Personal Finance

Ontario - Electricity Rate Locking - Is it worth it?

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  • Mar 19th, 2014 4:31 pm
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Mar 2, 2010
452 posts
44 upvotes

Ontario - Electricity Rate Locking - Is it worth it?

Hello,

I am wondering if anyone has looked at the fine print about locking in electricity and/or natural gas rates and determine if it is worth it or not? Example: riterate.ca. Is it worth it?

PS: I know that for both electricity and natural gas, the rate is for the consumption portion only (approx. 30-50% of the bill).

Also, what are the fine prints associated with these contracts?
- What if we sell the house and move within Ontario? What if the move is outside Ontario? Any liability associated with this?

Thanks for your input.
9 replies
Deal Addict
Jul 21, 2004
1361 posts
107 upvotes
I think those contracts just prey on people's fear of uncertainty. You way overpay in the present, hoping that at some point in your contract the rate goes higher thus saving money. If the rate never goes higher, but instead goes lower, like nat gas did, then you get screwed, or if you overpay for the first 4 years, only to save a little in the 5th year you still lose. The media has done many reports on this issue, and locking in your rates was never the right choice.
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Feb 15, 2008
26318 posts
3242 upvotes
Calgary
Each individual contract should be examined, before signing, to determine the extent of liquidated damages.

The whole idea of taking out a futures contract on an input is sound. This helps the production side plan for a given level of demand. The devil is in the details, and 'contracts' often marketed to retail customers door-to-door may not be very favourable.

Another approach that people might take, in lieu of signing contracts, is to invest a portion of their assets in the equity of producers exposed to the spot rate, or a basket of stocks associated with such. One might have a higher energy bill in such a case versus going with a contract, but presumably the returns on their investment would make up for that.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Member
Sep 23, 2013
271 posts
61 upvotes
Calgary
Mark77 wrote: Each individual contract should be examined, before signing, to determine the extent of liquidated damages.

The whole idea of taking out a futures contract on an input is sound. This helps the production side plan for a given level of demand. The devil is in the details, and 'contracts' often marketed to retail customers door-to-door may not be very favourable.

Another approach that people might take, in lieu of signing contracts, is to invest a portion of their assets in the equity of producers exposed to the spot rate, or a basket of stocks associated with such. One might have a higher energy bill in such a case versus going with a contract, but presumably the returns on their investment would make up for that.
Only you could making paying for electricity sound so complicated...
Deal Addict
Jan 11, 2004
1277 posts
161 upvotes
Always follow the money. How do this company trying to sell me something make money? If you don't know the answer to that question always assume it's you.
Jr. Member
Apr 25, 2013
154 posts
14 upvotes
MISSISSAUGA
I'll make it easy.

Don't do it.
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Feb 15, 2008
26318 posts
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Calgary
GonePostal wrote: Always follow the money. How do this company trying to sell me something make money? If you don't know the answer to that question always assume it's you.
A futures contract can be a win-win for both the purchaser and the vendor, as it reduces investment risk for the vendor.

Not everyone is out to get your money, and pre-purchasing supply can be mutually beneficial. The devil, as I said earlier, is in the details.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Addict
Jan 11, 2004
1277 posts
161 upvotes
Mark77 wrote: A futures contract can be a win-win for both the purchaser and the vendor, as it reduces investment risk for the vendor.

Not everyone is out to get your money, and pre-purchasing supply can be mutually beneficial. The devil, as I said earlier, is in the details.
Theoretically but that isn't the world I live in.
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Feb 15, 2008
26318 posts
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Calgary
GonePostal wrote: Theoretically but that isn't the world I live in.
So can you explain how you'd look at one of these contracts and compare it to the spot rate pricing options that are available?
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Banned
May 12, 2004
9756 posts
4136 upvotes
Ottawa
Weren't these around in the 90's and when rates went up and people were going to cash in a few of these companies went belly up?

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