Nicor Gas on the "Budget Plan"

[Note: This post was expanded on March 12, 2009, comment added March 23 and new data added March 25.]

Comment added March 23, 2009. According to the New York Times article "Natural Gas, Suddenly Abundant, Is Cheaper" dated March 20: "..the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries. Six giant plants capable of cooling and liquefying gas for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.....Gas industry executives expect that liquefied gas imports into the United States will at least triple in the second half of this year.....The global capacity for liquefied natural gas exports of 200 million tons a year will increase by 25 percent with the completion of six new plants in Qatar, Russia, Indonesia and Yemen, totaling $48 billion in investments, and the upgrading of a seventh plant in Malaysia.....Natural gas in the United States costs a little over $4 per thousand cubic feet, down from a peak of more than $13 last year. Oil now costs a bit more than $51 a barrel, down from a peak of more than $145 in July. On average, world spot prices for liquefied natural gas cargoes have come down by more than two-thirds since last summer." Note: You may need an account at the New York Times to access the article, but creating an account is "free".
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Nicor Solutions recently sent me a letter, which offered me the opportunity to freeze my natural gas costs for a year. I received such a letter last year and declined the offer, after making my own assessment of the costs of natural gas and concluding that gas prices were most likely going to decline. I was of the opinion that accepting the Nicor offer would have resulted in higher natural gas costs, in my view. However, I had no way of knowing if costs would decline, increase or remain unchanged.

I have researched the alternatives available and present that information here. This may assist you in making your own decisions. I am aware that this unusually cold winter resulted in a spike in my energy usage, and that of many of my fellow unit owners. The questions are; what are the alternatives, could I have saved money and what should I do about this, in planning for the winter of 2009/2010?

After having read this, if you have questions, if you would like assistance in determining how your bill is calculated, or if you want to determine if you have viable options, send me an email at letmethinkaboutthisblog@gmail.com and I'll respond and make arrangements to review your gas bills. I do not work for an energy company, I am not a broker or salesman. I am providing this as a means to be of service.

Controlling energy use

The use of energy in my unit is determined by several factors. These include the temperature outside, the setting of my thermostat, the quality of the insulation of my unit, the condition of my gas appliances, and the amount of consumption for cooking, hot water, heat and the gas fireplace. Other factors include the setting and types of forced air registers, the orientation of my unit, which determines the amount of sunlight which enters through windows and therefore assists in heating my unit, and contributes to winter heat loss. The condition of windows and patio doors also determine how much energy is used.

To go into the factors that affect heat transfer would make this far too long a post. But some knowledge is useful for determining how to reduce energy consumption in the cold winter months. This applies, in reverse, during those hot summer months. Heat is transferred three ways: conduction, convection and radiation ("radiation" in this case, has nothing to do with nuclear plants or devices). Heat flows via conduction from warmer areas to cooler areas. Via convection, heat flows up to my ceiling where some is lost by conduction to the attic space above. If you are in a first floor unit, heat is lost through the floor to the earth below. In my unit, heat is conducted through walls, windows, doors, ceiling and floor from the warmer spaces to the cooler spaces. The greater that temperature difference, the greater the heat lost. As the difference in temperature increases, the loss of heat increases even faster; or "at a faster rate". My energy bill is directly related to the amount of heat lost and that temperature difference. Some heat is gained from sunlight entering my patio and kitchen windows. The infrared energy contained in sunlight is converted to heat upon striking the objects and floor of my unit. Cold air entering my unit must be heated and also contributes to my energy consumption.

So what can I do about controlling heat loss? In my unit, I have insulation installed in my ceiling. I open draperies wide in windows facing the sun during the daylight hours, and have some energy retarding shades to reduce heat flow outwards during the hours of darkness. I have registers adjusted to direct more heat to certain living spaces. This includes kitchen, bath and dining and living room, which is our sitting area; the register in the boudoir adjoining our master bath and bedroom is full open, to heat that space and the sleeping space. All interior doors, except closets are left open at all times; the one-time adjustment of registers has controlled the distribution of hot air from the furnace. I also have an automatic set-back thermostat. Using this reduces the temperature difference between my living spaces and the outdoors or attic, and therefore reduces heat loss. Of course, it also reduces energy consumption. This thermostat is located in our central hallway and is set to maintain our living spaces at 70F at times when we are present, and is reduced to 66F at times when we are not, and at night after we are asleep. The thermostat has different time and temperature settings for week days and Saturday and Sunday, which permits us to adjust for our presence. We do from time to time increase the setting using a manual button on the thermostat, if we are uncomfortable. We have increased this to 72F on occasion. We do have a gas fireplace, which we use during the holidays. However, the flue is kept closed when this is not in use, to prevent heat loss via convection up the chimney.
There are other things which we have done, to improve the energy efficiency of our unit, but these are too long for this post.

The "budget plan" and alternative plans

Each year I have chosen the Nicor Gas “Budget Plan” which estimates my usage each year, and charges me a fixed amount each month in a fixed payment. It does not lower my energy costs, but instead spreads those costs over a period of 12 months. This smooths my payments, but I do pay for all energy I use. As a result of the budgeting, during the warm months I use less energy than Nicor is charging me for and so I accrue an account balance for the unused amount. This grows throughout the summer months and the credit, hopefully, is sufficient to cover my increased usage during the cold, winter months. However, it is possible that I will use more gas than I have amassed a credit for, and my monthly payment will increase. Or I will use all the credit I have and exceed that amount, which will cause a large increase in my gas bill, until my usage declines and I again begin accruing a credit.

Nicor re-calculates my monthly budget amount from time to time, and adjusts it for changes in my energy consumption and costs. For example, my monthly bill was $32.00 in 2008. It was also $32.00 per month in 2004. It increased to $41.00 in 2005, then to $62.00 in 2006 and decreased to $38.00 in 2007.

Currently, Nicor Gas and Nicor Solutions offer several alternative approaches. These include:

1. Pay as you go, which simply bills all energy consumed each month at the current rate.
2. Budget Plan, which is similar to the "Pay as you go" plan but averages the payments over 12 months.
3. Fixed bill plan, which offers a guaranteed monthly billing, and does not vary with gas usage or natural gas price fluctuations. It includes, I understand, a furnace inspection and cleaning.
4. Flex plan, which offers gas at a $0.05 per therm discount and bills for all energy used.

I am currently using the "Budget plan" and on March 12 I did call Nicor Solutions to see what my options were. They provided me with information on all of the plans available. Here is a summary of costs for those plans, as compared to my budget plan.

First, I am again of the opinion that there are no significant natural gas price increases on the immediate horizon which would influence my bill in the winter of 2009/2010. I base that in part on data available from the US government EIA website, which projects natural gas prices to increase between 0.09% and 7% in the East and West North Central Regions. However, for the sake of comparison, I'm going to assume that natural gas will increase by 7% next year, and with it, my budget plan monthly bill.

Secondly, the winter of 2008/2009 was unusually cold. How cold? According to the National Weather service, this is how monthly low temperatures compared to the normal lows for Chicago-O'hare weather station:

• October Normal Low +43F, this winter (Oct. 2008) +31F
• November Normal Low +31F, this winter (Nov. 2008) +17F
• December Normal Low +20F, this winter (Dec. 2008) -6F
• January Normal Low = +14F, this winter ( Jan. 2009) -18F

These are much lower than the "normal" lows, which were for the period 1971 to 2000. I am going to assume that next winter will be no colder than our most recent. If I am correct, I will use the same quantity of natural gas for heating next year, and my bill should reflect that.

Using my budget plan, here is a chart of the information which I describe below. To compare plans, I need to know costs. For this purpose I am using the bills for the coldest six months ending March 19, 2009. I have not updated the chart below to include the data for February 17-March 19:

The natural gas was consumed for cooking, heating and for hot water, and by a fireplace. Our unit has a 10 year old gas furnace with a set-back thermostat. It also has a natural gas fireplace with pilot. We light the pilot in the fall and do use the gas fireplace during the Christmas holiday season. Once temperatures outside reach 70F I close off the gas valve to the fire place, to shut off the pilot and conserve. Our hot water heater is a 50 gallon natural gas unit which was the “best” that GE had to offer in 2005. It also has a newer (6 year old) G.E. gas stove and oven. We don't use the self cleaning oven feature, which consumes energy; I use the old fashioned "Easy Off" product to clean it periodically. Our unit has ceiling insulation and we are in a second floor, 3-bedroom, 2-bath “B” unit. My spouse and I enjoy cooking and baking and we do a substantial amount.

Here is a summary of our natural gas usage for 6 periods. These include:

1. September 18 - October 17, 2008.
2. October 17 – November 17, 2008.
3. November 17 – December 17, 2008.
4. December 17 – January 19, 2009.
5. January 19 – February 17, 2009.
6. February 17 - March 19, 2009.

My usage, according to my Nicor billing statements were as follows, with usage split on each bill into the months of usage. So my September – October bill includes therms billed in September and October. I took a look at my bill for December 2007 – January 2008 and I used about half the energy (53%) in that period, as compared to the same period this year:

1. September 18 - October 17, 2008 = 2.73 + 3.35 therms = 6.08 therms used.
2. October 17 – November 17, 2008 = 26 +27.24 therms =53.24 therms used.
3. November 17 – December 17, 2008 = 32.18 + 36.77 therms = 68.95 therms used.
4. December 17 – January 19, 2009 = 81.58 + 97.89 therms = 179.47 therms used.
5. January 19 – February 17, 2009 = 33.18 + 40.84 therms = 74.02 therms used.
6. February 17 - March 19, 2009 = 34.88 + 52.32 therms = 87.20 therms used.

Each monthly bill also includes a “Total” which is the sum of cost of energy used each period and includes delivery charges, municipal and state taxes, environmental fees and a utility fund tax. My total for each of the monthly periods was:

1. September 18 - October 17, 2008 = $15.35.
2. October 17 – November 17, 2008 = $59.00.
3. November 17 – December 17, 2008 = $66.76.
4. December 17 – January 19, 2009 = $145.81.
5. January 19 – February 17, 2009 = $63.53.
6. February 17 - March 19, 2009 = $62.35.

Using the number of therms used, and the “total” from the monthly bill, this is my delivered and taxed cost per therm for each month:

1. September 18 - October 17, 2008 = $15.35/6.08 = $2.53.
2. October 17 – November 17, 2008 = $59.00/53.24 = $1.11.
3. November 17 – December 17, 2008 = $66.76/68.95 = $0.97.
4. December 17 – January 19, 2009 = $145.81/179.47 = $0.81.
5. January 19 – February 17, 2009 = $63.53/74.02 = $0.86.
6. February 17 - March 19, 2009 = $62.35/87.20 = $0.72.

Comparison of costs of the Plans available

This comparison looks at these plans:

1. Budget plan.
2. Fixed Bill plan.
3. Flex plan

Using the information presented earlier in the post, here are the comparisons of these plans. I have no crystal ball and so I need to make some assumptions about the future, i.e. the winter of 2009/2010, and energy costs:

Budget plan. If my energy usage next winter is identical to this winter, and if natural gas cost increases by a maximum 7% as predicted by the U.S. government EIA, then my monthly budget amount will also increase by about 7%. Therefore my cost per month under the budget plan will be: $34.24, and my cost for 12 months will be $410.88.

Fixed Bill plan. I called Nicor Solutions and discussed this plan. They reviewed my energy usage, and using their forecasting data, which includes anticipated temperatures and gas costs, they offered me a plan at a cost per month of: $78.80, and my cost for 12 months will be $945.60.

Flex plan. I called Nicor Solutions and they described this plan. It would provide a $0.05 reduction per therm for energy used. I decided to use this information and compare it to my actual consumption for the five months posted earlier in the blog. I used 386.26 therms for which I was billed $257.61. If I had used the Flex Plan, I would have been billed $238.49 for the therms I used. The Flex Plan would have saved me $19.11, and would have reduced my monthly bill to about $28.18, instead of $32.00 per month.

The Winning plan is:

The winner, and plan which offers me anticipated lowest natural gas bill for a year is, in my case, the Flex Plan.

Author's Comments to the Above:

I have several comments to the information presented here:

1. As of October 17, 2008 I had achieved a budget surplus, or credit, of $225.53. This had decreased to $19.25 as of February 17, 2009, and to $0.01 as of March 19, 2009.
2. The comparison of the Flex Plan only uses five months of information. The cost savings is applied to those five months. So the conclusion uses approximate information and my savings over a period of 12 months could be slightly higher or lower.
3. I did not exceed my "Budget Plan" as of March 19, 2009. However, my balance was only $0.01. So Nicor has increased my budget to $35.00 per month, which is their best guess at this time for consumption for the next year. I should again begin to accrue a positive balance until the fall.
4. One of the reasons for the varying cost per therm of natural gas used, is the multi-tiered billing system for delivery charges. I pay a higher amount per therm delivered for energy below 20 therms, a lesser amount for the next 21 to 50 therms delivered, and then an even lower amount for therms above 50. This is added to natural gas costs.
5. Natural gas costs vary per month. For example, according to my Nicor bill, December and January gas was billed at $0.65 per therm used. February this bill decreased to $0.57 per therm, and March decreased to $0.43 per therm.
6. Any comments?