New Philadelphia Gas Aggregation Letter Questioned

A recent letter from Michael Taylor, Mayor of New Philadelphia, urges city residents to sign a contract with Constellation Energy which will lock them into a two year contract for natural gas. Before you do anything read it all and understand it before you make any commitment. It is a strange document to come from a public official and raises questions that beg to be answered.

The implication is that the users of natural gas for heating, hot water, and cooking will save money should they buy into the Constellation program. This is not necessarily true. To a natural gas buyer using a supplier which charges more per cubic foot of gas than Constellation, the price Constellation is offering is a good deal. But Constellation’s price is not the least expensive available.

First, check to find out what going prices are available. Two sites on the Internet, http://www.puco.ohio.gov and http://www.pickocc.org, will give you prices which are being charged by the gas suppliers which supply consumers in New Philadelphia. A comparison of prices will expose quite a variance.

All suppliers of natural gas pay the same amount per thousand cubic feet, the price set by the New York Mercantile Exchange (NYMEX). This is the exchange in New York City where natural gas is sold to all suppliers in the United States. The price on Thursday, March 31, 2011, was $4.27 per thousand cubic feet of gas. The supplier then adds his expenses and profit to this price.

The total charge then appears on your gas bill with an entry similar to "Gas Cost 13.4 MCF @ $6.59 $88.31", which is the charge for the gas delivered. Added to that is a 6.5% tax bringing the cost of the gas to $94.05. Delivery charges added to the cost of the gas by Dominion East Ohio which include a basic charge of $19.63, Usage-Based charges for delivery in the amount of $2.4149 per thousand cubic feet, and a 4.6044% tax on the distribution charges, all of which are added to the total bill. 30% of the monthly gas bill is made up of service charges and taxes.

With that in mind, when the letter you received from Mayor Taylor talks about a fixed rate of $5.89 per thousand cubic feet, it must be remembered that charge applies only to the cost of the gas delivered and is not the entire charge.

Questions have been raised as to the legitimacy of the letter sent by Mayor Taylor. The first line of the letter states the City of New Philadelphia has approved Constellation as the natural gas supplier for the city. This statement is misleading and suggests that other gas suppliers are not approved for distribution of gas within New Philadelphia. The Mayor has neither the right nor authority to approve or disapprove of any gas distributor operating within the city.

Use of the City logo on a sales pitch for Constellation is in bad taste as it indicates the backing of the City to a commercial enterprise.

Do not be misled by a letter which does not include signatures of all principle parties involved in any proposed business deal. Constellation did not sign the promotion letter. By his lone signature Mayor Taylor accepts full responsibility for the letter’s contents, offers, and promises. Constellation accepts no responsibility for the contents of the letter nor of the attachments.

It is amazing that the Mayor would endorse one particular competitive business operating in the City to the detriment of others. His responsibility is to provide a good business climate to all enterprises which choose to provide goods and services to New Philadelphia citizens.

The conditions of this offer contained in the materials of this mailing are not consistent.

On one hand cancellation of the contract with Constellation is said to be possible at any time, but the contract itself requires a 30 day written notice.

An attachment to the Mayor’s letter states “you have the ability to cancel the Agreement at any time without penalty.” However, the contract states “You may terminate this Agreement without penalty if you relocate outside the service territory of the Utility.” The long and the short of that is that if the contract is signed there will be a termination charge if you do not move out of Constellation’s service area.

If a waver of the early termination charge is not in the contract, oral agreements have no validity. A signed contract always rules over verbal promises. As with any contract, be careful before you commit. Once signed, only the contract is binding. Oral promises are written on the wind. There is no recourse once you have put your name to paper. Be careful. Seek advice. Do the research. It is your money. Be certain you fully understand what you are agreeing to before signing the required long term contract with Constellation.

What was the reason that Mayor Taylor, Service Director Zucal, and Councilman Zucal, pressed so hard for a gas aggregation program in New Philadelphia? Why was an outside broker, Buckeye Energy, chosen to drive this project? Why was Buckeye Energy retained as the City’s broker after its incompetence was displayed when its first recommendation of a supplier was one involved in an active legal action with New Philadelphia? Why was Constellation chosen by the city when it was fined millions of dollars by the federal government because of illegal activities in the supply of natural gas? Questions unanswered.

Is there more to this agreement between the City, the broker, and the supplier than we imagine?

(Editor’s Note: For background articles see blogs “New Philadelphia Gas Supplier Agreement Questioned”, 12/8/2010, and “New Philadelphia Committee Mishandles Gas Aggregation Proposal”, 12/22/2010.)