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Managed natural gas program questionnaire

July 20, 2012
Like all energy markets, the natural gas market has been historically unpredictable. A review of pricing over the past decade shows numerous surprises, sometimes sharp increases and sometimes unexpected drops.
 
In an effort to offer customers the ability to reduce their exposure to increases while capitalizing on the drops, some suppliers offer managed programs. Similar to a mutual fund, the success of the program depends largely on the competency of the organization running it.
 
We have found that one of the key indicators that a program will accomplish its goals is complete disclosure. The supplier should be able to tell you exactly what their plan is for the program, as well as what your rates will be based on. Without that disclosure, customers open themselves up to the possibility of inflated supplier margins.
 
Attached below is a list of questions you should ask any supplier offering a managed program. If they cannot answer all questions and if the information is not verifiable on each invoice or storage report, we recommend considering another program.
 
Index Rates
What percentage of the rates are index rates?
 
Does this percentage change throughout the contract period or does it remain the same? If it changes, when and why?
 
What is the index rate based on?
 
A rate above or below the NGI Index or NYMEX? If yes, what is that rate?
 
A rate above the supplier’s cost? If yes, what is that rate?
 
How has the supplier’s cost compared historically to the NGI Index or NYMEX?
 
Can they provide verifiable information, such as customer invoices regarding their rate history?
 
What is included in calculating their cost? 
 
How are those calculations different than the margin they are charging you above their cost?
 
A pooled rate?
 
How is that rate calculated?
 
What is the supplier’s purchasing strategy?
 
How long has that pooled rate been offered?
 
How has the pooled rate compare to the NGI Index or NYMEX?
 
How long of a track record will the supplier provide?
 
Are the rates verifiable?
 
Fixed Rates
What percentage of the rates are fixed rates?
 
Does this percentage change throughout the contract period, or does it remain the same? If it changes, when and why?
 
When are rates locked?
 
At once, or over a period of time?
 
What is the strategy based on?
 
Will they disclose the fixed rates for the term of the agreement once those rates are locked?
 
Storage
Are you benefitting from storage benefits? If yes, in what form?
 
Are there injection and withdrawal strategy or storage credits?
 
If using an injection and withdrawal strategy, what is that strategy?
 
If receiving storage credits, what are those credits and where are they applied? If no, why?
 
Invoices and Reporting
Do invoices detail index and fixed rates as well as their respective volumes? If not, how do you know what you’re paying for the respective rates?
 
Are reports available informing you of pending fixed rates?
 
If not, how do you know what volumes of rates are fixed and at what rate?
 
Are storage reports available detailing activity?
 
If you are in a pooled program, is the above information available for the pool?
 
Utility Management Group offers natural gas and electric programs as well as options to reduce your electricity consumption. Their programs are supported by the CATA.
 
Working with multiple suppliers gives them the ability to shop your service among the top suppliers in the market, ensuring that those suppliers compete for your business and offer the most aggressive rates possible.
 
CATA members can obtain discounted rates based on the strength of the organization as well as priority customer service.
 
For more information regarding these offerings, please contact UMG at (630) 279-0117.
 
 

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