With a frigid start to the winter season, many businesses are understandably concerned about how colder temperatures may impact their cost management in the months ahead. Winter weather has a direct influence on natural gas demand, and as demand rises, so does the potential for price volatility. As we learned from last year’s winter, even mild or uncertain outlooks can turn into record-setting cold snaps that can quickly reshape the market and strain supply.
For businesses that rely on natural gas, these conditions can introduce budget uncertainty and operational challenges, especially if energy purchasing strategies are not designed with winter volatility in mind. By understanding how pricing structures, market trends, and operational usage interact, businesses can better manage costs and avoid surprises during peak winter months.
How Winter Weather Impacts Natural Gas Pricing
Natural gas prices are closely tied to supply and demand. During the winter months, demand increases as businesses rely more heavily on natural gas for operations. At the same time, supply can be constrained by infrastructure limitations, storage withdrawals, and weather-related disruptions.
Extreme cold accelerates storage withdrawals, tightening supply and often placing upward pressure on prices, but the impact can vary depending on broader market conditions. For example, a cold winter paired with stable storage levels may result in modest price increases as supply remains sufficient to meet demand. In contrast, a cold winter combined with low or unstable storage can trigger sharp price spikes, particularly in regional markets, as buyers compete for limited supply.
As highlighted by the EIA as the end of 2024, even with above-average storage levels, colder-than-normal weather expectations drove forecasts significantly higher for natural gas prices compared to the prior winter.
For businesses purchasing energy from the utility, this volatility can translate into unpredictable monthly costs during the coldest periods of the year.
Find the Right Pricing Plan for Your Business
One of the most effective ways to manage winter energy costs is by choosing a pricing approach that fits how your business plans and manages risk. A third-party energy supplier, like Sprague, can help create a pricing plan tailored to your needs, whether that means locking in a fixed price to stabilize energy costs over a longer period to make budgeting more predictable, or selecting market-based pricing that follows daily price movements and allows you to benefit when prices dip. A hybrid approach can also be used, fixing a portion of your energy usage, while leaving the rest open to the market to balance cost certainty with flexibility. Each option comes with tradeoffs, and the right choice depends on your budget goals, risk tolerance, and energy usage patterns.
Fixed-price plans can help businesses lock in rates ahead of winter, offering budget certainty and protection against sudden market spikes. Alternatively, variable pricing may benefit businesses that prefer to take advantage of market opportunities and are able to actively monitor and respond to market conditions.
Many businesses also adopt a more customized pricing plan, as not every business is made the same. This option combines elements of fixed, variable, and market-based pricing to provide a bespoke solution that balances risk and opportunity. Understanding what fits within your overall financial and operational goals is key to navigating peak winter months more confidently.
Learn more about our pricing plan offerings in our blog: “Optimize Your Natural Gas Operating Costs: A Guide to Sprague’s Pricing Plans and Budget Certainty”.
Stay Informed on Market Conditions
By monitoring energy market activity, weather patterns, and regulatory developments relevant to your industry, we help businesses make informed, timely purchasing decisions and adjust strategies as conditions evolve. Even basic awareness of market drivers, such as prolonged cold forecasts or declining storage levels, can provide valuable context for managing energy spend during the peak winter months. Subscribe to our MarketWatch report to stay informed daily.
Understanding Purchasing Strategy and Risk Management
Energy purchasing is not just about securing supply; it is also about managing risk. A thoughtful purchasing strategy considers both short-term operational needs and long-term financial objectives. Risk management tools, such as hedging, contract layering, and budget forecasting, can help mitigate exposure to volatile winter pricing.
For businesses with predictable usage patterns, proactive planning before peak winter months can reduce the likelihood of budget surprises. For others with fluctuating demand, flexible strategies paired with ongoing market monitoring may be more appropriate.
Effective risk management also involves evaluating internal factors, such as energy efficiency initiatives, usage trends, and operational schedules. Reducing overall consumption during peak periods, even marginally, can help offset higher winter prices and improve cost control.
Energy Efficiency Strategies
Regardless of your industry, there are steps you can take to reduce energy usage both during and after hours of operation.
- Optimize Water Heating Settings
Facilities with standard gas-fired water heaters may be able to reduce natural gas use by lowering setpoints to around 120°F. Each 10-degree reduction can potentially lower water heating costs by 3 to 5 percent, depending on system design and usage. Insulating hot water pipes and storage tanks can further reduce heat loss. - Reduce Electricity Usage After-Hours
While many businesses prefer to keep lights on after hours for safety reasons, limiting lighting to essential areas, or utilizing motion sensors, can cut electricity consumption down greatly. - Seal Air Leaks and Insulate
Drafty doors, windows, and poorly insulated walls force heating systems to work harder. Weatherstripping, caulking, and adding insulation can significantly reduce gas use. - Educate Staff on Energy-Conscious Practices
Encourage employees to close doors, turn off unused equipment, and report heating or ventilation issues. Simple behavior changes can make a big difference.
What You Can Do Today
Even though winter weather and energy markets are hard to predict, there are practical steps you can take right now to feel more in control of your energy costs.
- Check Your Price Structure
If your supply is through the utility, review how rates change during peak winter demand. If supply is purchased separately, confirm whether pricing is fixed, market-based, or blended/customized. Knowing how your rate responds to cold weather periods helps identify potential exposure to winter price volatility. - Review Winter Usage Trends
Take a look at past winter bills to identify consumption spikes tied to specific days, shifts, or processes. These insights can guide targeted operational adjustments. - Limit Usage Where Possible
When feasible, shift energy-intensive activities, such as using multiple equipment at full capacity, away from peak periods to help reduce costs during extreme cold. - Monitor Key Market Drivers
Track extended weather forecasts, storage levels, and regional supply conditions. Periodic check-ins can help you anticipate changes rather than react to them. - Revisit Your Energy Strategy
As business needs evolve, reassess whether your current approach provides the right balance of price stability and flexibility.
If you are unsure where to begin, start with a no-cost energy assessment. As a trusted energy partner with over 155 years in business, we’ll help guide you toward the solutions that make the most sense for your business in today’s volatile energy market.
