How Natural Gas Prices Drive Ohio Business Power Costs
Ohio market insight · Rates & regulation
The short answer
Natural gas plants set PJM's wholesale energy price most of the time — they were the marginal resource in 77% of intervals in 2025 — so gas prices flow straight into the energy part of Ohio electricity costs. When Henry Hub gas rose from a historic-low $2.21/MMBtu in 2024 to $3.53 in 2025, PJM's average real-time price rose about 50%, to $50.73/MWh, with fuel costs accounting for most of the increase. A useful rule of thumb: at the gas fleet's average efficiency, each $1/MMBtu change in gas moves the cost of gas-fired power by about 0.78¢/kWh. Gas affects energy prices, not capacity, which is fixed by PJM's auctions through May 2029.
For the capacity side of your costs, see PJM capacity auction results; for Ohio-specific price drivers more broadly, see managing energy price volatility; for winter price spikes on index products, see extreme-weather preparedness; and for how new supply and permitting affect the longer run, see permitting reform and Ohio prices.
How gas sets the power price
PJM runs a single-price market: in each interval, the most expensive unit needed to meet demand sets the price every generator is paid. Nuclear, coal, wind and solar usually run below that level; gas-fired plants usually sit at the margin. PJM's market monitor found gas units were the marginal resource in 77.0% of real-time intervals in 2025, up from 73.7% in 2024, and that natural gas made up 43.8% of the average real-time price.
The link is a plant's heat rate — how many Btu of fuel it burns per kWh. EIA puts the average U.S. gas-fired heat rate at 7,754 Btu/kWh for 2024. Multiplying gas price by heat rate gives the fuel cost of gas-fired power:
| Gas price ($/MMBtu) | Fuel cost ($/MWh) | Fuel cost (¢/kWh) |
|---|---|---|
| $2.21 (2024 Henry Hub average) | $17.14 | 1.71¢ |
| $3.00 | $23.26 | 2.33¢ |
| $3.53 (2025 average) | $27.37 | 2.74¢ |
| $4.00 | $31.02 | 3.10¢ |
| $5.00 | $38.77 | 3.88¢ |
Less efficient peaking plants have higher heat rates, so on the hottest and coldest days — when they set the price — the same gas price produces a bigger power-price move. Wholesale prices also include congestion, losses and other costs, so the table is a guide to direction and scale, not a forecast.
What happened in 2024–2026
| Year | Henry Hub average ($/MMBtu) | PJM real-time load-weighted price ($/MWh) |
|---|---|---|
| 2024 | $2.21 | $33.74 |
| 2025 | $3.53 | $50.73 |
| 2026 (EIA forecast) | $3.43 | — |
| 2027 (EIA forecast) | $3.28 | — |
Of the $16.99/MWh increase in PJM's average price in 2025, the market monitor attributed $9.94 — about 58% — to fuel and consumable costs. The rest reflected higher demand and other factors.
EIA's September 2026 Short-Term Energy Outlook expects prices to ease slightly as production grows by about 4.5 billion cubic feet per day in 2026, even as LNG exports climb from 15.1 Bcf/d in 2025 to 17.4 in 2026 and 18.6 in 2027. It projects end-of-October 2026 storage about 5% above the five-year average. The export growth ties U.S. prices more closely to world demand; the storage cushion reduces, but doesn't remove, winter spike risk.
For Ohio businesses, EIA data show average commercial prices of about 13.78¢/kWh in January–June 2026, versus 11.07¢ a year earlier — the combined effect of higher energy prices and the step up in capacity costs.
How gas moves the offers you see
| Product | How gas prices reach you | When |
|---|---|---|
| Utility default service (SSO) | Set by auctions held in advance, typically blending several auctions | Resets each June 1; gas moves at auction time are locked in for the year |
| Fixed all-in supplier price | Priced from forward power prices on the day of the quote, which track gas futures | At signing; fixed for the term |
| Fixed energy with capacity passed through | Energy fixed at signing; capacity billed separately | Gas risk only at signing |
| Block-and-index | A fixed block covers part of your load; the rest floats with hourly prices | The floating share moves with gas every hour |
| Full index | All energy at hourly wholesale prices plus an adder | Continuous, including winter spikes |
Two practical consequences. First, a fixed quote is a snapshot of the gas market that day; if futures rise between quotes, so do offers. Second, index exposure is concentrated in extreme weather: in cold snaps, pipeline constraints can push regional gas and power prices far above their averages for days at a time.
Sizing your gas exposure
Illustrative only. Assumptions: an office using 1,401,600 kWh a year, fully on an index product, with gas assumed to set the price in every hour.
- Each $1/MMBtu change → about 0.7754¢/kWh
- 1,401,600 kWh × $0.007754 ≈ $10,868 a year
That's an upper bound: gas doesn't set the price in every hour, and a fixed-price contract removes the exposure for its term. It's still a useful way to compare how much a gas move matters to your budget against the premium a supplier charges for fixing the price.
What to watch and do
- Watch two EIA releases: the weekly natural gas storage report (Thursdays) and the monthly Short-Term Energy Outlook. Storage well below the five-year average heading into winter is a warning sign for index buyers.
- Match the product to your tolerance. If a $10,000 swing matters to your budget, fix most of your energy; see fixed vs variable rates.
- Layer purchases. Buying in two or three tranches at different times averages out the gas price you lock in; see hedging strategies and market timing.
- Keep gas and capacity separate in your analysis. A lower gas price doesn't touch the capacity cost in your rate, which is set by PJM's auctions through May 2029.
- If you also buy gas directly for heating or processes, Ohio's major gas utilities offer customer choice; a fixed gas contract covers that exposure separately.
FAQ
Why do natural gas prices affect my electricity bill if I don't use gas?
Gas-fired plants set PJM's wholesale power price most of the time, so their fuel cost becomes part of the energy price everyone pays.
How much does a $1 change in gas prices move power prices?
At the average gas-fired heat rate of about 7,754 Btu/kWh, about $7.75 per MWh, or 0.78¢ per kWh, in hours when gas sets the price.
What is EIA forecasting for natural gas prices?
EIA's September 2026 outlook forecasts Henry Hub averaging about $3.43/MMBtu in 2026 and $3.28 in 2027, after $3.53 in 2025.
Does a fixed-price electricity contract protect me from gas swings?
Yes, for the energy portion during its term. The gas market still affects the price you're offered at signing and at renewal.
Sources
- https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2025/2025-som-pjm-sec3.pdf
- https://www.eia.gov/todayinenergy/detail.php?id=64184
- https://www.eia.gov/outlooks/steo/report/natgas.php
- https://www.eia.gov/electricity/annual/html/epa_08_01.html
- https://www.eia.gov/electricity/monthly/
- https://www.eia.gov/naturalgas/weekly/