No Price Break for Some Terasen Customers

Friday, March 24, 2006 04:00 AM

There won’t be any reduced pricing for Terasen Gas customers who decided to lock in with the “Stable Rate” when prices are rolled back 11% on April 1st

The “Stable Rate” of $11.28 per gigajoule was offered to Terasen customers in October of last year. The rate was guaranteed for the full year of 2006, regardless of shifts in the natural gas rates. At the time, rates had climbed 19 % over four months (5.6% in July, 13.3% in October) and the average Prince George Residential customer was paying $9.72 per gigajoule.

About 6,000 Terasen customers (province wide) chose to sign up for the stable rate gambling that rates would be more likely to go up than come down. But the rates are coming down, with an 11% roll back planned for the 1st of April. While the average customer will benefit from that rollback, those who “locked-in” will not.

“Its like choosing a mortgage,” says Dean Pelkey, Media Relations Manager for Terasen “You can choose to float with a variable rate, or lock in for a term.”

The change means the locked –in customer has already paid 15.5% more per gigajoule through winter, and when the rate drops, those same locked-in customers will be paying at least 23% more than their non locked-in neighbours.

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Posted on Friday, March 24, 2006 04:00 AM in News by 250 News

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Comments

Posted by: QuasiMe on March 24 2006 10:04 AM

Some people took a look at the risks and decided they could sleep better knowing what price they were paying as opposed to playing the market. Others did their own analysis and decided to take a risk that prices would ease off. You can't have it both ways.

Posted by: lunarcom on March 24 2006 11:07 AM

Thing is the average consumer is not going to save the $175 or so that Terasen is saying they will anyway ! Come mid-fall they will be back asking for a price increase for the winter period. So the summer period, when your consumption is next to nothing compared to winter is when you get the good price break.

Posted by: Palopu on March 24 2006 11:28 AM

Lunarcom has it right.

In the first place Terasen has stated a number of times in the past that they do not make any money on the cost of gas. They buy it on the open market and sell it to the consumer (us) at cost. They make their money by delivering the commodity. Now if you look closely at what was said in the papers you will notice that they said part of the drop in prices was offset by an increase in the amount Terasen charges to deliver the commodity. In other words they have put in an increase while implying that we are getting a reduction.

The question now is will they decrease the delivery charge later when the cost of gas goes up or will it stay. This is nothing more than a thinly disquised increase in our gas rates, and I am suprised that the papers did not pick up on it, rather than going along with Terasen and implying that we are getting a reduction from Terasen.

We are getting a reduction because the price of gas has gone down. We are getting an increase from Terasen. Its that simple.

Posted by: Percy on March 25 2006 12:49 AM

It's about managing cashflow. Think about it. Teresan can count on fixed income from 6,000 customers for whatever period the term was. Good for the company.
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On the other hand, the customer elected to agree to a price that they would be satisfied with for the terms of the agreement. So, end of discussion. Everybody wins. Percy

Posted by: Palopu on March 25 2006 8:41 AM

For those 6000 people who signed on to the fixed rate. **You have to dance with the one you brung**

Terasen buys this gas on the open market and delivers it to customers at cost. They do not make any money from the sale of Natural Gas. They make their money from delivering the product. They applied for and got the ok to increase their delivery price by approx $3.00 per residential customer per year. On the surface this doesnt look like much, but when you extrapolate it over 800,000 Customers it amount to increased revenue to them of approx 2 1/2 Million dollars. You will know how much of an increase you received when you compare your delivery cost per gigagoule this year (2006) compared to (2005).