President John Ballenger. Figuring gas prices are bound to fall, he’s thinking about ways Champion might let contract customers benefit from declining rates without incurring a hefty fee.
“We’ve never had a market like this in Texas,” Ballenger said.
Some residents like Stanley, the Texan retiree, prefer to have the choice to shop around for electricity, regardless of the risks. Stanley said he wishes the same option was available for natural gas.
Jeff Bowman, an information-technology professional from Suwanee, Georgia, is going the opposite route: He’s willing to accept some temporary pain in the form of high rates so he doesn’t get trapped in a long-term contract.
In his state, prices per therm, a unit equal to 100 cubic feet of natural gas, have soared to more than 90 cents for fixed-rate contracts, excluding some charges, up from a typical 55 cents in previous years. Variable rates have risen much higher, above $2 a therm.
“I don’t want to lock myself in, because when I lock myself in, I’m going to be paying 98 cents a therm, and I’m going to be paying them that for two years,” he said.
In essence, Bowman is betting on a drop in prices.
“This is like the storm,” Bowman said. “I’m riding it out.”
This article was provided by Bloomberg News.