Making Sense of Energy

Residential Energy Rates in Alberta: What to do? December 2020 Edition

By Cameron Mitchell

Solution 105 Consulting Ltd.

“CHANGE IS IN THE AIR”

Christmas season will be very different for many families this year, but it seems like good (vaccine) news may be lurking just around the corner. Unfortunately, we are still awaiting any good energy plan news offered by energy retailers. November electricity rates settled at around 4.3 cents per kWh for the month. December and January forward rates suggest those months’ will be coming in at around 5.0 cents per kWh and 6.9 cents per kWh respectively. Calendar 2021 has increased a fair bit compared to last month – in the 6.6 cents per kWh range now. As forward rates starting in January look high, we would recommend locking in a fixed rate for your homes, even if there are no amazing retail offers around.

Floating natural gas rates have continued to creep upwards lately and are expected to come in around $2.70/GJ for December and January.

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:
      • Encor by EPCOR has a 6.29 cents/kWh option. Rates stable for up to 5 years. $7.00/month admin. Free termination.
      • ATCOenergy has a 6.29 cents/kWh option. Rates stable for up to 3 years. $6.99/month admin. Free termination.
      • EasyMax by Enmax has a 6.29 cents/kWh option. Rates stable for up to 1 year. $7.10/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 on the ATCO “Three for All” offer. This expired offer has me paying 3 cents per kWh for electricity and $3/GJ for gas from January 2019 until December 2021. Since I use about 9,000 kWh/yr, the 3.3 cent per kWh savings compared to other fixed rate offers, should lead to a savings of about $297 per year. On the gas side, I use about 100 GJ per year, and the fixed rate of $3/GJ is likely about $1.00/GJ more than I might have to pay if I stuck with DERS… but that only leads to an extra cost of $100 per year. So it would appear the Three for All offer would save me about $200 per year, and lock in my rates. If something way better were to come along, I could still terminate by paying $100/$50 (depending when I terminate, in 2020 or 2021).

NATURAL GAS

For gas, we are not seeing any super exciting residential fixed rate offers. Most offers are higher than $3.40/GJ. Short term pricing is now around $2.70/GJ, and longer term pricing is still a bit below $3.00/GJ into 2024. 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 December, the DERS rate is $2.705 /GJ. This figure subtracts about $0.06/GJ to reimburse costs from last month. For January, we are expecting a DERS gas rate around $2.70/GJ. Looking at the longer view, we still recommend DERS. Index offers from most retailers add around $0.30/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. Starting January, the forward market is suggesting rates that are a bit higher than the current retail offers available – so the current fixed offers are probably worth switching to.

Forward pricing currently suggests index residential rates will come in around 5.0 cents per kWh and 6.9 cents per kWh over the next two months. November 2020 averaged about 4.3 cents/kWh. At this point, 2021 forward market rates suggest the year could average around 6.6 cents per kWh.

If I were to pick an electricity only option today, the 6.29 cents per kWh five year term with Encor by EPCOR is the one I’d go with.

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.