Making Sense of Energy

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

By Cameron Mitchell

Solution 105 Consulting Ltd.

HAPPY NEW YEAR

Best wishes to all as we head into, what has thus far been, a very cold 2020! Get your new Christmas sweaters on!! Electricity prices came in around 5 cents per kWh in December. For 2019 as a whole, rates averaged around 6 cents per kWh. Forward markets for January and February are trading very high at present, suggesting rates will be in the 7.0 cent per kWh range for the first two months of 2020. Floating gas rates are expected to come in around $2.50/GJ for January and February. A few energy retailers have moved their residential rates upwards a bit more – and still no new exciting offers to speak of!

One other big piece of news is that Federal Carbon Pollution Pricing will add about $1.05/GJ to your gas bill starting January 1. On April 1, this will move up to about $1.58/GJ. The bright side is that most everyone will be getting Climate Action Incentive Payments that, for most Alberta households, will more than cover the extra carbon tax cost.

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:
      • EasyMax by Enmax has a 5.89 cents/kWh option. Rates stable for 1 year. $7.10/month admin. Free termination.
      • Encor by EPCOR has a 6.29 cents/kWh option. Rates stable for 5 years. $7.00/month admin. Free termination
      • ATCOenergy has moved their rate up to 6.29 cents/kWh. Rates stable for 3 years. $6.99/month admin. Free termination.
      • Direct Energy has a “one month free electricity” promotion. Fixed rate of 7.19 cents per kWh, but August 2020 would be at 0 cents per kWh. Rates stable for 2 years. $12/month admin (ouch!! Could be a bit much for low use residents). Free termination.
    • Best floating rate option:
      • The 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 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 super exciting residential fixed rate offers. Most offers are higher than $3.00/GJ. Although short term pricing has bumped up to around $2.50/GJ, longer term pricing is still well 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 January, the DERS rate is $2.259 /GJ. For February, we are expecting a DERS gas rate around $2.50/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. 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 7.0 cents/kWh in January and February. December 2019 averaged about 5 cents/kWh.

If I were to pick an electricity only option today, there is nothing that really stands out, but EasyMax by Enmax 5.89 cent per kWh 1 year option 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.