The utility can only earn a return on the local delivery of the product, and those prices won t change for the next three years. In August, Niagara Mohawk reached an agreement with the New York State Public Service Commission to freeze delivery rates at their current levels for the next three years. Under the same agreement, transportation charges the cost of getting the gas from the place it is produced to Niagara Mohawk s service territory are expected to remain stable. Natural gas is produced from wells located primarily in the Gulf States and Canada. It is transported through a network of interstate pipelines to the local delivery systems of companies such as Niagara Mohawk.
Natural gas is a deregulated commodity.
Therefore, its price is dictated by the strength of the demand for gas and the readily available supply. For example, the nation s prolonged economic expansion has increased the demand for all forms of energy. Meanwhile, higher petroleum prices have kept industry from switching to oil from natural gas to meet their production needs. In addition, an increasing amount of clean-burning natural gas is being used to generate electricity. Today, about 15 percent of the electricity generated in the U.S. comes from gas-fired plants, but that percentage is growing.