Making Sense of Energy

Residential Rates in Alberta: What to do? February 2020 Edition

By Cameron Mitchell

Solution 105 Consulting Ltd.

“COMING OUT OF THE COLD”

Super cold weather in January helped to push spot market electricity rates to around 14 cents per kWh for the month! Fortunately, February looks to be coming in at a much more reasonable 5 cents per kWh. March is expected to come in around 6 cents per kWh.

Floating gas rates are expected to come in around $2.00/GJ for February and March. A few energy retailers have moved their residential rates upwards a bit more – and still no new exciting offers to speak of!

One other thing to remember 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:
    • ATCOenergy has moved their rate up to 6.29 cents/kWh. Rates stable for 3 years. $6.99/month admin. Free termination. Current promo has 50% off energy rate for Nov and Dec 2020, and also a $25 anniversary credit.
    • Encor by EPCOR has a 6.29 cents/kWh option. Rates stable for 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 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:
    • 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. 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 February, the DERS rate is $2.242 /GJ. For March, we are expecting a DERS gas rate around $2.00/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 5.0 cents/kWh in February and 6.0 cents per kWh in March. January 2020 averaged about 14 cents/kWh!

If I were to pick an electricity only option today, 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.

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.