Making Sense of Energy

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

By Cameron Mitchell
Solution 105 Consulting Ltd.

“HELLO? SPRING… WHERE ARE YOU?!”

Cold weather has come back to haunt Albertans, as we start May. On the bright side, electricity prices are staying soft. April settled near 4.5 cents per kWh and May and June are expected to be in the 5.4 cent per kWh and 5.9 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 and is expected to come in around $1.30/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 May if you can. They under-collected (again!) in April, and are adding about $1.10 /GJ extra to the May 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.
    • 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. There is no rush to get on this DERS rate however, as the May rate has been set quite high (see note on that below).

For May, the DERS rate is $2.285 /GJ. This rate is a result of about $1.10 /GJ extra in the May rate due to under-collections though February to April (due to higher than anticipated rates, and high use from cold February weather). For June, 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 5.4 cents/kWh and 5.9 cents/kWh for May and June respectively. April 2019 averaged 4.5 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