Making Sense of Energy

Residential Energy Rate in Alberta: What to do?

By Cameron Mitchell

Solution 105 Consulting Ltd.

“UNCERTAIN TIMES”

We have a new party leading the province and a federal election coming by October. Because of this, there is a bit of uncertainty in the air (and a bit of smoke too). Electricity prices came in pretty high for May, settling around 8 cents per kWh. June and July are expected to be in the 6.4 cent per kWh and 7.5 cent per kWh range respectively. For the remainder of 2019, index electricity rates are expected to come in around 6.5 cents per kWh. Gas is continuing to be cheap and is expected to come in around $1.30/GJ for the remainder of 2019. Also, with the carbon tax ending, your gas bills should see a drop of about $1.50/GJ starting in June.

WE RECOMMEND:

 

  • Gas Only: get onto Direct Energy REGULATED Services. DERS. This is the default, no retailer rate.
  • Electricity Only:
    • Here are the best fixed rate options:
      • Direct Energy has a “one month free electricity” promotion. Fixed rate of 6.29 cents per kWh, but August would be at 0 cents per kWh. Rates stable for 5 years. $12/month admin (ouch!! Could be a bit much for low use residents). Free termination.
      • ATCOenergy has a 5.99 cents/kWh option. Rates stable for 5 years. $5.99/month admin. Free termination. $25 anniversary credit.
      • Encor by EPCOR has a 5.89 cents/kWh option. Rates stable for 2 years. $7.00/month admin. Free termination.
    • Best floating rate option:
      • Best option is ENRG Power, as their floating rate is spot plus 0.22 cents/kWh. Monthly admin fee of $5.90/month.
    • Solar options:

For those residents with solar panels, there are a number of retailers that have high export rates. Best option is ENRG Power or Spot Power as their admin fee seems to be the lowest at $5.90/month. Similar to other providers, their rate is 18.75 cents/kWh. This is a great option for users where solar production outpaces their home use.

AT MY HOUSE

I’m with the ATCO “Three for All” offer. This has me paying 3 cents per kWh for electricity and $3/GJ for gas for the next 3 years. Since I use about 9,000 kWh/yr, the 2.8 cent per kWh savings compared to other fixed rate offers, should lead to a savings of about $252 per year. On the gas side, I use about 100 GJ per year, and the fixed rate of $3/GJ is likely about $1.50/GJ more than I might have to pay if I stuck with DERS… but that only leads to an extra cost of $150 per year. So it would appear the Three for All offer would save me about $100 per year, and lock in my rates. If something way better were to come along, I could still terminate by paying $150/$100/$50 (depending when I terminate, in year 1, 2 or 3).

NATURAL GAS

For gas, we are not seeing any exciting residential fixed rate offers. Most offers are higher than $3.00/GJ. The shorter term forward market is around $1.00/GJ for May and June. Longer term pricing is still below $2.00/GJ into 2022. So for gas, we recommend going with Direct Energy REGULATED Services (DERS)… remember “Regulated Service”. If you aren’t with these guys now, you will automatically go there if you terminate your current gas contract. Make sure there are no termination fees! There may also be a small enrollment fee to get on with DERS.

For June, the DERS rate is just $0.365 /GJ. This rate is a result of about a $0.59 /GJ reduction in the June rate due to over-collections last month. For July, we are expecting a DERS gas rate around $1.00/GJ. Looking at the longer view, we still recommend DERS. Index offers from most retailers add around $0.70/GJ or more for fees to the floating rate. As DERS fees are closer to $0.06/GJ, we recommend residents stay on the default gas rate.

ELECTRICITY

As noted previously, I am on a fixed rate product. I am a bit risk averse, and don’t really want big swings on my bills if I can avoid it. Plus, the forward market is suggesting rates that are very close to the offers available – so the fixed offers are pretty good.

Forward pricing currently suggests index residential rates will come in around 6.4 cents/kWh and 7.5 cents/kWh for June and July respectively. May 2019 averaged 8 cents/kWh.

If I were to pick an electricity only option today, there is nothing that really stands out, but I’d likely move forward with the Direct Energy “one month free electricity” promotion or the ATCOenergy 5.99 cents/kWh option. The concern with the “one month free electricity” is the $12/month admin fees (but you do have free termination and rates are stable for up to 5 years). With ATCOenergy the rates are stable for 5 years. $5.99/month admin. Free termination. $25 anniversary credit.

Just to help put things into perspective, all that we are talking about here is the commodity rates and costs, not the delivery and other regulated charges. An average house might use around 9,000 kWh and 100 GJ over a year.

SOLAR SPOTLIGHT:

As we move closer to summer, the sun is staying out longer, and it makes sense to provide some advice to residential users who are looking into solar, or already have solar panels on their roofs. There are a number of firms that have a rate of 18.75 cents/kWh. This high rate is super if your solar system produces more electricity than your home uses in a month (i.e. net exporter). These rates can also be cancelled or switched with just a few days’ notice. ENRG Power or Spot Power are two of many providers that have this type of offer.

COMMERCIAL USERS

And for those of you who are not residential users, and maybe a bit bigger, give us a call. We are seeing even better pricing for commercial users so get in touch and we can help.