New Online CUB Service Details How Most Consumers Pay Higher Bills With Natural Gas Competition, Odds Worse Than Blackjack

28 March 2006

More than half of the offers peddled by unregulated natural gas suppliers in northern Illinois are bad deals compared with utility rates, even with Nicor Gas and Peoples Energy charging record-high winter prices, according to a new service unveiled by the Citizens Utility Board (CUB) Monday.

CUB's free Gas Market Monitor tracks the monthly price offers of unregulated alternative gas suppliers and compares those plans to the prices charged by Nicor and Peoples. The service, available at http://www.CitizensUtilityBoard.org/GasMarketMonitor.php , is updated monthly and provides the only comprehensive natural gas price analysis available to consumers.

"Competition in the natural gas market is being sold to consumers as a way to save money on their gas bills," CUB Executive Director David Kolata said. "But as our new Gas Market Monitor shows, you currently have better luck at the blackjack table than you do switching natural gas suppliers. And, unfortunately, you need a crystal ball to figure out if you'll be one of the winners."

While not a crystal ball, the market monitor tracks the prices of 789 alternative natural gas plans that have been marketed to consumers since 2003. Of those, 291 plans have expired and 477 plans are still in effect. A gas supplier defaulted on the contracts of an additional 21 plans. Most alternative plans require customers to sign a contract for between one and five years.

Of the 291 expired plans, the monitor shows that consumers lost money on 57 percent of them. Consumers saved on 37 percent of the plans. The average loss was $97.23, while the average savings was $183.89. Of the plans still in effect, 60 percent would have cost consumers more money to date. The market monitor will analyze these plans monthly so consumers can assess their savings or losses.

Kolata noted that the current analysis shows that more plans have saved money than when CUB last studied the data in December 2004. At that time, less than 3 percent of the offers had saved money. He attributed that to the fact that some customers were lucky enough to lock in lower prices before natural gas prices soared to historic levels.

Eight firms are participating in the "customer choice" programs being offered to Nicor Gas, Peoples Energy, and North Shore Gas customers. According to 2005 federal data, about 161,000 residential customers have chosen an alternative gas supplier.

Alternative suppliers generally offer two types of rates, a fixed rate locked in for a period of one to five years, or a variable rate tied to an index that changes monthly. But the initial rate offered under both types of plans is almost always higher than the utility price at the time, meaning the utility price would have to increase substantially to make the offer pay off.

The Gas Market Monitor compares the rates customers paid on the alternative pricing plans with the actual rates charged by Nicor Gas, Peoples Gas, and North Shore Gas as reported to the ICC. The savings and loss estimates are based on typical usage of 1,325 therms a year, allocated by monthly consumption. Offers still in effect were analyzed through February.

New data is obtained each month from the alternative suppliers and includes the per therm gas charge along with monthly fees and other charges. Government-mandated taxes and surcharges are not included.

Since 1998, when northern Illinois' natural gas market opened to competition, CUB has argued that it was ripe for abuse. Alternative gas suppliers face little state oversight and often mislead customers by using the same name and logo as the regulated utility company. And one company, Santanna Energy Services, reneged on its fixed price offers because customers were saving too much money.

With the price of gas so volatile, consumers desperate to save money have become easy prey for the often aggressive and misleading marketing from alternative suppliers, whose personnel go door-to-door and usually are paid a commission for each customer they enroll.

CUB is a nonprofit statewide utility watchdog organization created by the Illinois Legislature to represent the interests of residential and small- business utility customers. For more information about CUB and its efforts to protect consumers, call CUB's Consumer Hotline at 1-800-669-5556 or visit http://www.CitizensUtilityBoard.org .

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New Online CUB Service Details How Most Consumers Pay Higher Bills With Natural Gas Competition, Odds Worse Than Blackjack

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