Why are natural gas prices so volatile?		Is the natural gas supply adequate?
	Does MGE profit from rising gas costs?		How does MGE purchase gas?
	How do natural gas prices compare to other fuels for commercial and industrial customers?		What I do about high natural gas costs?
	For more information

Why are natural gas prices so volatile?

In general, the volatility in the wholesale natural gas market is tied to:

• Weather. Often the biggest factor in how much residential customers pay for natural gas is the role of weather, an unpredictable and unavoidable element, from winter temperatures to tropical storms and hurricanes off the oil- and natural gas-producing Gulf Coast.
• The economy. Higher costs for all fuels drive up natural gas costs.
• Electric generation. As more power plants use natural gas to generate electricity, the fuel plays an ever-increasing role in the U.S. economy. As it has become the clean fuel of choice, natural gas becomes more in demand and more expensive, resulting in both higher gas and electric costs.
• Demand. Global demand for natural gas is also on the rise, particularly in the United States and China.

Top of Page

Is the natural gas supply adequate?

Yes, the United States currently has adequate supplies of natural gas. However, gas supplies will continue to get tighter until new sources for exploration and drilling are developed. Almost all the natural gas used in our country comes from the United States and Canada, in sharp contrast to heating oil and other petroleum products—more than half of which must be imported from foreign countries.

Demand for natural gas will likely lead to an increase of imported gas. Liquefied natural gas (LNG) shipped from overseas currently supplies about 3% of the U.S. natural gas demand. To meet growing demand, LNG supplies will gradually increase as new facilities are built to process deliveries from overseas suppliers.

Top of Page

Does MGE profit from rising gas costs?

No, MGE does not profit from any fluctuations in gas costs. The commodity cost of natural gas is passed through to customers without any markup. MGE's profit changes with the volume of natural gas we sell, not the price. Under state regulation, utilities cannot mark up to the gas price.

Top of Page

How does MGE purchase gas?

We purchase gas:

• Through firm contracts
• On the spot market
• During the spring and summer for storage

Through this combination, we are always working to secure the lowest gas prices possible.

For more on gas purchasing, see How MGE Buys Gas.

Top of Page

How do natural gas prices compare to other fuels for commercial and industrial customers?

Fuel oil and propane (LP gas) prices are also higher than in previous years. Natural gas prices are driven by oil prices, which rose sharply during the summer.

Top of Page

What I do about high natural gas costs?

• Continue your normal conservation practices
• Review equipment upgrades and other proposals
• Paybacks on new equipment might be more attractive now than in past years.
• Call your MGE account representative for more information.
• If you do not know your MGE account representative, call MGE's Business Help Line at (608) 252-7007.

Top of Page

For more information for industry sources:
The Energy Information Administration (U.S. Department of Energy)
The Natural Gas Supply Association
American Gas Association