• Purpose

    The NWIESC Natural Gas Cooperative is just what the name suggests -- an association of school districts and other organizations that have formed a cooperative purchasing group to manage price risk in the natural gas market. Using hedging strategies, the group creates an annual and multi-year portfolio of its usage needs by purchasing futures contracts on the New York Mercantile Exchange (NYMEX). With the assistance of consultants, the cooperative is able to provide its members with timely information to manage price risk. Managing price risk increases the predictability of the districts' future energy budgets and provides a vehicle for dealing with the volatility of natural gas pricing.

    Goal

     

    The NWIESC natural gas consortium was formed in 2003.  The group’s goal is to take advantage of natural gas deregulation.  Participating members pay less than they would if they solely engaged the deregulated market on their own.  Most of all, the program provides insurance against severe price hikes and that is valuable to members in protecting their school and district budgets. 

     

    Of all the cost variables a school district has, energy prices are among the least controllable.  The group can however, control the effect those prices have on their cash flow and budget.  There are three main reasons the group undertake energy risk management solutions: maintain a budget (hedging), minimize procurement cost (group price discount), and maximize market opportunities (hedging on market dips).