Rate Offerings

The pricing options offered by the Choice Gas Suppliers generally consist of two types of pricing; fixed and variable. These general pricing types are combined in various ways to make up the price offerings.  View a comparison of the rate offerings.

Fixed Prices

The fixed prices are just that; a price that is constant for the entire period over which it is offered.  This pricing option is forward-looking in that the fixed price is established before the gas is consumed.  The price is guaranteed to be the price offered – no changes, no surprises.  The fixed price is low risk to the customer and the supplier bears most of the risk, resulting in a price which is relatively higher than with market-responsive pricing.  This is a good choice when price certainty or adhering to a budget is important.

Variable Prices

Variable prices are prices that follow the wholesale gas market. There are two general types of “indexes” which are used to establish market index rates.  The first is the NYMEX Natural Gas futures contract and the second are indexes published by certain gas trade journals who poll buyers and sellers to establish gas pricing in certain geographic areas.  Some of these are pipeline indexes (CIG Rockies, Northwest Pipeline Rockies) and some are at market centers (Opal Hub, Cheyenne Hub).  For the Wyoming area, the pipeline or market center indexes reflecting Rockies pricing generally are a better basis for market index pricing. The disadvantage of these indexes is that they are not readily available to anyone not subscribing to the particular journal.  Market index prices are generally quoted in two parts; the index value and the adder.  The index value represents the value of wholesale gas into the pipeline or at the market center represented by that index.  The adder includes all the other costs to deliver the gas into the distribution system, including upstream transportation (if applicable), risk costs and margin.  The adder is usually constant for the entire Choice Gas Program year while the index value changes from month-to-month.  Market index rates expose the customer to monthly gas price changes, but protect the customer from daily price fluctuations.  The price represented by the index value plus the adder is the same for the entire month.

Combinations

Choice Gas Suppliers, including MUE/Seminole, offer rates which combine fixed prices with variable prices or different variable prices.  These are generally known as blended rates.  Blends of fixed and variable prices give customers the benefits of having some of their gas costs known, while being able to have the rest market responsive.  In this way a customer can spread the price risk to a portion of the load or even to a time of year.

Pass-On Rate (Regulated Rate)

This rate is offered by the utility, Kinder Morgan, under the oversight of the Wyoming Public Service Commission.  It is different from any of the rates offered by the Choice Gas Suppliers in that it is a pure pass-on of actual costs incurred with no margin.  It is also different because it consists of a forward looking estimate of costs and a true-up of past costs.  For a particular period the gas cost collected from customers is compared to the actual gas cost.  Any difference between collections and actual costs, positive or negative, is passed on to the customers under this rate in the subsequent period. The Pass-On Rate is changed at least every three-to-six months, but can be changed more often if market conditions dictate.  Since it is based on an estimate with a true-up, it is difficult to know what the Pass-On Rate will be for more than the current period.  Additionally, the Pass-On rate is partially hedged (has a fixed price component) but the exact percentage hedged or the fixed price portion are not known until Kinder Morgan makes its filing, which in all probability will be done after the selection period.

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Comparison of Pricing Options

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Wyoming Choice Gas Program Service Areas

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CIG vs NYMEX

The above chart represents the CIG Index compared to NYMEX last-day close. Prices are expressed per MMBtu.  To convert to therm, divide price by ten.

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