Commercial natural gas pricing consists of two main components: the commodity cost (the gas itself) and delivery charges (transportation and distribution). Understanding these components and the factors that influence them is essential for managing your business energy costs effectively.

The Two Components of Your Gas Bill

1. Commodity (Supply) Charges

The commodity charge covers the actual natural gas you consume. In deregulated markets, this is the portion you can shop for among competing suppliers. Key elements include:

  • Base Commodity Rate: The per-therm or per-CCF price for gas
  • Supplier Margin: The supplier's profit and operating costs
  • Balancing Charges: Adjustments for usage variations

2. Delivery (Distribution) Charges

Delivery charges cover the infrastructure and services needed to transport gas to your facility. These are set by your local utility and are not negotiable. Components include:

  • Customer Charge: Fixed monthly fee for service
  • Distribution Charge: Per-therm fee for local delivery
  • Transmission Charge: Fee for pipeline transportation
  • Taxes and Surcharges: Various regulatory fees

Factors That Influence Natural Gas Prices

Supply Factors

  • Domestic Production: U.S. natural gas production levels
  • Storage Levels: Underground storage inventories
  • Imports/Exports: LNG trade and pipeline flows
  • Production Disruptions: Weather, maintenance, or other issues

Demand Factors

  • Weather: Heating and cooling demand
  • Economic Activity: Industrial and commercial consumption
  • Power Generation: Gas-fired electricity production
  • Seasonal Patterns: Winter heating, summer power demand

Market Factors

  • NYMEX Futures: Benchmark pricing for natural gas
  • Basis Differentials: Regional price variations
  • Pipeline Capacity: Transportation constraints
  • Regulatory Changes: Policy impacts on supply and demand

Understanding Your Bill

Line Item Description Negotiable?
Gas Supply Charge Cost of natural gas commodity Yes (in deregulated markets)
Customer Charge Fixed monthly service fee No
Distribution Charge Local delivery costs No
Transmission Charge Pipeline transportation No
Taxes State and local taxes No

Seasonal Price Patterns

Natural gas prices follow predictable seasonal patterns that commercial customers should understand:

Winter (November - March)

Prices typically peak during winter months due to heating demand. Cold snaps can cause significant price spikes. This is generally the worst time to sign new contracts.

Shoulder Seasons (April - May, September - October)

Moderate prices as demand transitions between heating and cooling seasons. Good opportunities for contract negotiations.

Summer (June - August)

Generally lower prices as heating demand drops. However, power generation demand can cause localized increases. Often the best time to lock in fixed rates.

Regional Price Variations

Natural gas prices vary by region due to:

  • Proximity to Production: Areas near gas fields typically have lower prices
  • Pipeline Infrastructure: Constrained areas may see higher prices
  • Local Demand: High-demand areas may have premium pricing
  • Regulatory Environment: State policies affect costs

Strategies for Managing Costs

1. Shop for Supply

In deregulated markets, compare suppliers to find the best commodity rates. This is where the biggest savings opportunity lies.

2. Time Your Purchases

Lock in fixed rates during favorable market conditions, typically in late spring or early summer.

3. Reduce Consumption

Implement energy efficiency measures to reduce your overall usage and lower both commodity and delivery costs.

4. Monitor Your Bills

Review bills regularly for errors and to understand your usage patterns. This information helps with future purchasing decisions.

Get Help Understanding Your Costs

Our team can analyze your current bills and identify opportunities for savings. Contact us for a free rate analysis and consultation.

Frequently Asked Questions

What portion of my bill can I control?

In deregulated markets, you can shop for the commodity (supply) portion of your bill, which typically represents 40-60% of total costs. Delivery charges are set by your utility and are not negotiable.

Why do prices vary so much by season?

Natural gas prices are heavily influenced by heating demand. Winter months see higher prices due to increased consumption, while summer months typically have lower prices as heating demand drops.

What is a therm vs. CCF?

A therm is a unit of heat energy (100,000 BTUs). A CCF is 100 cubic feet of gas. They're approximately equal, though the exact conversion depends on the gas's heat content. Most commercial bills use therms.