Andrew Tobias provided great advice in a 1980 book with the puckish title “Getting by on $100,000 a Year.”
Earning $100,000 a year is notable even now. Back in 1980, it was about five times the average median family income in these United States.
If one got past the provocative title, it was discovered that Tobias, a prolific writer on investing, offered some real-world guidance on making the most of one’s money, no matter how much was earned. I remember one example in which he explained that making an investment didn’t have to be limited to buying stocks, bonds, real estate, collectibles or the like.
Instead, if you liked tuna fish, and a store had a 40-percent-off sale, the smart thing to do was buy a case or two, instead of a few cans. You’ve booked an immediate 40 percent return on your money.
I think of Tobias often as I try to navigate economic change, particularly in times of relatively high inflation as now.
Even before this breakout in overall prices, and particularly in energy, I was convinced it had to come. That’s why, three years back, given the chance to lock in my natural gas utility rate at $2.69 per thousand cubic feet (mcf), I leaped at the chance.
Gas bills in these parts are divided into paying some to the company that pipes the natural gas to your door, in my case Peoples, and the rest to the company that supplies that gas itself. That also can be Peoples, but the cost tends to be high
My natural gas commodity provider was Dominion, which has left the field, at least for my zip code, and ceded its accounts to something called igsenergy (all lower case). These good folks at igs sent me a letter informing me of the change, due to me having opted for them.
I called the phone number provided on the letter and said I’d made no such decision. Yeah, well, you were just automatically transferred to us, said the tired voice on the other end of the line. Many others had called regarding this very same bit of misinformation.
This did not give me a great first impression of igs. But the company agreed to honor the remaining time on my agreement, so it was acceptable.
Still, I knew a day of reckoning was coming. Ironically, a field representative for igs stopped by a few months back to chat and was astounded by my low rate. What he was offering was considerably higher. Color me surprised.
Now, I’m running out of time to make a decision. I’ve had email discussions with igs customer service, and even called today to speak directly to a representative.
What I’m having trouble understanding is the igs gas rates, currently $5.99/mcf for a 12-month commitment and $6.99/mcf for a 36-month fixed contract.
When first I started checking on the igs web site, in early January, the numbers were $5.99 and $7.99, respectively.
If you check the March futures contract for natural gas, you would see the price has dropped from $3.72/mcf Jan. 5 to $2.514/mcf Feb. 10.
No one you are allowed to speak with at igs can explain what exactly is going on in terms of a commodity dropping about 30 percent in just over a month, but the 12-month price charged by igs remaining unchanged and the 36-month dropping just $1, about 12.5 percent.
It flummoxes them that I have a little depth of knowledge on this subject, having lost my butt trading the UNG exchange-traded fund that tracks the price of natural gas.
The igs customer service people cite price volatility to account for their seemingly elevated pricing. OK, but as a company, you just buy futures to hedge your exposure. For example, you have me for 36 months at $6.99/mcf, and who knows how many others. You can buy futures with expirations over that time span either giving you the right to buy or sell natural gas at this given price.
That way, no matter what happens to prices in the interim, whether they rise, fall or remain static, the net effect can be zero or close enough to zero to make the price volatility a nonfactor. You make your money on the spread between what you have contracted to pay for the natural gas, perhaps directly from a driller or pipeline company, and the higher price that you are selling it to me.
This is how farmers and industrial companies hedge their commodity risk, the very reason a futures market was first created. Why can’t igs do this and offer me a better rate, closer to the spot, or near-month futures price?
Lacking any acceptable explanation for their pricing from igs, now I’m checking around for alternative suppliers and have found at least one company offering a three-year deal at $5.59/mcf. That’s about 20 percent less than igs.
This company, Pennsylvania Energy, will be getting a call from me Monday morning.
Based on my past year’s mcf natural gas consumption, as reported in my latest bill, I will save about $157 a year over the igs 36-month offer if I go with Pennsylvania Energy.
Tobias would be proud. I can buy a lot of tuna fish with the savings.
Sam Ross Jr's site 