2021-22 Natural Gas Price Outlook
Natural gas prices for the 2021-22 winter heating season are expected to be a bit more than 50% higher than last year across the country. Montana-Dakota Utilities projects a similar increase for its natural gas customers in North Dakota, South Dakota, Montana and Wyoming. While each state differs slightly, Montana-Dakota projects a 52% increase on natural gas costs over last year.
The main reason prices are higher not only nationally, but globally, is that supply simply hasn’t kept up with demand. The biggest increase in demand growth from 2020 is from liquified natural gas (LNG) exports. And despite natural gas prices increasing in 2021, drilling nationwide hasn’t grown. The amount of natural gas in storage also is below the five-year average.
The cost of natural gas is a straight passthrough to customers; Montana-Dakota does not earn a profit on the cost of natural gas. The company goes through a robust process to secure an adequate supply for the winter heating season, using different sources and methods to mitigate big swings in prices.
Montana-Dakota uses a pair of underground natural gas storage facilities where it places about a third of its winter needs. That natural gas is bought at lower prices over the summer and placed in storage. The company also has about 25% of its needs on fixed contracts, also at a lower price. As part of our portfolio, Montana-Dakota uses more than 20 suppliers to buy the remainder of its natural gas from the market, which can fluctuate. The company optimizes those three supply options (storage, fixed price, market) to limit its exposure to the more volatile day market.
While natural gas prices are projected to be higher than last year, it’s still the most affordable fuel. Natural gas is 25% to 50% lower than other fuel sources, such as propane and electricity, depending on the fuel and local pricing.
There are ways customers can control their natural gas use: Balanced billing is a way for customers to levelize their payments over the course of a year. More information is available here. We also can direct customers to agencies that provide assistance, such as LIHEAP. And customers can control costs by installing a programmable thermostat, having their furnace checked and change filters regularly, etc. More information is available here.