Natural Gas Prices
The NYMEX natural gas futures contract is widely used as an international benchmark price, including here in Alberta. The futures contract trades in units of 10,000 million British thermal units (MMBtu). The price is based on delivery at the Henry Hub in Louisiana, the centre of 16 intra- and interstate natural gas pipeline systems that draw supplies from the region’s prolific gas deposits. The pipelines serve markets throughout the US East Coast, Gulf Coast and Midwestern US.
It is important to realise that the NYMEX does not set the prices of the traded commodities. Market forces determine the prices through an open and continuous auction on the exchange floor.
The AECO “C” spot price, which is the Alberta gas trading price, has become one of North America’s leading price-setting benchmarks. (The above link will take you to the Natural Gas Exchange Inc (NGX) website for AECO-C and other market prices)
The Alberta Natural Gas Reference Price is a monthly weighted average field price of all Alberta gas sales, as determined by the Alberta Department of Energy through a survey of actual sales transactions. This price is used for royalty purposes.
In Alberta, there are two major companies responsible for providing regulated natural gas service: Direct Energy Regulated Services (providing gas for customers of ATCO Gas North and South) and AltaGas Utilities. Their natural gas rates are set at the beginning of each month, subject to verification by the Alberta Utilities Commission. These rates reflect the forecast market price for the upcoming month, correcting for any amount that is over- or under- collected from previous months. Natural gas rates are “passed through” (i.e. the gas rate reflects the costs to purchase natural gas and the costs involved with managing that gas supply). There is no profit or mark-up on regulated natural gas rates.