Most businesses that buy natural gas treat it like a smaller, simpler version of their electricity bill. It isn't. Gas pricing has more moving parts, more places to quietly overpay, and — for the buyer who understands it — more levers to pull than electricity ever offered.

We've reviewed gas contracts for manufacturers burning 100,000-plus MMBtu a year that were paying a single all-in number they couldn't break apart, much less explain. They had no idea what the commodity cost versus what the pipe cost. They had never seen their basis differential. They locked their contract the week the old one expired, with no view of the forward curve and no idea that winter was about to reprice the whole strip.

That's the norm, not the exception. Here's the honest version of how commercial natural gas procurement actually works — and where the savings most buyers ignore are sitting.

Why Gas Is More Complex Than Electricity

Electricity is generated and consumed in the same instant. There's no warehouse for it. That makes the pricing story relatively linear: a commodity rate, capacity, transmission, and delivery.

Natural gas is a physical molecule. It gets pumped out of the ground in one part of the country, pushed through thousands of miles of pipeline, stored underground for months, and burned somewhere else entirely. Every one of those steps — production, transportation, storage, and local delivery — has its own price, its own market, and its own seasonality.

That physical reality is exactly why gas costs more to understand and more to get wrong. The headline price on a national index tells you almost nothing about what you'll actually pay at your meter. The gap between the two is where the money lives.

The Anatomy of a Commercial Gas Bill

A commercial gas bill splits into two halves, and the split matters more than most buyers realize.

The first half is the commodity — the molecule itself. In a deregulated market, this is the competitive portion. You choose your supplier, you negotiate the structure, and this is where every dollar of procurement savings comes from. Depending on the market and the season, the commodity runs roughly 40% to 70% of the total bill.

The second half is delivery — the charges from your local distribution company, or LDC, for moving gas through the local pipes to your building. These are regulated tariff charges. You don't shop them, and no broker can negotiate them down. They're a real cost, but they're not where the game is played.

The single most common mistake we see is buyers fixating on the all-in rate without separating these two. If you don't know what's commodity and what's delivery, you can't tell whether your supplier is competitive or whether you're getting a good deal that's being dragged down by LDC charges nobody can change. Pull them apart first. Everything else follows from that.

Henry Hub and the Basis Differential

The benchmark for North American natural gas is Henry Hub — a physical delivery point in Erath, Louisiana, where dozens of pipelines converge. When you hear a gas price quoted on the news, that's Henry Hub. The NYMEX futures contract that the entire market trades off of settles there.

But you don't buy gas in Louisiana. You buy it at your meter, wherever that is. And gas at your location almost never costs the same as Henry Hub. That difference — the location premium or discount — is called the basis differential, or just basis. Henry Hub basis is the single most underappreciated number in commercial gas procurement.

Basis can run in your favor or against you, and it moves with geography and pipeline constraints:

• Discount markets. In production-heavy regions where gas is abundant and pipeline takeaway is constrained, gas trades below Henry Hub. The Waha hub in West Texas's Permian Basin has traded at steep discounts — at times negative, where producers paid to offload gas. The Houston Ship Channel often trades at a modest discount as well. A buyer in those zones who captures the favorable basis pays meaningfully less than the headline.
• Premium markets. In demand-heavy regions far from production with tight pipeline capacity, gas trades above Henry Hub — sometimes dramatically. The Algonquin Citygate serving New England is the textbook case: on cold winter days, constrained pipelines into the Northeast have pushed basis to several dollars per MMBtu over Henry Hub, occasionally far more. A New England buyer who ignores basis is exposed to the most volatile premium in the country.

The point is this: a basis swing of even $0.30 to $1.00 per MMBtu is real money. For a manufacturer using 100,000 MMBtu a year, $0.50 of basis is $50,000. Most buyers never see this number because it's buried inside an all-in quote. Smart buyers ask for it, watch it, and lock it when it's favorable.

Contract Structures: Fixed, Index, NYMEX-Plus-Basis, and Full-Requirements

How you structure the commodity portion is the biggest decision you'll make, and the fixed vs index natural gas question doesn't have one right answer. It depends on your risk tolerance and your view of the market. The main structures:

• Fixed price. You lock one all-in rate per MMBtu for the full term — typically 12 to 36 months. Total budget certainty, zero exposure to market swings. The tradeoff is that the supplier prices in a risk premium for taking the volatility off your hands, and you can't benefit if the market falls.
• Index (variable). You float with a monthly index, usually tied to NYMEX or a regional price. You get the market's lows, but you also eat its highs — and gas highs come in winter, exactly when your usage may be peaking. This is the structure that produces the surprise February invoice.
• NYMEX-plus-basis. This is the structure sophisticated buyers gravitate toward, because it lets you manage the two risks separately. You lock the NYMEX strip — the national commodity component — when the forward curve looks attractive, and you handle basis as its own line. You can fix basis too, or leave it floating, depending on your market. The power here is control: you're not forced to make both decisions on the same day.
• Full-requirements. The supplier delivers whatever you burn, bundling commodity, basis, and the costs of balancing your swings into one rate. It's simple and it covers usage uncertainty, but you pay for that convenience — the supplier bakes in a premium for absorbing your volume risk. Fine for smaller or unpredictable loads; usually leaves money on the table for a large, steady industrial user.

For a buyer of any real size, the ability to lock the NYMEX strip and the basis as separate decisions is the most valuable tool on this list — and it's the one bundled all-in quotes quietly take away from you.

Winter Risk and Why Timing the Lock Matters

Natural gas is a seasonal market, and the season is winter. Roughly half of U.S. homes heat with gas, so when temperatures drop, residential and commercial heating demand spikes across the whole country at once. That heating-season demand is what drives gas volatility, and it's predictable in timing if not in magnitude.

The forward curve reflects this every year: winter months (the November-through-March strip) trade at a premium to summer. When a cold snap hits a constrained region, daily spot prices can spike several times over the base level for days. Buyers floating on index in those windows get billed for it directly.

There's a layer on top of that now. Natural gas isn't just heating fuel anymore — it's the swing fuel for power generation. Gas-fired plants ramp up to meet electricity demand, including the soaring load from data centers and electrification. That means gas and power markets increasingly spike together, and a cold day can hit you on both your electric and gas bills at once.

The practical takeaway is about timing. The forward curve almost always prices winter risk into the strip as fall approaches and traders position for heating season. Locking your gas before October — ahead of that repricing — has, in most years, beaten waiting until you're staring down winter with an expiring contract. We don't promise the market will cooperate every year, but the discipline of acting before the seasonal premium builds, rather than after, is one of the clearest edges a buyer has.

Storage, Transportation, and Capacity

Two pieces of the physical system quietly shape your price even though they never appear as a line you can shop.

Storage is the market's shock absorber. Through the summer, when demand is low, gas gets injected into underground storage fields. Through winter, it gets withdrawn to meet heating demand. The level of gas in storage relative to the five-year average is one of the most-watched numbers in the market — a low storage report heading into winter can move the entire forward curve. You don't buy storage directly, but it's the backdrop to every price you're quoted.

Transportation and capacity are the cost of pipeline space to move gas from the hub to your region. This is the physical reason basis exists. When a region's pipelines are full and no more gas can get in, basis blows out — that's the New England winter story in one sentence. Larger buyers can sometimes hold firm transportation capacity directly, but for most commercial users this cost is embedded in basis and in the supplier's delivery structure.

Pooling, Aggregation, and Capturing Basis

If you operate multiple sites — several plants, a portfolio of facilities, locations across more than one LDC territory — pooling your volume changes the math. Suppliers price aggressively for larger, predictable loads, and aggregating accounts into a single negotiated program routinely beats letting each site fend for itself. We've moved multi-site operators several percent on the commodity simply by presenting the combined load as one book of business instead of a dozen small ones.

And then there's the lever almost nobody pulls: capturing basis discounts on purpose. If your facilities sit in or near a discount market like Waha or the Houston Ship Channel, the basis is working in your favor — but only if your contract is structured to pass that discount through to you rather than letting the supplier keep it inside an all-in rate. The same logic applies in reverse for premium markets: if you're in New England, the goal is to fix basis before winter constraints reprice it, not to float into the spike.

This is the heart of where gas savings actually come from, and it's worth stating plainly: the real money in commercial gas isn't in shaving a penny off a fixed quote. It's in capturing favorable basis and timing the NYMEX strip — two things the all-in number on most contracts is specifically designed to hide.

What Smart Buyers Do Differently

The businesses that consistently pay less for gas aren't getting a secret rate. They run a process:

• They separate commodity from delivery so they actually know what's competitive and what isn't.
• They quote the structure, not just the price. They ask for the NYMEX strip and the basis as separate numbers, and they refuse to evaluate gas as one opaque all-in rate.
• They lock the strip and basis independently — fixing the national component when the forward curve is attractive and managing basis on its own clock.
• They time the seasonal market and act before fall, rather than scrambling into a winter-priced strip when an old contract expires.
• They pool volume across sites to negotiate as one large, predictable load instead of a scatter of small accounts.
• They watch storage and the curve so the decision to lock is informed, not a coin flip on the day the contract lapses.

What That Adds Up To

Put numbers to it. Take a manufacturer burning 110,000 MMBtu a year, currently on a bundled full-requirements contract they signed the week the last one expired — in October, into a winter-priced strip, with basis buried inside the rate.

Restructure to NYMEX-plus-basis, lock the strip on a dip in the forward curve, capture the favorable basis their region actually offers, and competitively bid the supplier margin. Across the commodity portion, that kind of repositioning routinely lands in the 15% to 25% range on the part of the bill that's actually shoppable. On a gas spend of that size, that's a six-figure annual swing — earned by understanding the structure, not by finding a magic supplier.

The Recommendation

If you buy gas and you've never seen your basis differential, never separated commodity from delivery, and locked your last contract whenever it happened to expire, you are very likely overpaying — and you can't see by how much, because the structure hides it.

Start by breaking your bill into commodity and delivery so you know what's competitive. Demand quotes that show the NYMEX strip and basis separately. Then lock the strip when the curve is favorable and manage basis on its own — ideally before fall reprices the winter strip. For a large or multi-site buyer, that discipline is the difference between paying the headline and paying the floor.