(March 5, 2006) — Nancy Dailey thought she had done her research and decided to go with an unregulated supplier of electricity and natural gas instead of Rochester Gas and Electric Corp.

But the Greece resident is now facing much higher utility bills than customers who chose RG&E.

Why? The energy services companies, or ESCOs, had rightly advertised savings on electricity costs during the "Voice Your Choice" campaign toward the end of last year. However, the larger portion of most bills in this area is for natural gas, which most households use for heat.

When Dailey made her choice, natural gas prices were spiraling upward after hurricanes Katrina and Rita. So she locked in at a fixed rate of $1.45 per therm for 12 months.

Now she has a choice of paying a cancellation fee or riding it out and hoping that natural gas comes down. As that happens, natural gas prices for the ESCOs might get closer to what RG&E has been charging.

Three months into 2006, the commodities price is much lower already. RG&E's variable price for March is 93.9 cents a therm, only about 65 percent of what Dailey is paying.

Beginning Monday, Energetix's variable rate will drop dramatically from $1.315 to $1.10 a therm, still 17 percent higher than RG&E. The 12-month fixed rate will decline to $1.16. The other ESCOs that service RG&E's distribution area also are expected to lower their prices.

Over the past six months, Energetix's variable gas price has been 22.3 percent higher on average than RG&E's.

"I always stand in the wrong line," Dailey said of her choice.

Elizabeth Wells of Perinton wound up in the right line. As a Fairport Electric customer, she paid little attention to the Voice Your Choice electricity campaign. And she doesn't remember ever being approached by a natural gas alternative provider. So she's been an RG&E customer all along.

"I'm glad our inactivity for once paid off," she said.

Some experts believe the higher costs are a short-term issue, albeit one that could affect customers such as Dailey through the 12 to 36 months of their contracts. The Public Service Commission, which regulates utilities, issued a report Thursday saying that deregulation has saved consumers money on an inflation-adjusted basis from its conception in 1996 through 2004.

But John Reese, the PSC's director of economic development and policy coordination, admitted that those numbers could change after the tumultuous 2005 circumstances.

"I think it's fortunate that we've had a relatively mild winter and that the impact of Katrina on infrastructure (is) largely behind us," he said. "There is a downward trend."

Paul Tonko, D-Schenectady, chairman of the state Assembly Energy Committee, blistered the report as incomplete because it did not include the 2005 figures. Any benefit to a consumer's bill came from regulatory efforts, even after deregulation, he added. "The only good came through regulating downward delivery rates," he said. Deregulation allowed the creation of ESCOs in the service areas of RG&E and other companies. The largest one locally is Energetix, which is owned by RG&E's parent company, Energy East.

Futures contracts for natural gas — which are predictors of future retail costs — are much lower now than they were in the fall. For April delivery, they were about 67 cents a therm, down from more than 80 cents. These are the wholesale costs that suppliers would pay.

"You have to remember that the RG&E price you are seeing for March is the average of the last 12 months," said energy consultant and former RG&E employee Bill Baker of KB Marketing Associates in Walworth, Wayne County. "They charge an average price for the last 12 months instead of a month-to-month price, so you don't see the big jumps in their price.

"An ESCO selling month to month in a period of rapid change, that customer is going to see — if it's a rapid change upward — a higher price than RG&E. But in a time of rapid change downward, the ESCO customer is going to see a bigger price break because RG&E is always lagging."

But even before the sudden escalation in prices after the hurricanes, RG&E's 2005 monthly prices typically were somewhat lower than the ESCOs'. Between January and July, Energetix's price was lower than RG&E's only in May (88.9 cents vs. 90.1 cents).

Katrina pushed the gas market to dizzying heights. With a dip in supply and the threat of a chilly winter, "everybody kind of panicked in terms of what the price might be," said Duane Piede, a former RG&E employee and head of Walworth's North Coast Associates, an independent energy consulting firm.

But the dire fears never came to fruition.

"We had the warmest January in 100 years," Piede said. "And now we have more gas than we know what to do with. And the price is crashing. So over the next few months, unless something weird happens, you'll see the variable price of gas settle into more of the historic average."

Blaine Grindle, who buys energy for Colgate Rochester Crozer Divinity School, might not be so willing to see how it plays out. He's thinking hard about buying natural gas for the rest of the year after reading a recent update from Hess Daily Energy, a market report.

"They're saying (that) to buy for the rest of 2006, you'll pay $7.62 for 1,000 cubic feet,'' he said. That translates to between 75 cents and 80 cents a therm. "Boy, that's pretty good protection, considering what we've just been through."

As a Penfield homeowner, however, Grindle doesn't have the luxury of locking in at such low prices. And because he's an Energetix variable-rate customer, he realizes that for more than a year he has been paying higher prices than he would have with RG&E. "I'm going to have to take a harder look at my home," he said.

But Jeffrey Mayer, president and chief executive of Connecticut-based MXenergy, an ESCO that markets in the Rochester area, sees things brightening for his variable-rate gas customers, who paid $1.239 a therm in February.

"A variable contract price starting in April will be very competitive (with RG&E) because at that point we can pass through the current market cost, just like the utility does," he said.

Maybe so, but Georgia Gaiger of Pittsford is re-evaluating her situation after recently receiving an energy bill of $245, of which less than $20 was for electricity. She's an Energetix fixed-rate gas customer at $1.30 a therm, and she's wrestling with the idea of paying a $35 fee to cancel the contract.

"I don't know if it's worth it to switch," she said. "They say (March 1) is the last day of winter. But that doesn't mean that our weather isn't going to keep going. I've been here for 30 years. Our weather can go into May."

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