Components of Natural Gas Pricing

NYMEX- New York Mercantile Exchange. This is the commodity portion of your natural gas price. Natural gas futures contracts are traded on the NYMEX each business day between the hours of 9:00 AM and 2:30 PM for the regular session. The forward month, which is the next month to close, settles 3 business days prior to the start of gas flow. Should you wish to “trigger” the price of your gas, this trigger must be placed and must be filled prior to the settlement of that month’s contract. Should a trigger not be placed or filled, the NYMEX portion of the price reverts to the NYMEX settle for that month.


Transportation Basis– Each gas price is made up of 2 pieces: the NYMEX and the transportation basis. The transportation basis is the cost of the pipeline capacity to move your natural gas from the NYMEX equivalent point, which is the Henry Hub in Louisiana, to your delivery point, which is the citygate of your LDC. The basis may be a premium or a discount that is added or subtracted from the NYMEX price.

Citygate Delivered Price= NYMEX Trigger or Settle Plus Transportation Basis
Example: January NYMEX Settle was $3.189 + Transportation Basis of $.55= Citygate Delivered Price of $3.739 per Dth


Cash Prices– The cash market is a market that trades daily for next day and rest-of-the-month gas supply. Cash Prices are a bundled price, meaning they include the commodity and the transportation together. The NYMEX is no longer relevant for a cash price, as the NYMEX for that month has already settled. However, the NYMEX movement does influence cash prices and vice versa.


Swing Provisions– The supplier’s cost for nominations and balancing is typically included in the basis pricing. However, when a customer has natural gas usage for a given month that requires additional/ excess gas, this extra gas is priced at either the current cash market price or at a pre-determined natural gas index price. The same is true when less volumes are required due to under-usage, the volumes are sold and credited to the customer at either the cash market price or a pre-determined natural gas index price.

For customers whose usage fluctuates, and who would rather pay an upfront premium versus having monthly pricing on incremental volumes, customers can elect for an additional swing tolerance. Typical swing tolerances are 10%, 10%, or in some circumstances, 100%, which is also called full requirements pricing. Swing may be calculated on a daily volume basis or a monthly volume basis, so it is important to check which option you are requesting and receiving.


Supplier Margin– The supplier’s margin is typically included in the transportation basis pricing provided. Suppliers may have additional costs associated with incremental volumes, and/or NYMEX hedging, particularly for the risk involved in hedging volumes in increments under 10,000 Dth (1 contract) per month.