The Seasons of Natural Gas In Georgia

Posted on Posted in Consumer Advocacy, Fixed Rates, GA Natural Gas, Natural Gas in Georgia, Trends, Uncategorized, Variable Rates
How does your seasonal usage measure up?
How does your seasonal usage measure up?

Georgia faces much different heating and cooling needs than its northern neighbors. While these needs vary somewhat throughout the state savvy natural gas consumers in Georgia must understand how natural gas prices vary from season to season so they can take advantage of the best natural gas plan rates.

Nearly ten years ago, it was basically understood that the best time to shop for cheap natural gas in Georgia rates was in August. This was because natural gas was expensive throughout most of the year. However, at the end of summer, gas production was just high enough to offset demand, even if a few southern states, like Texas, were relying on expensive natural gas-fired generators to meet air conditioning demand.

Hydraulic fracturing (fracking) now produces enormous supplies of natural gas in several locations throughout the country for a fraction of what it once cost. Because gas burns cleaner than coal and requires less expensive pollutions controls, many electricity generators have been converting to burn natural gas. Approximately 37.5 percent of all natural gas consumed in Georgia in 2011 was consumed by the electric power generation sector. As of 2015, natural gas became the largest source of electricity in Georgia, supplying nearly 40% of the load.

Currently, natural gas in storage is at a five-year high with national storage inventories projected to hit 4,042 Bcf at the end of October 2016. So much gas is now being produced in different regions that it can outstrip demand in early spring and late summer. All the same, gas supply and consumption pass through yearly cycles that are important to understand.

When to Shop for Natural Gas in Georgia

Generally, wholesale prices are determined by supply and consumption. Modest dips in the wholesale price occur twice a year. The first happens just as warmer temperatures move in to affect the lower 48 states — usually just after astronomical spring starts. This is when heating demand begins to melt away, about as fast as the snow cover. This trough lasts until the end of May when gas prices begin to climb as electric generators begin spinning up to meet summer cooling demand.

The second dip comes when summer heat waves fade and fall weather begins with moderate daytime and evening temperatures. Recent weather patterns have pushed this time frame much later from into mid-October. It’s also about this time that the storage injection period begins winding down and the amount of natural gas in storage pushes commodity prices lower.

By watching the commodity price and being aware of the two yearly consumption peaks and troughs, consumers can take advantage of when to start shopping for a new natural gas provider.

Find Cheap Therms

Natural gas in Georgia is usually sold by the therm. During summer, from June through September, the price per therm for natural gas delivered to residential customers on variable rate plans goes up, peaking in September.

Which sounds criminally wrong, doesn’t it? After all, with the exception of power burn, there’s nothing like the same kind of demand that happens in winter. So, natural gas during the summer should cost LESS, right?

The thing is, it’s the coming winter demand that natural gas providers are preparing for.

Because natural gas usage drops in the summer, gas companies need to manage price risk on the gas that they buy and sell several months in advance. That way, they can afford to buy gas supply in the summer months ahead of winter. The problem is that summer natural gas commodity (or wellhead) prices are only somewhat elevated (due to low supply and power burn demand) but residential demand is very low — so gas providers are not selling big volumes of the stuff. While transmission and distribution costs remain fixed regardless of the level of consumption, natural gas providers may increase the price per unit ($/therms) to meet their fixed costs of doing business (rent, taxes, salaries, licensing fees, loan payments, and purchasing natural gas supply months in advance). In short, they need to charge more per unit of natural gas to meet their bottom line.

Of course, savvy natural gas consumers can avoid paying those higher summer therm rates by locking in a steady natural gas price by signing up for a fixed rate plan. This way, the per-therm rate on your monthly bill will not change for the length of your plan and you’ll actually save money in the summer by using less natural gas.

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