Dr. Al Behrens of Northern Natural Gas in Nebraska has developed a neural network that predicts next month's gas price change with an average accuracy of 97%. Northern Natural Gas is a regulated wholesaler of natural gas. They must develop and file a rate for gas based on the volume-weighted average cost of gas. Prices and terms are specified in contracts. Being able to predict costs provides a valuable piece of planning data.
The monthly price is sometimes tied to an index such as those published in Inside FERC and Natural Gas Week. The price is a function of many factors, including recent market activity, seasonal factors, weather, etc. Dr. Behrens used seven inputs to the neural network which included some past information.
quarter of the year
NNG's sales commodity rate last year
NNG's market sensitive price last year
Nat. Gas Week price index last month
Nat. Gas Week price index last year
Degree-days last month
Gas Index next month