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Vectren's gas purchasing strategy for Indiana customers

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If you’re an Indiana customer with natural gas service, you may wonder how Vectren buys natural gas and exactly how the price you pay is determined.

First, keep in mind there are two key parts to your natural gas bill. One is the “Distribution and Service Charges” line item – this charge reflects the cost to deliver the natural gas to your home. Second is the cost of the natural gas, which is listed on the bill as “Gas Cost Charge” – this charge reflects the price of the gas you actually used in your home.

In the winter, gas costs can make up as much as 70% of your bill.

So how is the Gas Cost Charge determined?
Natural gas is a commodity that’s bought and sold in an open market, just like oil or even stocks. It’s traded daily on the New York Mercantile Exchange, or NYMEX market. Its price can fluctuate daily based on supply and demand, weather or even the economy, and no one can predict its price.

Because of this uncertainty, Vectren buys natural gas on behalf of its customers using a mutli-pronged approach. Our goal ultimately is to obtain gas at the best possible price while reducing the impact of market volatility. 

How do we do this? 
1) We buy gas when prices are typically lower, store it and then deliver it to you in the winter.
2) We also lock in prices for delivery in future months.

This blended price is then used to formulate the price you pay per unit each month. Keep in mind – Vectren Energy Delivery, by law, cannot profit from nor mark up the price of natural gas. We pass these costs on to you, our customers, on a dollar for dollar basis.  Therefore, it’s in our best interest and obviously yours that we do what we can to secure a fair price and make sure you aren’t subject to high-market price spikes throughout the year.

You can determine your monthly gas costs by reviewing your bill.  Just see the “Gas Cost Charge” line item. Take this amount - divide it by the number of therms you used – and you arrive at your cost per unit for that billing period. Remember that this price typically fluctuates month to month – just like the market.

The bottom line - Vectren cannot control, nor predict, the price of natural gas, and we never try to out-guess the market when it comes to our purchasing strategy.

That being said, if you use less gas, your bill will be lower. Find ways to use less by reviewing the energy efficiency tips and how-to videos on this site, VectrenLiveSmart.com

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