Rate Volatility

While delivery rates are fairly stable, usually going years between changes, gas costs are extremely volatile. Natural gas is an unregulated commodity and the price is determined by market forces, primarily supply and demand. While the Commission has approved policies and services designed to reduce that volatility, the Commission does not regulate the price of natural gas or the rates on the interstate pipelines and underground storage used in providing gas to New Hampshire. Utilities do not profit from high gas costs, they may only recover the actual commodity cost.

The gas and steam utilities in NH, in addition to using physical hedges whereby they purchase and store commodity prior to setting winter rates, use financial hedges to guard against price spikes on supplies to be delivered during the winter period. While not guaranteeing lower prices, by hedging over a long period of time the utilities are less impacted by winter spikes, when usage is heaviest. Not all supplies are hedged, allowing the utilities to benefit from any decreases in commodity costs and for rates to more closely reflect market conditions.

KeySpan and New Hampshire Gas also offer a winter Fixed Price Option, whereby customers may elect to lock in a rate for the winter period.