April 2005
Variable Versus Fixed Rates

The volatility of natural gas makes it difficult when deciding to lock into a fixed rate. Most people ask "when is the best time to lock in?"

"It's hard to define a specific time of year to sign a 12 billing cycle fixed contract," says Allen Powers, Walton EMC Natural Gas director of gas operations. "You can't predict future prices."

WEMCNG depends on Powers as its "natural gas expert." Powers came to WEMCNG with over 20 years experience in the natural gas business.

He continually tracks the daily trends of natural gas prices and supply to fairly set the monthly price per therm rates for WEMCNG customers. Powers and WEMCNG want you to understand and know your options as a customer.

You have two options in choosing natural gas rates: variable or fixed. Both rates change month to month depending on supply and demand of natural gas and the price of natural gas at the wellhead.

"Fixed rates are often times more expensive," Powers explains, "but you at least know your price for natural gas for 12 months, while variable rates follow market trends."

If natural gas prices are high at the wellhead, the variable rate is high. The same trend results when prices are low.

If you choose the variable rate, WEMCNG doesn't require you to sign a contract. However, signing a 12 billing cycle fixed contract locks you into a contract, meaning you pay the same per therm rate 12 billing cycles no matter how the natural gas demand and supply fluctuates.

Even if the price of natural gas decreases, you're locked into the fixed rate. But when prices are higher during the heating season, you pay a lower price with your fixed contract. With a fixed contract, Powers says it gives customers certainty during uncertain times.

Is a fixed contract right for you? Consider your habits and the seasons you use the most natural gas – during the summer for grilling, or the winter for heating? Also consider if you're willing to lock into a fixed rate keeping in mind the variable rate could fall below the fixed rate, and you have to pay the fixed rate at a higher price.

Natural gas supply and demand reflect the price of gas. "Coming out of the winter, supplies are plentiful, but expensive," Powers said. "It's hard to guess where prices will go next."

Georgia has a liquefied natural gas (LNG) facility on Elba Island, providing a good supply of LNG. The facility brings natural gas supplies from more diverse sources such as South America.

WEMCNG rates are competitive. Since WEMCNG has been in business, it's offered the lowest variable and fixed rates most months compared to other Georgia natural gas marketers.

Compare rates of Georgia's natural gas marketers.

The fixed rate may be higher than the variable rate most months, but if you locked in at $0.819 in March of 2004, you actually paid a lower rate most months.

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