Natural gas is a common power choice for many American homes. It’s versatile, running appliances like clothes dryers, hot water heaters, stoves and ovens. Many homes rely on natural gas for heating and cooling as well. And it emits less than half the carbon dioxide as coal, making natural gas a clean-burning fossil fuel. Many people aren’t aware of how power companies price and bill for natural gas. Yet you will likely see natural gas cost per therm among the most common terms. Here’s an explanation that will help you understand your bill and usage.
You can measure natural gas use in a number of different ways. You might have seen terms like “therm,” “Btu” and “Ccf.” Here is what they mean.
A Btu measures the heat value of natural gas. It’s short for British thermal unit, which is the amount of heat you need to increase the temperature of 1 pound of water 1 degree Fahrenheit.
Ccf is short for one hundred cubic feet (C is the Roman numeral for 100). Ccf measures the quantity, or volume, of natural gas.
A therm is a convenient way to price natural gas. Many companies bill their natural gas price per therm. A natural gas therm is equal to 100,000 Btu.
In 2018, the annual average heat content of natural gas in the United States was 1,036 Btu per cubic foot. So, on average across the country, 1 Ccf (or 100 cubic feet) of natural gas was 103,600 Btu, or 1.036 therms.
The average cost of natural gas per therm varies considerably by season and location. In January 2020, the national average price was $9.52 per thousand cubic feet. That’s $0.95 per Ccf. And at the 2019 national average heat content of 1,037 Btu per cubic foot, it’s a natural gas therm price of $0.92. The previous August saw prices hit $18.58 per thousand cubic feet, or $1.86 per Ccf, for a natural gas therm price of $1.79.
Next to seasonal changes, location is the second biggest factor in natural gas per-therm rates. In 2019, Hawaii residents paid the highest prices on average over the whole year ($44.14 per thousand cubic feet/$4.41 per Ccf/ $4.64 per natural gas therm). Idaho residents paid the least on average in 2019 ($6.47 per thousand cubic feet/$0.65 per Ccf/ $0.63 per natural gas therm).
Natural gas is a frequently traded commodity. An interplay of complex factors affect prices. Natural gas prices can be volatile, so exploring your options may not be such a bad idea. It also helps to understand therm prices and why prices are the way they are.
Natural gas cost per therm depends on a number of factors. Unlike electricity, which is generated nearby, natural gas has to be shipped from where it’s produced and stored. Distance from its source explains why natural gas is more expensive in Hawaii and cheaper in Idaho and North Dakota. The method of natural gas shipment and how it’s stored and distributed matters. Pipelines are cheaper than trucks and trains. Higher capacity to store and distribute natural gas can translate into lower prices per natural gas therm.
Like every commodity, supply and demand play a part. During times of high demand and low supply, the price goes up. Season, weather and economic strength are major drivers of demand. Lastly, state regulations and taxes add costs to your bill over and above the cost per natural gas therm.
Calculating your natural gas per therm rates is pretty easy, even if your bill doesn’t provide a natural gas price per therm. The key is to find the heat content of natural gas that your energy provider uses. As noted above, that varies, but the national annual average in 2019 was 1,037 Btu per cubic foot, where 1 Ccf equals 1.037 therms. Using that value, if you have the price in dollars per Ccf, dividing the price by 1.037 will get you the price per therm. Conversely, if you have the natural gas price per therm, you can multiply that by 1.037 to get the price per Ccf.
The figure below explains how to convert Ccf rates to therms and natural gas therm rates to Ccf rates. To convert between cubic feet, cubic meters, Btu and megajoules, the U.S. Energy Information Administration provides a calculator.
Given the growing popularity of natural gas, it makes sense to understand how usage is measured and priced. When you know the natural gas price per therm, you can begin to manage how efficiently you’re using this resource.
Another way to understand natural gas cost per therm is to compare prices for your home. Constellation offers natural gas to residential customers in many states, including Georgia, Maryland, Ohio, Massachusetts and Pennsylvania. View our current natural gas rates and decide if switching to Constellation makes sense for you.
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