By Cameron Mitchell
Solution 105 Consulting Ltd.
“2024 COMES IN LIKE A LION”
The cold snap that Alberta experienced in January sent prices through the roof! January spot electricity rates had numerous hours at 99 cents per kWh, but ultimately settled around 16 cents per kWh for the month. February and March forward rates suggest those months will be coming in at around 12 cents per kWh and 8 cents per kWh, respectively. EPCOR’s RRO for February totals 18.315 cents per kWh.
The spot market for natural gas jumped due to the cold January weather. January’s index rates averaged roughly $3.70/GJ. Despite that, the forward market for natural gas has dropped a little further compared to last month. Short term rates are now trading under $2.00/GJ. This being the case, we suggest moving to a floating rate if your current fixed rate is above $3.30/GJ. Forward market gas rates for all of calendar 2024 are trading near $2.00/GJ, 2025 is trading around $3.10/GJ, and 2026 to 2028 are in the $3.50/GJ range.
One great feature of these fixed rate residential options is that they can be terminated at no cost if a better offer comes along.
WE RECOMMEND:
Natural Gas Only:
- Unless you have a fixed rate under $3.30/GJ, we recommend to get onto 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.
Electricity Only: The best fixed rate options:
- Empowering Communities Energy has a 10.75 cents per kWh option on three-year plan. Admin of $6.60 per month. Free termination. Deposit and PAD (Pre-Authorized Debit) required.
- Sponsor Energy has a 9.99 cents per kWh on a 5-year plan. Deposit and PAD required. Admin of $16.69 per month is very high, however. Free termination.
ATCO Energy has a 11.59 cents per kWh option on a 1-year plan. Admin of $8.99 per month. Free termination.
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 DERS floating rate for gas and the Empowering Communities Energy three-year plan for electricity as soon as possible. If rates drop or 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”. That said, February’s DERS rate is a bit inflated due to a big under-collection adjustment. More to come on that adjustment below. If you are not with these 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 recently moved their admin rate up to about $10.17 per month. And their floating rate now includes a margin of roughly 12.2 cents per GJ. Still, this is better than most floating margins, which average over $0.40 per GJ.
For February, the Direct Energy Regulated Services (“DERS”) rate is $4.430/GJ. Approximately $2.03/GJ of this figure is to recoup previous period undercharges. This very large adjustment comes on the back of the January cold snap that was experienced in Alberta, where index pricing averaged closer to $4/GJ rather than the DERS approved January rate of $2.173/GJ. If not for this large adjustment, the DERS February rate would have come in around $2.40/GJ. We expect March’s DERS rate to be approximately $2.50/GJ.
ELECTRICITY
As the forward market is suggesting electricity rates will be much higher than the current fixed rate retail offers available, we would highly recommend moving to a fixed rate offer if you are not already there.
Forward pricing currently suggests index residential rates will come in around 12 cents per kWh in February and around 8 cents per kWh in March. 2024 is trading at roughly 8.5 cents per kWh. January averaged about 16 cents/kWh on the floating index.
As the forward market is suggesting lower rates going forward, we will continue to watch the market to see if retailers drop their rates, or if an index option might become more appropriate.
If I were to pick an electricity only option today, I’d go with the three-year term with Empowering Communities Energy at 10.75 cents per kWh.
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.