The natural gas market has historically been volatile. Periods of low, steady prices are interrupted by spikes in the market, making budgeting for your natural gas costs difficult. UMG’s goals are to both reduce and stabilize your cost. These services are offered for commercial accounts only.
The cost of natural gas fluctuates daily. There are numerous factors affecting the market, including the economy, weather, the demand for electricity, unrest in energy producing nations, crude oil prices and the demand for gas. Because these factors are unpredictable, no one can predict future gas prices with 100% certainty but we can make educated recommendations based on current factors and historical trends.
Natural Gas Purchasing Options
There are a number of ways to purchase natural gas. UMG continuously monitors the gas market to ensure you are utilizing the most beneficial pricing method based on your budget and the current market.
Index pricing –Index pricing is pricing that changes from month to month, following the changes in the market. Index pricing is generally based on either a set cost above a verifiable index, an undefined index or the supplier’s cost. Since we can't know what a supplier's cost is or what they'll charge using an undefined index, we recommend programs based on a verifiable index. In the Chicago area it's called the NGI Index, and our customers pay a set rate above it. There is no gray area in that either they're billed at the NGI Index plus the adder or their bill is wrong.
Fixed rates – Under this program you have the option of paying a set rate per therm for a specified amount of gas and for a specified period of time. Whether it is beneficial to lock your rates will depend on your budgetary needs and market conditions.
Fixed rates are not based on the current day’s gas prices, but what the providers believe the price of gas will be for the period of time for which you are locking your rates. There is no guarantee that locking your rates will reduce your cost. It is, however, a tool that will help you stabilize your cost.
Storage program – Some providers allow you to purchase and store additional gas. The idea is to purchase gas when prices drop and use it when rates increase. There is no additional cost to store the gas. You will generally store gas outside of the winter months and use it between November and March. The savings you receive are based entirely on the variance between the summer and winter gas prices. Please keep in mind that while it is not common, there are years where non-winter rates exceed winter rates. If this occurs, utilizing this program will reduce or eliminate your savings. All providers we recommend will provide you with a detailed record of the additional gas purchased for your use during the winter months. Most importantly, please remember that you pay for your gas when it is purchased for you, not when you use it. Since you are paying for between 20% and 33% of your winter gas during the summer, this program will distribute your gas cost more evenly throughout the year.
Each of these options has benefits as well as a downside. Which is right for your organization is based on your budgetary goals, something we discuss prior to recommending a program and supplier.