When buyers of natural gas believe the price will remain stable or increase, Index Minus is a way that they can beat the Index. Buyers can obtain a discounted purchase price in exchange for a floor. The discount amount depends on where the floor is set. Typically, the higher the floor, the greater the discount.

Benefits
Index-minus offers buyers a discount from the Index price when it is needed the most – when pricing are rising.

Example:
A Northwest Utility believes that natural gas prices may be on the rise. Its regulatory committee requires that gas be purchased based on market prices and that prices higher than market should not be paid. This utility enters into an agreement with NFM. A floor of $2.50 is set by NFM. In exchange for this floor, NFM pays the utility a premium of $.20 per MMBtu. As a result of this transaction, the utility will pay Index less $.20 for its gas over the term.