Local gas coalition’s contract up
Contract for 75,000 customers in NW Ohio to expire April 1
3/12/2013Thousands of natural gas customers in the Toledo area have begun getting cards from IGS Energy alerting them their natural gas contract with the supplier is about to expire April 1.
If you receive the notice, it means you are a part of a local residential gas-buying group, the Northwest Ohio Aggregation Coalition, that negotiated a one-year contract with IGS Energy in March, 2012.
Once the contract expires, customers who are part of the coalition have two options: choose an alternate supplier from a list of gas providers certified by the Public Utilities Commission of Ohio, or do nothing and automatically become a customer of Columbia Gas of Ohio Inc., which, by law, must supply gas to anyone who doesn’t choose an alternate.
The coalition represents 75,000 customers in Toledo, Maumee, Northwood, Oregon, Sylvania, Perrysburg Township, Holland, Lake Township, and all unincorporated areas of Lucas County.
Both Leslie Kovacik, the city of Toledo attorney who represents the aggregation coalition in contract negotiations, and Mark Frye, an energy consultant with Palmer Energy Co., the official adviser to the coalition, say they plan to do nothing and revert to coverage with Columbia Gas, which offers a rate that varies monthly.
The reasons are two-fold, they said. First, natural-gas usage for a residential household drops considerably from May through September and with natural-gas prices near historic lows, it makes little sense to seek out a new contract immediately.
Second, there is a good chance IGS Energy will want to strike a new contract with the aggregation coalition by September. If a customer is locked into a contract with another supplier at that point, that customer would have to stay with that new supplier or pay a fee to get out of their contract.
“Given where natural-gas prices are, it’s challenging right now for fixed prices to compete with variable gas prices,” Mr. Frye said. “I haven’t seen anything that’s going to shift that position in the next few years. So, if you are going to get a new supplier, you’ve got to be able to get a better price deal to reduce risk and to make it worth your while to switch.
“For my own house, I’m going to flop back to Columbia and I’m just going to stay there and until we get a deal done with IGS for an extension [of the previous contract]. If that doesn’t happen, then I’m going to look around,” Mr. Frye said.
When the coalition and IGS Energy hammered out the current contract a year ago, it provided a price of 2 cents per hundred cubic feet less than Columbia Gas’ monthly price. The contract allowed IGS Energy to decide when the contract took effect, but that could be no later than Oct. 1. It started providing gas in September to coalition members.
Mr. Frye said the gas supplier likely delayed implementing the contract because it couldn’t make any profit off the contract during the summer months with gas usage typically being so low.
The contract allowed for a one-year extension beginning next month, if both parties agreed. But Mr. Frye said it appears IGS Energy doesn’t want an extension right now because it again would be forced to supply gas during summer months when gas usage is low and it would lose money as a result.
Ms. Kovacik said the aggregation coalition did not want to negotiate a contract that, in effect, only covers the winter months, “but they offered such a good rate for the winter, we couldn’t say no.”
Mr. Frye said that for the summer, the aggregation coalition will “officially be on hiatus” as far as natural gas. But coalition officials have been in contact with IGS Energy about renewing its offer in the fall. “They’ve mentioned that they’re interested, but there’s no agreement yet,” he said.
Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.