To counter the monopoly pricing power naturally held by utility companies, Ohio’s deregulation allows consumers to freely choose a natural gas supplier. The local gas company still gets paid for delivery service to your home, but you can shop among many qualified suppliers for the best gas price. Although the optional program requires wading through a bit of arcane complexity, it can be worthwhile, possibly saving hundreds of dollars a year—especially if you know this little trick to help determine which type of plan to choose.

Gas is delivered to Central Ohio consumers by Columbia Gas of Ohio, which provides an explanation of the pricing program on its Customer CHOICE® page. The industry is overseen by the Ohio Public Utilities Commission, which provides residential consumers with a supplier comparison on its Apples to Apples chart. This saves a lot of time and effort that would otherwise be required to research each offering individually.

The impact can be fairly significant. In November 2011, the Apples to Apples prices ranged from about 50 to 76 cents per hundred cubic feet (ccf, a measure of the actual volume of gas delivered to your house). Columbia Gas estimates the average residence uses 57 ccf per month, so the difference amounts to nearly $15, or about $180 a year.

Although the PUCO chart is fairly clear, there is little to help consumers with the most fundamental question: Should I choose a variable rate or a fixed rate plan. Whereas the lowest prices are generally found in variable plans—which carry the risk of runaway bills—fixed plans charge a premium and may incur early cancellation fees in return for their increased certainty. Choosing is really a bet on the likely direction of future gas prices. The PUCO Historical Pricing chart graphically shows a zigzag pattern since 2008 between $.40 and $1.19, making it seem even more difficult to predict what might happen in the coming year.

A valuable answer lies in the same mechanism by which big industry players manage their business: the commodities futures market. These firms purchase gas many months in advance through a bidding process that is open and observable, so a quick glance gives us a sense of their collective view. To determine whether the cost of natural gas is likely to go up or down, and by how much, we look at the prices that buyers are currently paying for gas they will receive during the coming months. The Henry Hub Natural Gas Futures quotes show the market for gas that will be physically delivered in each of the subsequent 36 months and beyond.

You can ignore most of the confusing array of data on the page. Simply focus on the Month column, which tells when the gas will be delivered, and read the quotes in the Prior Settle column for the coming year. Those 12 numbers arm you with the information you need to make an intelligent gas supplier choice.

Although the quotes are in dollars per dekaTherm (a measure of energy content equal to 10 therms or one million British Thermal Units), all you want to know is the trend: rising, falling or remaining fairly constant. If the trend is constant or falling, you probably want to choose a simple monthly variable rate plan. Conversely a rising trend may make a fixed rate plan attractive despite its early cancellation fees.

The final step is to convert the futures quotes into something that you can compare with the prices on the Apples to Apples chart. An explanation on the Columbia Gas SSO Price page is helpful. We simply add the Retail Price Adjustment of $1.88 to the quote and divide by 10 to get Columbia’s Standard Service Offer (SSO). Add to that the Transportation Cost that is listed on the Apples to Apples page, and the result is comparable to the Supplier Total Rate. (Note that the values of the Retail Price Adjustment and the Transportation Cost will vary, so we have to look them up each time we repeat the analysis.)

As of November 2011, we can put it all together like this. A look at the futures quotes reveals a fairly stable pattern over the next 12 months, with a slowly rising trend to a maximum of $3.868. Add a retail price adjustment of $1.88 and divide by 10 to forecast a maximum SSO of $.575. Add transportation costs of $.023 to get a total of $.598—a number we can compare to the other suppliers.

As of this writing, the lowest Fixed Rate Plan on the Apples to Apples chart has a Supplier Total Rate of $.622. Since this is somewhat higher than the maximum SSO rate of $.598 that we forecast above, we see little or no reason to choose a fixed rate plan.

Among the Apples to Apples variable rate plans, all except three are over $.631—significantly higher than the comparable Columbia Gas SSO rate of $.563. Quick calls to the firms offering lower rates proved instructive. One gets rejected because a meager savings of $.006 does not merit the risk of going with a firm that is brand new to the Ohio market. Another would save even less, $.003, and includes a vague “target” provision by which it can convert to a 12-month Fixed Rate plan at the suppliers discretion. The last is just a 2-month teaser, after which it reverts to a relatively high $.699.

With this analysis in hand, it is an easy decision to stay with the Columbia Gas of Ohio standard service offering. Although going with a variable plan necessitates repeating this analysis every couple of months to see if anything has changed, it will definitely give the lowest natural gas costs for our household over the coming months.