The price of natural gas has two main parts (all cost components include a number of taxes):
Commodity costs — the cost to the natural gas itself.
Transmission and distribution costs — the cost of move the natural gas by pipeline from where it is produced to the customer’s local gas company, and to bring the natural gas from the local gas company to your house.
Since the winter of 2001-2002, the natural gas commodity cost (the cost at the wellhead) has constituted more than half of the residential price. This relative cost pattern differs from earlier years in which the commodity cost was consistently less than half the total residential price. The large commodity cost share has resulted from increasingly high prices for natural gas during most of this decade.
The increasing price trend reflects market conditions that have included:
- Colder-than-normal weather for long periods during some heating seasons
- Increasing use of natural gas for electric generation
- Production disruptions from hurricane activity in the Gulf of Mexico
- Fluctuating net import levels
- Record-high crude oil prices over much of the last two years
Breakdown of Natural Gas Price Paid by Residential Consumers During the Heating Season, 2003-2009
Mcf = Thousand cubic feet.
Source: History: U.S. Energy Information Administration, Natural Gas Monthly (October 2008).
Projections: U.S. Energy Information Administration, Short Term Energy Outlook (November 2008).
Average Natural Gas Prices in the United States
Between 1999 and 2008, the national annual average residential natural gas price more than doubled, from $6.69 per thousand cubic feet (Mcf) to $13.68 per Mcf. The national average price of natural gas is only part of the story, as the prices in individual States can differ greatly. These differences are often related to a market’s proximity to the producing areas, the number of pipelines in the State, average consumption per residence receiving service, and the transportation charges associated with them, as well as State regulations and degree of competition.
For example, based on 2008 data, residential consumers along the Atlantic Coast tend to pay the most, with prices ranging from $15 to more than $20 per Mcf. By contrast, States in the rest of the country benefit from either indigenous production or the presence of major trunk lines traversing the State. The availability of relatively abundant supplies results in prices between $10 and $15 per Mcf.
How Can Residential Customers Reduce Their Natural Gas Bills?
To cope with or reduce their natural gas bills, residential customers can:
- Shop for lower-priced natural gas, if their State has customer choice programs. Find more information on the status of natural gas residential choice programs in each State.
- Participate in their local gas company’s yearly budget plan to spread gas costs evenly throughout the year, thereby lessening the impact of higher prices.
- Check natural gas appliances and space-heating equipment for efficient operation.
- Obtain a home energy audit to identify ways to conserve energy.
- Reduce thermostat settings, especially when they are not at home.
In addition, both Federal and State energy assistance programs are available to natural gas customers who have a limited budget. For example, the Low Income Home Energy Assistance Program (LIHEAP) is a Federal program that distributes funds to States to help low-income households pay heating bills.
Additional State energy assistance and fuel fund programs may be available to help households pay energy bills during a winter emergency. To find out if you qualify for assistance in your State, contact your State public utility commission or your local gas company.