Henry Hub and your commercial natural gas price

Spot, forward, and retail prices answer different questions

A spot reference describes a near-term market transaction, while forward or futures references concern later delivery periods under defined contracts. A retail supplier transforms market references into the product and obligations needed by the business. Comparing a multi-year fixed offer with today’s spot price ignores that difference. Specify the month, publication, unit, and timestamp when using Henry Hub in an analysis. Historical averages should be identified as historical rather than presented as executable prices.

The local delivery point changes the price

Gas must reach the region and utility serving the building. Pipeline capacity, local demand, storage, and service obligations can create a price difference from the benchmark. A contract may fix Henry Hub but pass through that basis, or it may bundle both into a delivered commodity price. Ask how the local adjustment is determined and what other costs remain excluded. Physical service firmness is another issue; a benchmark price does not guarantee pipeline availability during a restriction.

Use compatible units and volumes

Market gas references often use dollars per MMBtu, while a utility bill may use therms, Ccf, or Mcf. One MMBtu equals ten therms, but cubic-foot conversion requires heat content and relevant corrections. Never compare $/Mcf directly with $/MMBtu as though the units are identical. Use the bill’s conversion factors and retain the calculation. Evaluate seasonal quantities because a business buying more gas in winter weights those delivery months more heavily than a simple annual average.

Hypothetical retail build-up

Start with an illustrative $3.00/MMBtu benchmark, add $0.75/MMBtu of defined regional basis and $0.40/MMBtu for specified supplier services, and the modeled supply subtotal is $4.15/MMBtu. That equals $0.415/therm before delivery and other excluded items. A proposal with a different bundle cannot be compared solely with its advertised adder. These are invented teaching numbers, not live Henry Hub prices, supplier fees, or a business rate forecast.

Practical review checklist

• Label the benchmark series as spot, forward, or another defined reference with month and unit.
• Identify local basis and every transport, fuel, balancing, margin, and distribution component.
• Convert bill and quote units consistently using actual heat-content information where required.
• Weight delivery months by expected consumption and keep benchmark scenarios separate from retail offers.

Questions & answers