By Cameron Mitchell
Solution 105 Consulting Ltd.
February is bringing some very cold weather in with it. Temperatures across the province are well below freezing, and Alberta’s electricity demand has recently hit a new peak as a result. The high demand has also led to floating electricity rates being over 20 cents per kWh thus far in February! (I hope everyone moved to a fixed rate!)
January electricity rates settled at around 7.7 cents per kWh for the month. February and March forward rates suggest those months’ will be coming in at around 15.0 cents per kWh and 6.5 cents per kWh respectively. The remaining calendar 2021 is expected to come in around the 6.8 cents per kWh range. As forward rates are looking high, we would recommend locking in a fixed electricity rate for your homes.
Floating natural gas rates have continued to creep upwards lately and are expected to come in around $4/GJ for February and $3/GJ for March.
- 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:
- 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 just 1 year. $7.10/month admin. Free termination.
- ATCOenergy has recently moved their rates up and now have a 6.79 cents/kWh option. Rates stable for up to 3 years. $6.99/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.
- Here are the best fixed rate options:
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 $1.00/GJ more than I might have to pay if I stuck with DERS… but that only leads to an extra cost of $100 per year. So it would appear the Three for All offer would save me about $200 per year, and lock in my rates. If something way better were to come along, I could still terminate by paying $50.
For gas, we are not seeing any super exciting residential fixed rate offers. Most offers are higher than $3.40/GJ. Short term pricing is now around $2.90/GJ, and longer term pricing is still a bit 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 $2.766 /GJ. This figure includes about $0.07/GJ to reimburse costs from last month. As actual floating rates are coming in much higher than expected for February, DERS will likely have to inflate the March rate significantly. So for March, we are expecting a DERS gas rate around $5/GJ – which would include an adjustment of about $1 to $2/GJ to recover under collections for February. 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 – even though we expect a high March rate.
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. Since the forward market is suggesting rates that are a bit higher than the current retail offers available, we would recommend moving to a fixed rate offer if you are not already there.
Forward pricing currently suggests index residential rates will come in around 15.0 cents per kWh and 6.5 cents per kWh in February and March respectively. January 2021 averaged about 7.7 cents/kWh. At this point, 2021 forward market rates suggest the year could average around 6.8 cents per kWh.
If I were to pick an electricity only option today, the 6.29 cents per kWh five year term with Encor by EPCOR 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.
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.