The price that residential consumers pay for natural gas has two main parts (all cost components include a number of taxes):
1. Commodity costs — the cost of the natural gas itself, known as the wellhead cost.
2. Transmission and distribution costs — the cost to 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 the customer's house. These transmission and distribution costs account for the difference between the price of natural gas at the wellhead and the price paid by residential customers.
The shares of these two cost components vary according to natural gas market conditions.
The low wellhead price in recent years reflects several market conditions:
- Record levels of production due to the development of gas from shale formations (plays)
- Growth in supply exceeding growth in demand
- Few supply disruptions as a result of relatively calm hurricane seasons
Residential prices also reflect market forces including:
- Pipeline constraints to high-demand areas, particularly in the Northeast
- Net producing regions tend to be geographically removed from net consuming regions
Average Natural Gas Prices in the United States
Although national average prices for residential natural gas have declined in recent years, the prices in individual states can differ greatly. These differences are related to a number of factors:
- the market's proximity to the producing areas
- the number of pipelines in the state
- average consumption per residence receiving service
- transportation charges associated with delivery
- state regulations
- degree of competition
How Can Residential Customers Reduce Their Natural Gas Bills?
To help 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.