Making Sense of Energy

Residential Energy Rates in Alberta: What to do? April 2019 Edition

By Cameron Mitchell

Solution 105 Consulting Ltd.

“SPRING HAS SPRUNG!”

The cold February weather is still scarred in the minds of many, but the recent warm weather is cause for celebration. Electricity prices too have come down from those February heights. March still settled near 8 cents per kWh, so hopefully, everyone got on a fixed rate! April and May are expected to be in the mid 5 cent per kWh and mid 6 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 has really softened recently. It is expected to come in under $2/GJ for the remainder of 2019.

WE RECOMMEND:

  • Gas Only: get onto Direct Energy REGULATED Services. DERS. This is the default, no retailer rate. BUT… try to avoid DERS for April if you can. They under-collected (again!) in March, and are adding about $1.40 /GJ extra to the April DERS rate. (It is probably not worth jumping away for a month, then back, but if you are moving to DERS, delay another month).
  • 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.

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 April and May. 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. There is no rush to get on this DERS rate however, as the April rate has been set quite high (see note on that below).

For April, the DERS rate is $2.885 /GJ. This rate is a result of about $1.40 /GJ extra in the April rate due to under-collections though February and March (due to higher than anticipated rates, and high use from cold weather). For May, we are expecting a DERS gas rate around $1.30/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 5.5 cents/kWh for March and April. January and February 2019 averaged 4.7 and 11.6 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.

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.