The Trend is Down
Natural gas and oil have been on a trend down together at the end of this year and the latest forecast from industry professionals is that they could fall even further this year. The trend has continued beyond many experts predictions and there is no way to guess as to when this trend will start its reverse. Based on trend alone we can guess that the Gulf Oil CEO is right when he predicts gas will reach $1 by next year. If this is the case Texas electric rates and natural gas will most likely fall as well by the end of next year. We have forecasted that natural gas will continue to fall for the next 10 – 12 months. Natural gas prices falling provides the added benefit of bringing down Texas electric rates with it and this could potentialy bring us 8 – 9 cents kWh residential electric rates in Dallas for a 1 year fixed rate term. This is only speculation that rates will fall like this but wouldn’t it be great to lock in for 1 year at 8 cents kWh for an “all in” electric rate?
There is no point on holding off on locking into an electric rate unless you believe you have a hunch on what electric rates are guaranteed to do. Because there are no guarantees it would be best to lock in to a fixed rate even if just for a short term. There are 6 month fixed rate if you would like to wait awhile and see what happens as the year progresses. Sometimes you will find that when at the beginning of the year you checked rates you could get a cheaper 6 month rate that 6 months later a 1 year contract is the cheaper contract while a 6 month rate is more expensive. Why is it that monthly terms vary back in forth in price like this? Energy commodity futures determine if a 6 month rate or 12 month rate will be the more expensive rate. All Texas electric provider prices fall in line with the futures commodity market prices. If a 6 month rate is the most expensive electric price then you can expect that signing on the more expensive rate will likely be in your favor as the expectation is that rates will be much lower in 6 months.
Chancing it with the Cheapest Rate
In the other scenario if you saw that a 12 month electric rate was more expensove then a 6 month rate then you can bet that 12 months from now you may be able to lock in at a better rate then you could 6 months away. Statistically you are buying the best insurance by locking in at the more expensive term. If you are a risky person then by all means always lock in at the cheaper rate but if you want protection then choose the more exensive monthly or yearly term.