Making Sense of Energy

Residential Energy Rates in Alberta: What to Do? June 2018 Edition

By Cameron Mitchell
Solution 105 Consulting Ltd.

“Market volatility is back!

May electricity spot pricing started out very low, then jumped towards the middle of the month – ultimately settling near 8 cents per kWh.  Forward rates for June are in 4.5 cent per kWh range and are around 6.5 cents per kWh for the remainder of 2018.  Gas remains boring… and cheap, at well under $2/GJ.

WE RECOMMEND:

  • Gas onto Direct Energy REGULATED Services.   This is the default, no retailer rate.
  • Electricity:
    • Here are the best fixed rate options:
      • ATCOenergy has a 5.89 cents/kWh option. Rates stable for 3 years.  $5.00/month admin.  Free termination.
      • Encor by EPCOR has a 5.89 cents/kWh option. Rates stable for 2 years.  $7.00/month admin.  Free termination.
      • Spot Power has a 5.79 cents/kWh option. Rates stable for 1 year.  $5.90/month admin.  Free termination.
      • Direct Energy has a lucky penny promo going on. For August and January, you can get power for 1 cent per kWh (and for 1 cent per GJ), but the other months will be at 5.99 cents/kWh for electricity and $3.69/GJ for gas.  $12/month admin.  Free termination.
    • Best floating rate options:
      • Best option is ENRG Power, as their floating rate is spot plus 0.55 cents/kWh. Monthly admin fee of $5.90/month.

AT MY HOUSE:

I had a friend ask about the Direct Energy Lucky Penny promo.  The fixed electricity rate is good, but the fixed gas rate is pretty high.  I would say this option would be a good one for the months of August and January, but not particularly great for gas costs between September and December.  One option would be to sign up for just the month of August for both fuels.  Or, you could sign up for just electricity.  Since it seems the termination is free, either option is ok, though the savings are really focused on those two months.

Even knowing about the above option, I am not going to jump around at this time.  I am sticking with my fixed 5.39 cents/kWh electricity rate with ATCOenergy.  For gas, I’m with Direct Energy REGULATED Services.  That is the best gas option both short and long term at present.

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 June and $1.40/GJ for July.  Longer term pricing has moved upwards a bit, but is still below $2.00/GJ into 2020.  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 $0.544 /GJ.  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 slightly higher than the offers available – so the fixed offers are pretty good.

Forward pricing currently suggests index residential rates will come in around 4.5 cents/kWh for June and 6.8 cents/kWh for July.  The remainder of 2018 is expected to average around 6.5 cents/kWh.  May 2018 averaged about 7.9 cents/kWh.

If I were to pick an option today, I’d likely move forward with either a 1-yr Direct Energy Lucky Penny promo for electricity only, or the three year ATCOenergy option.  However, this is only if I didn’t already have a better contract in place.

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.

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