Natural Gas
The natural gas market has seen unprecedented changes over the past 3 years. In addition to
record high prices, we have experienced increased volatility. In the past, gas rates generally
stayed within a $.20 range over a 12 month period. Gas is currently moving over $1.00 over a 12
month period. UMG’s goals are to both reduce and stabilize your cost. These services are
offered for commercial accounts only.
The cost of natural gas fluctuates daily. There are numerous factors affecting the market,
including weather, unrest in energy producing nations, crude oil prices and the growing
demand for gas. The increased unpredictability of these factors is driving the volatility of gas
prices. No one can predict future gas prices with 100% certainty, but we can make educated
forecasts and recommendations based on current factors and historical trends.
UMG’s Natural Gas Management Services
Your natural gas cost generally includes three charges, the cost for the natural gas you use, the
delivery of the gas and taxes. In making our recommendations, we consider the affect of those
recommendations on all three charges.
There are no quality issues with natural gas. Regardless of the supplier you select, you will
receive virtually the same natural gas. No provider can offer you gas that burns more efficiently
or will sell you gas that will not burn.
Our natural gas recommendations are intended to accomplish 2 goals. First, it should reduce
your cost over a twelve month period. The estimated savings we provide you is a historical
comparison between the program we are recommending and the program you are currently on.
The savings shown is not a guarantee of future savings. Your savings over your contract term
will vary, depending on the natural gas market. Second, it will help stabilize your costs. Other
than cost, the single largest natural gas issue is the instability of gas prices. Our
recommendations will help address the issues that cause that instability.
Natural Gas Purchasing Options
There are a number of ways to purchase natural gas. UMG continuously monitors the gas
market to ensure that you are utilizing the most beneficial pricing method based on your
situation and the current market. Some of these options are explained below.
Index pricing –Index, or floating pricing is generally based on a set price above the NGI index.
The NGI index is the index which the natural gas industry uses to measure the cost of gas. The
monthly index rate is mostly determined by the daily prices the last few days of the preceding
month. It is to the natural gas industry what the prime rate is to the financial industry. If you
receive a loan at 2% above prime and the prime rate is 4%, you know that your loan is at 6%. If
the price we quote you is at $.04 above index and the index is at $.60, you’ll pay $.64 per therm
for your gas that month. Just as no single financial institution controls the prime rate, no natural
gas provider controls the prime rate. In addition to allowing us to measure the cost of natural
gas, it also allows us to confirm that your bill is accurate. Either you are paying your quoted rate
above the NGI index for that month or your bill is incorrect. The rate we quote you is guaranteed
for the contract term.
Another index option is the “Gas Daily Daily” cost. This cost is calculated at the end of the
month, and is an average of that month’s daily gas prices. During months where the market
has dropped, the Gas Daily Daily price should be lower than the NGI price. During months
where the market increases, the opposite should be true.
Fixed rates – Under this program, you have the option of paying a fixed rate per therm. Whether
it is beneficial to lock your rates will depend on the amount of gas you use, when during the
year you use gas and current market factors. Fixed rates are not based on that day’s gas
prices, but what the providers believe the price of gas will be for the period of time you are
locking your rates for. There is no guarantee that locking your rates will reduce your cost. It is,
however, a tool that will help you stabilize your cost.
Summer storage program – Some providers allow you to purchase and store additional gas.
The idea is to purchase gas when prices drop and use it when rates increase, generally during
the winter months. There is no additional cost to store the gas. You will generally store gas
outside of the winter months, and use it between November and March. The additional savings
you receive are based entirely on the variance between the summer and winter gas prices. All
providers we recommend will provide you with a detailed record of the additional gas
purchased for your use during the winter months. Most importantly, please remember that you
pay for your gas when it is purchased for you, not when you use it. Since you are paying for
approximately 25% to 33% of your winter gas during the summer, this program will distribute
your gas cost more evenly throughout the year.
Our Providers
Our most important responsibility to you is to ensure that the suppliers we recommend provide
you with the best combination of quality, service and price. We do the “shopping” so you don’t
have to. UMG has utilized all providers we recommend for a substantial length of time. If a
provider hasn’t met our standards, they have not been included in our suite of services. After
they have met our standards, we have negotiated with them on your behalf to ensure that you
receive the best rates available. Since UMG has a substantial customer base, you will enjoy the
benefit of lower costs as a result of our buying power.
The Sales Process
The sales process is similar to that of electricity. All we request is that you provide us with your
last bill and a signed form allowing us to review your last 12 or 24 months of billing. If your last
bill is not available, any recent bill will be acceptable. Usually within 5 business days, UMG will
receive an analysis back from the respective providers showing the available savings. The
available savings can range from 0% to 20%. This information is forwarded back to you, and
the appropriate paperwork is submitted to assume your account.
Utility Management Group
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