NATURAL GAS FACTS PURCHASING AND PROCUREMENT
-What is the role of the utility when I buy my gas from a third-party?
The utility will continue to charge you transport fees as well as other fees related to the maintenance of the gas lines. The utility will also still be responsible for responding to gas leaks and all other issues related to the physical gas infrastructure. Depending on the specifics of your transaction arrangement, the utility may continue to handle all billing for the actual gas commodity or you may make a separate payment to a third-party gas company. Be sure to ask your gas representative about billing specifics.
-What is a therm? What is an mmBtu?
These are the two most common forms of measurement in the natural gas industry.
A therm is a unit of heat equal to 100,000 British thermal units.
An mmBtu is equal to 1,000,000 British thermal units. An mmBtu is also referred to as a decatherm.
There are 10 therms in one mmBtu (or decatherm).
-What is Core and Non-Core?
Core customers include all residential and small commercial customers with annual monthly average usage below 20,800 therms (or 2,080 mmBtu per month)
Non-core customers are large commercial customers with annual monthly average usage equal to or in excess 20,800 therms. (or 2,080 mmBtu per month)
-What is a natural gas usage profile?
Some consumers use gas seasonally and some consumers use a relatively even amount of gas throughout a given year. Depending on your usage profile your gas price may vary.
-How do sellers of natural gas make their money?
Sellers of natural gas make their money by charging a “margin” for each therm or mmBtu sold. The amount of the margin varies from market to market and can also fluctuate in relationship to the amount of the natural gas being purchased.
Many novice gas buyers often place too much emphasis on the margin amount and lose focus of the more important components of natural gas procurement. Quality sellers of natural gas will be open to discussing the many facets related to natural gas procurement including margin amount.
-Should I fix a price?
The ability to fix a natural gas price is an important outcome of natural gas deregulation. Consumers can fix a price 1-5 years into the future. Fixing a natural gas price can provide budgeting stability for a consumer as well as protect against the volatility of the natural gas market. However, a fixed price does not always equate to savings. The natural gas market is highly unpredictable and often times a fixed price results in higher prices for customers. Buyers should be careful when fixing prices and should always consider hedging their purchase (portion of their portfolio fixed and a portion not fixed). Talk with one of our sellers to get more information regarding fixed pricing.
-Where is natural gas stored? How is it transported? Where is it found?
Natural gas is often stored underground inside depleted gas reservoirs from previous gas wells, salt domes, or in tanks as liquefied natural gas. The gas is injected into storage during periods of low demand and extracted from storage during periods of higher demand. Storage capacity is one of the strongest factors in determining market price of natural gas. The larger basins, pipelines, and Hubs are shown below.