Times have changed from when businesses had no options in choosing their natural gas provider. Historically, there was only one utility company that was given exclusive rights over the supply, transmission, and delivery of your energy. For many years, your local utility handled all these phases of the business in a “vertically integrated” manner. After decades of growth, construction, and addition of market participants, this gave the local utility company an energy monopoly of the markets they service.
The Federal Energy Regulatory Commission (FERC) changed this in 1996. They determined competition should be introduced through deregulation. This separated the supply and interstate transportation sections of the industry. The gas supply area of the market was completely deregulated by FERC and regulations changed to accommodate a more competitive market for interstate transportation. Most utilities in the Midwest then elected to further competition by allowing gas marketers to sell the natural gas commodity directly to each utility’s commercial and industrial customers.
Qualified businesses now have the option of choosing a natural gas marketer to purchase their natural gas supply, separate from their local utility. That means YOU are no longer stuck with one option and can “shop-around” for a third-party gas supply company. However, your local utility will continue to deliver your natural gas, maintain the distribution system, respond to emergencies and read the meters.
It is important to understand that third party gas suppliers are not in competition with your local utility. The utility does not make anything on the natural gas commodity they would otherwise be delivering. The utility only makes money on the transmission and delivery part of the service. Unfortunately, many businesses are unaware of the options available to purchase their natural gas.
Consumers have the potential to save between 10% and 30% compared to their utility. Prices are better than the utility because they must be available to serve the entire city gas network in the worst-case scenario. This does not allow them to be as flexible with their gas supply strategies and requires they be prepared for the coldest day of the year. On the other hand, third-party suppliers can take advantage of buying large quantities of gas that are tailored to the specific supply requirements of their group of customers, which makes the price lower. Also, third-party suppliers are also not responsible for any residential load which causes large price spikes in the winter.
The reasons for choosing an alternate gas supplier can be many, but most companies tend to seek (i) lower prices (ii) price stability which is not available with variable utility rates (iii) longer-term contracts and (iv) energy produced by environmentally friendly sources. If you decide to make the switch to a third-party supplier, the utility will not change a customers’ meter fee or distribution charges, unless a utility regulatory commission approves it. There are also no changes to your building. The third-party supplier will run the gas through the current utility distribution and building lines.
Kinetrex Energy is the only locally headquartered third-party natural gas supplier in Indiana. If you would like more information on how your organization could save on natural gas, contact us here.