Locking in Natural Gas Price

frank1492 · 2008-11-19T04:39:35+00:00

I live in Massachusetts and my natural gas issupplied by Nstar. I have been given the option to lock inmy gas price for this heating season at $1.2624 per therm.It is also noted that, as of Nov.6, the gas supply charge"for the winter" is $1.2424. Is this a good idea do you think? I will need to guesswhether gas prices will go up in the NE. I do know thatthe NE is expected to be colder than normal this year. Your ideas would be much appreciated! Thank you. Frank

Nov 19, 2008 23 Replies

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Bob F 17 years ago

re:...else they would not do it.

I don't know the answer to this question, but I wonder how many of the utilility companies are forced to offer pricing options by whatever utility board they have to answer to?

Since the possibility exists for them to lose money (e.g. *everyone* chooses the fixed option and prices rise) I wonder how many of the options are offered because they have to be.

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They just buy futures to cover them if the price goes up. No risk is involved for the utility.

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Forrest 17 years ago

And if the price goes down ... they don't lose money on the futures? Wish I could find some like that.

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dpb 17 years ago

Bob F wrote: ...

They would certainly be glad to find out how you're going to remove any risk for them. (You _are_ going to educate them on what they've been doing wrong aren't you?)

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HeyBub 17 years ago

Almost all of them did. When they hit their ususal cash-crunch, they sold them. Only Southwest maintained their futures contracts and, until the end of this year, have been buying jet fuel at an average price of $53/bbl.

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