[From CATA Allied Member Utility Management Group] Natural gas prices have been receiving much attention lately as over the past 24 months we’ve seen two significant changes to the market. The first is an increase of pricing. As of late, depending on the month, prices are two to four times what they were two years ago. The second is the volatility of the market. The NGI Index, or the standardized price of natural gas for the Chicago market this year has ranged from $.4535 to $.879. It’s not uncommon for us to see the daily price of gas range from the low $.50’s to the low $.90’s within a 30 day period.

Locking rates for a percentage of your usage is a tool which can provide some budget certainty. When the market is stable which day you lock rates is not as important as the change in rates day to day is not significant. Selecting a day to lock rates with the volatility we’re experiencing becomes more difficult as rates can vary greatly from day to day. If you’d like to lock rates now or in the future we have two suggestions which address the current volatility.

The first is to utilize strike prices, where a target rate and percentage of use you’d like to lock is submitted to the supplier. The supplier watches the market daily and if your price is hit you have the option to either have the lock executed automatically or to be notified, giving you the choice to execute the lock or continue to watch the market. You have the option to be notified only if your price is hit, which is what most customers choose or to receive daily pricing.

The second suggestion is to start watching the market early. You may have fixed rates in place for the next year or so, but rates further out are much lower than near term rates making them more favorable and there’s no risk to submitting a strike price. Watching the market early gives you the opportunity to capitalize on a drop you may have otherwise missed. What we look for in suppliers is not only the option to offer a strike price, but the ability for their system to do it as an automated process as a manual process is difficult and time consuming for the supplier and drops in the market can be missed.

With the factors driving the market being unpredictable, no one can know what prices will do going forward or when this volatility will end, making these types of tools important in controlling your costs. If you have any questions regarding this or any energy related issue, please contact our office at 630-279-0117.