I will admit that I have always been leery of these people who knock at my door and offer ‘GREAT’ deals to save on gas and electricity. During early deregulation, I figured these companies made their money through a government sponsored deregulation (i.e. They are provided with a secured lower price to shift share from the utility monopoly).

Recently, Direct Energy sent over two different notes, encouraging me to sign up before my rates went through the roof. This has been tugging at the fringes of my mind for a while, so instead of throwing it into the garbage I dug in.

The form starts out with a statement ‘complete and mail in the enclosed application or call 1-866-290-6366. By doing so, you’ll secure a price of 9.35 cents per kWh through December 31,2009’. I read on … wondering, what do I pay today?

The last part of the form (section 6) is headlined with ‘What happens if I don’t sign up? My rate stays at the open market rate of 5.8 cents per kWh. Huh? I must be reading this wrong or missing something so I call the number.

Me: ‘I must be missing something; to me it looks like the price is 50% higher than what I am paying today’

Customer Service Agent: ‘Yes, that is right’

Me: ‘Then why would I sign up?’

Her: ‘To protect your price against the rapid rise in electricity costs. They are rising very fast’

Me: ‘But the price of oil is dropping. Generally, we have hit a peak and are seeing a decline. They are rising?’

Her: ‘Oh yes, we expect the price to go up 16% this year’

Me: ‘So, if it does that, I am still 35% lower?’

Her: ‘Yes, but it will keep doing that, going up each year’

Me: ‘So, do you have a break even between now and 2009 when I will start saving money versus paying a premium or how much you would project I will save doing it this way?’

Her: ‘Uh, no. We cannot forecast the future. But it is a great way to protect against the prices. Many people are signing up’

Me: ‘You do this for natural gas too, curious, is it the same thing?’

Her: (gets the figures, provides me the data which shows a 50% price premium)

Me: ‘Thanks’

Her: ‘Wait, lets talk about a maintenance contract on your furnace …’

CLICK

Buyer beware.