Fixed vs Variable Gas Rates | Price Changes & Flexibility

Ask who can change a variable price and when

This guide concerns pricing discretion and flexibility. Use the index-contract guide when evaluating an explicit benchmark formula; use the renewal planner to record the actual agreement’s deadlines.

Worked review: a low starting variable rate

Suppose a hypothetical variable product starts at $0.70 per therm and later charges $0.90, with 1,000 therms used in each of those two months. Commodity cost is $1,600. A constant $0.80 rate over the same quantities also produces $1,600 before fees and other charges. The attractive first-month number alone does not establish the lower total.

This is arithmetic, not a prediction that the supplier will make that change. Ask whether later prices are externally indexed or set by the supplier, how changes are communicated and what cancellation rights or notice obligations apply. If usage differs by month, weight the prices accordingly. Compare the business’s ability to absorb adverse changes with the scope of certainty offered by the fixed component rather than assuming either structure always wins.

Do not substitute an index chart for a supplier-set rate

A supplier-set variable price can use a discretion or notice mechanism different from a published index formula. The EIA series can provide market context but does not establish what that supplier must charge. Obtain the actual pricing clause and the method for finding the next rate. Keep introductory prices separate from the price mechanism that applies afterward. EIA: Henry Hub natural gas spot-price series and units.

Test the period when flexibility matters

Read what happens if the business wants to leave during a high-price month. Record the notice delivery method, effective date, any cancellation amount and utility enrollment lead time. Compare a higher-price scenario at the month’s projected volume instead of relying on a small annual average difference. A short pricing period is not evidence that every contractual obligation is equally short. EIA: natural gas customer choice and eligibility.

A decision record for the next rate change

Record how the next price becomes known, when the customer can act and what effective service date can be achieved. A business choosing flexibility needs a process for reviewing the next notice, not merely permission to leave eventually. Model the cost during a notice or transition period and keep uncertainty visible when the price mechanism is discretionary. Document the maximum variability the budget can accommodate and who must approve continuing service when that tolerance is exceeded.

Use the appropriate planning tool

Renewal planner: Enter the agreement’s actual notice and enrollment lead times; a price-change notice is not automatically the same as a cancellation deadline.