Description:
With fixed price, an end user market can lock in a specific price for natural gas purchases. By locking in a price, the purchaser always knows what price will be paid for natural gas. If market prices rise, the customer will not be affected. Additionally, weather or unpredictable demand will not impact fixed gas price.

Advantages:

• Provides a known purchase price
• Eliminates concern about rising gas prices

Example:
A small LDC in New Mexico wants to have a predictable gas cost for budgeting. The buyer believes gas prices may rise in the future because of the winter weather, so he locked in the forward market price. With a fixed price, NFM can help customers predict their gas costs. This LDC wants to lock in the current gas cost of $3.50 per MMBtu for the coming winter and summer months. By locking in a fixed price, this LDC paid $3.50 per MMBtu, not market prices, which rose above $4.50 in February. Regardless of where prices fell, this LDC knew what to expect to pay each month.