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As is evident, prices are changing constantly and where this winter’s prices will actually settle is still unpredictable. The projected NYMEX price is simply the market’s best guess of what future prices will be during the winter, based on technical and fundamental information available today. New information becomes available every day and the market’s prediction of future prices will react accordingly.

Knowing the current level of future natural gas prices is an extremely useful piece of information for those trying to manage energy budgets. Because natural gas futures prices are publicly traded on the NYMEX, customers can use CenterPoint Energy Services (CES) to lock-in a particular monthly price (or multi-month strip) for all or part of their expected monthly natural gas use. And, since the commodity price can easily amount to 90-plus percent of a monthly natural gas bill, having the ability to lock prices gives customers control over exactly how much they will be paying for gas in future months. Whether a locked price ends up being higher or lower than the actual market price for a particular month won’t be known until the future becomes the present. Locking a price gives a customer a “known” price, not necessarily a “low” price or a “high” price (compared to the actual settlement price).

Many CES customers already take advantage of their ability to lock commodity prices as they implement their individual energy management plans. CES does not prescribe to  “one plan fits all” when it comes to managing natural gas costs. Each facility has its unique operating characteristics and is exposed to unique positive or negative consequences from changes in natural gas prices. As such, CES wants to work individually with each of its customers to develop and implement a price management plan that works best for them.

We have summarized below five basic approaches that customers can use to manage their natural gas prices. When used in conjunction with a sound natural gas consumption strategy, one of the following approaches could be just what is needed to take control of your natural gas expense budget.

1. Get the bill, pay the bill. A totally market-based approach.


2. Monthly market-based price. Use the CES managed cost pool for un-locked usage.


3. Self-directed hedging program. Use CES to execute variable term price locks based on your company’s self-directed strategy.


4. Set and forget. An often overlooked approach whereby 80-90 percent of projected natural gas use is locked all at one time, for example, when budgets are finalized.


5. Structured hedging program. Customer works with CES to set a series of price lock targets that react to future price increases and decreases. When implemented, the net effect is to create a price range that a customer is comfortable operating within.

Natural gas price management strategies need not be complicated to be effective. But regardless of how complicated or basic your needs, your CES account executive has the expertise to help you develop a plan that works. Give your account executive a call to begin developing a plan.

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