Every year around this time, my electricity supplier sends me a notice about renewing our electricity supply agreement. Last year, I ignored it because the pricing was competitive and it automatically renews for a year. While we’ve only been using Washington Gas Energy Services for two years, I thought I’d take a closer look this year to make sure we’re still getting a good price.
The electricity supply agreement sets a flat annual kWh price on electricity supply of 10.8¢. In pricing electricity, usually there is a summer price and a winter price, with the summer price being higher in our area. With this agreement, it would be a flat rate throughout the year. To give you an idea of energy use, we typically use more energy in the winter than we do in the summer (about 1,000 kWh per month in the winter, 600 in the summer).
Supply & Delivery
Electricity and natural gas supply have been deregulated in a lot of states, including Maryland, so you have plenty of options when it comes to the supply and delivery of power. When it comes to supplying electricity to your home, you often have to make decisions on two parts. The first is the company that will be supplying the electricity. The second is the company that will be delivering the electricity. Very often, the two companies are the same and it’s usually the company delivering the electricity.
At our home, and I believe this is common, we have no choice on the company delivering the electricity – it has to BG&E. They own the wires and the pipes, so they will deliver the power. For the supplier, there are plenty of options and the only requirement is that they must be licensed by the Maryland Public Service Commission (PSC) and registered with BG&E.
Shopping for Electricity
Right now, our electricity supplier is Washington Gas Energy Services. They recently sent me an electricity supply agreement that would renew our plan at 10.8¢ per kWh. We have the option of renewing for one year or two years at that same 10.8¢ rate. Is that a good deal?
It is if BG&E would charge us more. On our electric bill, BG&E lists the “Price to Compare” at 11.97¢ per kWh. That is BG&E’s estimate of how much an average BG&E residential customer would pay on our schedule per kWh. In other words, working with Washington Gas Energy Services would save us over a cent per kWh, or nearly 10% off. We use around 6-700 kWh’s a month, so it’s a savings of $6-7 a month.
I would’ve expected WGES to have a price in between BG&E’s summer and winter rates, but it’s not. It’s lower than both. WGES is a better choice even with our uneven seasonal use of electricity.
Sign a Long Term Contract?
The next question is whether we should sign up for a one year renewal, which is the minimum requirement, or a two year agreement. Whenever I’m presented with this decision, I try to avoid over thinking and over analyzing it. I’m expected to save $6-7 a month based on BG&E’s estimates, which I have to believe are on the low end of their range because they want me to buy their electricity. I also expect energy prices to go up, that’s just the direction they naturally move in, so locking in long term makes sense.
What’s the risk? Electricity prices plummet, but I can’t believe they will plummet so far that I’ll feel burned by taking a two year 10.8¢ offer when BG&E’s projections are 10% higher. Last winter, the price was 11.75¢ per kWh. This past summer, it was 12.66¢ a kWh. Now, it’s 11.97¢ per kWh… prices aren’t going to drop so far that 10.8¢ looks like a bad deal.
We’ll be locking in the price for two years. There’s an added benefit of 5% of the electricity will be coming from wind power, that’s icing on the cake.
What do you think? Am I missing a big piece to the puzzle somewhere? This seems like such an easy decision that I feel like I’m missing something. I’d love to hear your thoughts!
(Photo: mpeterke )