Making Sense of Energy

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

By Cameron Mitchell

Solution 105 Consulting Ltd

“STAY HEALTHY

As COVID-19 pushed electricity demand lower in Alberta, April electricity rates settled at around 3.5 cents per kWh for the month. May and June forward rates suggest those months’ will be coming in at around 4 cents per kWh. The shorter-term forward electricity market has dropped a little due to impact of COVID-19 and lower electricity demand expectations.

Floating gas rates are expected to come in around $2.10/GJ for May and June.

The government announced the option of a temporary 90-day Utility Deferral for Residential, Small Commercial Business, and Farms. These lower-use customers can defer utility payments until June 18, interest-free. However, bills will still have to be paid in full at the end of the deferral period, so it may make sense to continue to pay bills if you can.

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:
      • ATCOenergy has moved their rate up to 6.29 cents/kWh. Rates stable for 3 years. $6.99/month admin. Free termination. $25 anniversary credit.
      • Encor by EPCOR has a 6.29 cents/kWh option. Rates stable for up to 5 years. $7.00/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.
      • Direct Energy has a “one month free electricity” promotion. Fixed rate has jumped to 7.39 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:
      • 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 $1.50/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 $150 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 $3.00/GJ. Short term pricing is now around $2.00/GJ, and 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 May, the DERS rate is $2.564/GJ (this includes about $0.48/GJ to help recoup under-collections from last month). For June, we are expecting a DERS gas rate around $2.10/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. However, if you are not on a great rate plan, the forward market is suggesting rates that are a fair bit lower than the current retail offers available – so the current fixed offers are not really that great.

Forward pricing currently suggests index residential rates will come in around 4.0 cents/kWh in May and June. April 2020 averaged about 3.5 cents/kWh.

If I were to pick an electricity only option today, I might just float with ENRG Power for a few months until some better offer came along (or the floating market started to move upwards). On the fixed rate side, there is nothing that really stands out, but the 6.29 cents per kWh three year term with ATCOenergy 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.

FOR 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.