Are alternative energy suppliers a good deal?

Q: I recently switched to a company that supplies both electricity and natural gas in my area. Are these alternative suppliers a good deal?

—Ken McDougall, Guelph, Ont.

A: I have insurance on my home, my car and on my life. I spend the money each and every month to protect my family in case something catastrophic happens. But I don’t have insurance on my home heating bill. Alternative energy suppliers are essentially offering insurance that will protect you from variability in electricity and gas prices. However, that protection comes at a price. If your budget is stretched really thin, predictability may be helpful to you. But for most people, an increase in energy prices is not likely to cause serious financial hardship.

If you can stand some ups and downs on your utility bills, it isn’t worth paying more, says Trevor Johnson, an analyst at National Bank Financial. “You will pay quite a premium for the price certainty. If you just let it ride, rates would typically have to rise quite aggressively for the consumer to end up spending more money.”

And hey, if you’re still looking for a way to cut down your energy bills this winter, follow my mom’s Depression-era advice. Turn the heat down and put on a second pair of socks and an extra sweater.

About Bruce Sellery

Bruce Sellery is the CEO of Credit Canada, the country’s longest-standing non-profit credit counselling agency. He is a former MoneySense columnist.