Natural gas prices are low, but consumers could save more if companies could better educate consumers: NEMA president

By Vimbai Chikomo | Mar 17, 2016

While current natural gas prices often favor the consumer, natural gas companies also often face challenges when advertising to residential consumers. And the savings may not always make it to the consumer.

“We still have monopolies in natural gas markets. That fact alone skews the natural gas market for residential consumers significantly,” Craig Goodman, President and CEO of the National Energy Marketers Association (NEMA), said.

“It makes it very expensive to acquire residential customers when a monopoly basically has been given an exclusive franchise about 100 years ago. And consumers are now, within the last 10 to 15 years, starting to learn that there are competitive offers for natural gas outside their utility monopoly,” Goodman said.

In order to educate consumers on the value of a competitive offer, it is both difficult and expensive because consumers generally don’t know that much about natural gas -- how it is delivered to them or how it is produced, Goodman said. “Utilities is a very complicated business.”

Goodman, who is also a lawyer and pursued oil companies for price gouging in the 1970s, believes consumers would easily grasp the complexity of the utility business if the same changes that were made to the telecommunications market (which was once comprised of large national and regional operators) were made to the electricity and natural gas market.

“They would get it immediately,” Goodman said. “Competition would be right there at their doorstep. There are hundreds of entrepreneurs willing to put up their own money to compete on price, quality of service and technology for the consumer. They’re out there looking up all kinds of new products so that when they present a value proposition to the residential consumer or small business consumer, they can really save them money and give them better service.”

Reaching residential consumers to offer savings and service can be further complicated by complaints that sometimes arise in the process.

On Nov. 17, IGS Energy (IGS), a company that supplies competitive natural gas and electric service to consumers in Illinois and 10 other states, filed a complaint against the Village of Hillside over a $500 citation for allegedly violating a solicitation ordinance by the village.

Solicitation ordinances generally require companies to obtain permits beforehand, while only permitting soliciting during specific times of the day and prohibiting solicitation on premises where occupants have indicated verbally or on signs that they do not wish to be solicited.

In the complaint, IGS alleged that after receiving the citation, counsel for the natural gas company attended two hearings to dispute the citation. IGS claims that the first hearing was rescheduled because no representation for Hillside was present, and at the second hearing, the police officer who issued the citation testified on Hillside’s behalf.

On Oct. 13, Hillside allegedly issued a written decision finding IGS liable for the violation and ordered the company to pay the $500 fine. According to the complaint, IGS stated that is was denied its right to due process because the hearing officer acted as both prosecutor and judge in the second hearing by “defending the officer on cross-examination” and cross-examining IGS’ witness. IGS also alleged that witnesses for both sides were not sworn in. IGS sought to have the decision reversed and vacated.

The case was dismissed on March 16 after a settlement was reached between the two parties, according to Cook County court records.

Despite such hiccups, energy companies are relying more on door-to-door sales than before because other methods have become less effective. People generally don’t respond to direct mail, and the do-not-call list has made it difficult to promote services through telemarketing.

Goodman said door-to-door sales, telemarketing and the various sales channels aimed at residential consumers all have their fair share of issues. So he can’t endorse one marketing strategy over another.

“I will say that if, either by executive order by the governor or the President of the United States, no monopolies were allowed to compete as monopolies in otherwise competitive markets anywhere in the country, you would find a totally different dynamic at the doorstep or on the telephone. People would be calling and shopping for the best deal in natural gas and electricity, related services and technologies,” Goodman explained.

But people cannot shop for the best deal if they are unaware of how much they could save each month.

“Gas prices are really low and if consumers are not participating in that it’s a shame; and it has to do with this market structure allowing monopolies to stay in the middle,” Goodman said. But he emphasized that there is great need for monopolies in the market.

“You can’t get rid of the monopolies because you need them to deliver the electricity or the gas. So their critical skill sets and their infrastructure are incredibly important for our national security. The thing they shouldn’t be doing is acting like a hedge fund when they are an infrastructure play. And that’s what is really going on,” Goodman said.

Goodman said that he is hopeful that the market will shift in favor of providing consumers with the best options, prices and services in the near future.

“Despite all of this, natural gas companies are still trying to bring competition to residential consumers and small businesses,” Goodman concluded.

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