Wednesday, December 07, 2011

Check Whether a Deal is a Deal

In my state, I have the option of purchasing natural gas and electricity from competitive retail suppliers or from the government regulated utility.   On the surface, it would seem purchasing energy from competitive retail supplier versus a regulated supplier.  However, that assumption isn't always true based on a historical analysis I did.

Until recently, I decided keep purchasing natural gas from the regulated utility.  I had heard "horror" stories of people committing to a fixed rate gas cost only to have the market price dip significantly below the competitive fixed rate retail price.  So I always stayed with the regulated market price.  However, last year, a competitive retail supplier offered a variable rate with a maximum cap.  So, the price we pay has a maximum amount but it can decline if the market price drops.  For us, it was a no lose situation so we purchased it

On the other hand, I decided to purchase electric energy from the retail supplier right away.   The offer was either an 18% discount from the variable regulated price or a fixed rate that was a 33% discount from the current regulated price.  For this one, I called our local electric utility and figured out that the regulated price didn't vary much during the year.  So a fixed rate at a 33% discount was likely the best deal, since there was a only a small chance that the price of electricity would decline much.  For the past year,  the 33% discount fixed rate option that we contracted turned out to be the best option.

Over the past year, we've reduced our energy utility costs by about 1/3.   So the analysis I did paid off is a great savings.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

1 comment:

Abnre said...

Very good tip!!!!

That is very clever! Definitely a great way to save(Crumblrr) is to analyze how much you spend in every utility you consume!

two thumbs up :)