By Cameron Mitchell
Solution 105 Consulting Ltd.
“THE EXCITEMENT IS BUILDING”
As Oiler fans rejoice, so too may many Albertans be smiling due to lower electricity and gas rates. Retailers continue to move their fixed rates lower and we are expecting even deeper rate drops in the months to come. Because floating spot rates are expected to beat the current fixed rate offers, our recommendation continues to be to float rather than fix. So, unless you have a great fixed rate (i.e. below 7 cents per kWh) already locked in at your home, our advice would be to move to a floating rate.
May spot electricity rates came in around 4 cents per kWh for the month. June and July forward rates suggest those months will be coming in at around 5.5 cents per kWh and 6.5 cents per kWh, respectively. The balance of 2024, and each calendar year up to 2027, is trading near 6 cents per kWh. EPCOR’s RRO for May totals 11.001 cents per kWh.
The spot market for natural gas averaged roughly $1.30/GJ for May. The forward market for natural gas has dropped slightly compared to last month. Short term rates are trading under $3.00/GJ until winter of 2025. This being the case, we suggest moving to a floating rate if your current fixed rate is above $3.00/GJ. Forward market gas rates for all of calendar 2024 are trading near $2.00/GJ, 2025 is trading around $3.00/GJ, and 2026 to 2028 are in the $3.50/GJ range.
WE RECOMMEND:
Natural Gas Only: Unless you have a longer-term fixed rate under $3.00/GJ, we recommend getting onto a floating rate.
- Direct Energy REGULATED Services. DERS. This is the default, no retailer rate. It is a floating rate. Check with your current provider to ensure there are no cancellation fees, etc. This rate is very close to spot plus $0.122 per GJ. The monthly admin fee is about $10.17/month.
- Encor by EPCOR has a floating rate of spot plus $1/GJ. The monthly admin fee is about $8.20/month.
- Electricity Only: Unless you have a fixed rate contract below 7.0 cents per kWh, it may be time to consider a floating rate:
Best floating rate options:
- Encor by EPCOR has a floating rate of spot plus 1.00 cents/kWh. The monthly admin fee is about $8.20/month.
The best fixed rate options:
- Direct Energy has an introductory offer of 7.77 cent per kWh until July 31, 2024, that then goes to 10.59 cents per kWh on a five-year plan. Admin of $12.50 per month… ouch! Free termination.
- ACE (Alberta Co-operative Energy) has a 7.69 cents per kWh option on a one-year plan. Admin of $7.99 per month. Free termination. Deposit, $25 refundable membership, and PAD (Pre-Authorized Debit) required.
AT MY HOUSE
On March 1, 2023 I moved my gas supply off the three-year renewal offer from ATCO for 5.99 cents per kWh and $3.99/GJ (and an admin fee of $6.99 per meter per month). I was told that moving my gas would not impact my fixed electricity rate or come with any gas cancellation fees, but I have heard stories from others who did not get the same feedback – so, best to double check and get something in writing.
I am now floating on DERS for gas and still with ATCO at 5.99 cents per kWh for electricity (until November 30, 2024). If I didn’t have this plan in place, I would go with a DERS or Encor by EPCOR floating rate for gas and the Encor by EPCOR floating plan for electricity as soon as possible. If something better comes along in the future, these plans can be terminated at no cost.
NATURAL GAS
The retailer offers we have seen are no better than $3.43/GJ. Short term forward market pricing is now slightly below $2.00/GJ, with 2024 expected to average around $2.00/GJ, and pricing below $3.50/GJ until winter 2025. So for gas, we recommend a floating rate. In general, a good option is to go with Direct Energy REGULATED Services (DERS)… remember “Regulated Service”. If you are not with DERS 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.
DERS has an admin fee of about $10.17 per month and their floating rate includes a margin of roughly $0.122 per GJ. Still, this is better than most floating margins which average over $0.40 per GJ.
For June, the Direct Energy Regulated Services (“DERS”) rate is $1.050/GJ. Approximately $0.31/GJ of this figure is to refund previous period overcharges. We expect July’s DERS rate will be approximately $1.30/GJ.
ELECTRICITY
As the forward market is suggesting electricity rates will be lower than the current fixed rate retail offers available, we would recommend moving to a floating rate offer this month – unless you have a fixed rate contract below 7.0 cents per kWh.
Forward pricing currently suggests index residential rates will come in around 5.5 cents per kWh in June and around 6.5 cents per kWh in July. The remainder of 2024 is trading at roughly 6 cents per kWh. May averaged about 4 cents/kWh on the floating index.
As the forward market is suggesting rates below 7 cents per kWh going forward, we will continue to watch the market to see if a fixed option might become more appropriate. Summer often can experience tightening the supply/demand balance, but so far it is looking like lower rates may prevail.
If I were to pick an electricity only option today, I’d go with the Encor by EPCOR floating plan.
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, give us a call. We are now seeing much better pricing for commercial users compared to residential users, and we can help get the lowest rates for your business.