Alternative gas suppliers defend contracts

Chicago Sun-Times
March 28, 2006
By Mary Wisniewski

More than half of the offers by unregulated natural gas suppliers in northern Illinois
are money-losers compared with standard utility rates, according to a report by the
Citizens Utility Board, a consumer watchdog group. Illinois gas customers can
choose to contract from another company, such as U.S. Energy Savings or MXenergy, to supply their gas while Nicor or Peoples Energy delivers it. About 10
percent of all Nicor customers use alternative suppliers.

CUB head David Kolata said consumers would have better luck at the blackjack
table than they would switching from their utility's gas to alternative gas suppliers.
"Unfortunately, you need a crystal ball to figure out if you'll be one of the winners,"
Kolata said.

CUB found that customers on 57 percent of expired plans and 60 percent of
ongoing plans would have saved money if they'd bought gas from their regular
utility. Alternative suppliers offer either fixed rates locked in for one- to five-year
periods, or variable rates.

The situation has improved since the last time CUB studied the data in December
2004, when less than 3 percent of alternative gas offers saved money. Kolata
attributes this to the fact that some customers locked in lower prices before gas
prices soared to historic levels.

But alternative suppliers say their companies offer price certainty -- so that
customers know what they're going to pay over the course of a contract instead of
being subject to monthly price fluctuations. They compare locking in natural gas
prices to locking in an interest rate on a home mortgage.

"My crystal ball is broken, but so is CUB's," said MXenergy CEO Jeffrey Mayer. "When CUB criticizes fixed-price contracts, they're saying they can foresee the future, and they can't."

Mayer noted that most homeowners protect themselves from interest rate fluctuations with fixed-rate mortgages, even though the rates are usually higher than adjustable-rate mortgages, because they want to be protected against
volatility.

"I'm surprised CUB, which protects consumer interest, has been so critical about
price protection," Mayer said.

MXenergy is offering a one-year contract price of $1.20 per therm. Nicor's price is
67 cents per therm in March, and was $1.19 in November.

CUB offers a Gas Market Monitor on its Web site to track the monthly price offers of
alternative gas suppliers, and compare those plans to prices charged by Nicor and Peoples. The service, available at www.CitizensUtilityBoard.org/ GasMarketMonitor.php, is updated monthly.