How to Fixed Price Natural Gas Programs Work?

A year or so ago, we were approached by a company called "Just Energy" Corp. and invited to sign up for a natural gas fixed price program, promising to "lock your price in now for guaranteed protection against future increases."

I guess whenever a business offers me something, my first question is, "what’s in it for them?" I presume they wouldn’t make me the offer purely for the altruistic purpose of saving me money. I presume they’re looking to make maximum profits, as well.

So what is in it for them? whats in it for me? is it worth it?

they told us 25.9cents per cubic metre for 5 years for natural gas. is that good?

i really have no idea.

my mom signed the contract without me helping her decide but i understad we do have 10days to cancel athe contract without penalty . i think..

thanks!

3 Responses to “How to Fixed Price Natural Gas Programs Work?”

  1. Cory Says:

    There is no way to know for certain whether the contract your mom signed is good or bad. There is a built-in profit margin for the company that offered it to you, because they are taking on a certain amount of risk. Risk is always compensated for by a higher average expected return. So you are paying this company a certain margin to take on the risk for you. On average, you will pay lower prices by NOT taking advantage of a fixed natural gas price. In other words, 25.9 cents per cubic meter is ABOVE the expected market price of natural gas over the next 5 years.

    But in any given year you may win or you may lose. So, just ask yourself if it’s worth it to you to pay a premium to reduce your risk of natural gas prices going on. For some people, it’s worth it; for others, it’s not. Perhaps you are on a very limited income and know you can afford 25.9 cents, but can not tolerate the chance it will increase significantly. Personally, I would rather take my chances on the variable rate, knowing that I’ll come out ahead on average. That’s exactly the same reason that I choose to invest in the stock market (risky but profitable on average) rather than park all my money in a savings account (safe but unprofitable on average).

    By the way, it’s obvious you’re an intelligent person. That’s apparent even just based on your use of the word "altruistic". But if you take a little extra time/effort to properly capitalize/punctuate your thoughts, you’ll go from seeming like a relatively smart young person to being indistinguishable from a highly-educated professional. Take that advice for what it’s worth.

    Best of luck!

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