Posted by Dave Granitzki on Oct 01, 2015
Due to concerns over climate change and decreasing resources, the demand for natural gas has been growing. Natural gas is clean burning, efficient, versatile and affordable. It’s also beneficial that supplies are available in the U.S. and Canada.
Initially, natural gas was attractive for its low cost, and this has contributed to large investments being made in generator facilities that use natural gas. Along with strict EPA regulations, natural gas consumption has become commonplace.
Natural Gas Rates And Your Utility Bill
With the rise in demand for natural gas – and the subsequent investment in facilities using natural gas – rates have increased as well.
Natural gas is most often used for space heating, so its demand is largely driven by weather patterns. In a peak-demand period, natural gas rates do tend to spike. However, natural gas production and transmission is not yet designed to move the full amount of peak demand to consumers. During warmer weather and lower demand, distribution companies have to buy and store gas in preparation for periods of peak demand.
Natural gas inventory levels are partly determined by market factors. There are various types of buyers and sellers who purchase or sell natural gas under different arrangements, such as long-term contracts with fixed pricing or terms that track variable market prices.
Buyers and sellers of natural gas use these financial arrangements to mitigate the risk involved with price volatility.
The impact the buyer-seller exchange has on your utility bill depends on your energy supplier. Because a procurement cycle may be anywhere from every six months up to every three years, energy suppliers have different ways of incorporating fuel costs into their pricing. If you partner with the wrong supplier, your utility bill is going to fluctuate along with natural gas rates.
The reason for the volatile nature of natural gas rates is fairly straightforward. However, the question then becomes: What should your business do to flatten the supply charge you see on your utility bill?
In Part 2 of this blog series, we’ll explore proven ways to reduce your energy consumption and control energy costs associated with fluctuating natural gas rates.
Ready to counter the future of turbulent natural gas rates? Schedule your 15-minute, no-cost consultation with an Energy Advocate at South Jersey Energy today.