There are many variables that influence natural gas prices in North America.
- supply and demand
- production and exploration levels
- storage injections and withdrawals
- weather patterns
- pricing and availability of competing energy sources
- market participants’ views of future trends in these and other variables
There are several pricing benchmarks in the natural gas market.
New York Mercantile Exchange (NYMEX)
The NYMEX natural gas futures contract is widely used as an international benchmark price. It is used here in Alberta. The futures contract trades in units of 10,000 million British thermal units (MMBtu).
The price is based on delivery at the Henry Hub in Louisiana. This is the centre of 16 intra- and interstate pipeline systems that draw from the region’s gas deposits. The pipelines serve markets throughout the U.S. East Coast, Gulf Coast and Midwestern U.S.
The NYMEX does not set the prices of the traded commodities. Market forces determine prices through open and continuous auction on the exchange floor.
The AECO “C” spot price is the Alberta gas trading price. It has become one of North America’s leading price-setting benchmarks.
To find the AECO-C spot price and other market prices, go to Natural Gas Exchange (NGX).
Alberta natural gas reference price
The Alberta natural gas reference price is a monthly weighted average field price of all Alberta gas sales. This information is determined by the Alberta Department of Energy through a survey of actual sales transactions. This price is used for royalty purposes.
Natural gas utility gas cost flow-through rates
In Alberta, 2 major companies are responsible for providing regulated natural gas service. They are:
- Direct Energy Regulated Services (providing gas for customers of ATCO Gas North and South)
- AltaGas Utilities
Their natural gas rates are set at the beginning of each month, subject to verification by the Alberta Utilities Commission. These rates reflect the forecast market price for the upcoming month. They correct for any amount that is over- or under-collected from previous months.
Natural gas rates are “passed through.” This means the gas rate reflects the costs to purchase natural gas and the costs involved with managing that gas supply.
There is no profit or mark-up on regulated natural gas rates.
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