By Cameron Mitchell
Solution 105 Consulting Ltd.
“TIME TO FLOAT”
As Albertans start to leave behind the dark, short days of winter and move towards longer, warmer days ahead, we are also looking for the retail energy market to start heating up… but in a good way for consumers. Forward market rates are tumbling, and we expect retailers’ rates will start to move downwards over the remainder of 2024. A few retailers have dropped their fixed rate offers a little. That said, based on where fixed rate offers are now, we think it is time for residential users to switch to a floating rate.
February spot electricity rates came in around 8.5 cents per kWh for the month. March and April forward rates suggest those months will be coming in at around 6.5 cents per kWh and 8.5 cents per kWh, respectively. EPCOR’s RRO for March totals 13.175 cents per kWh.
The spot market for natural gas averaged roughly $1.75/GJ for February. The forward market for natural gas has remained similar to last month. Short term rates are 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 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.
- Acorn Energy has a floating rate of spot plus $0.40 per GJ. The monthly admin fee is $7.35/month. Free termination. Deposit and PAD (Pre-Authorized Debit) required.
Electricity Only: Unless you have a fixed rate contract below 9 cents per kWh, it may be time to consider a floating rate:
Best floating rate options:
- Best option is Acorn Energy as their floating rate is spot plus 0.50 cents/kWh. Monthly admin fee $7.35/month. Free termination. Deposit and PAD (Pre-Authorized Debit) required.
- 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:
- Empowering Communities Energy has a 10.55 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.
Solar Club: If you have solar panels, you should start to consider the high-rate options available.
Many different UtilityNet providers have fixed 30.00 cent per kWh rates available. Acorn Energy is one of many options. Start watching for when your system is importing more than it is exporting. You will want to move to a high-rate option soon.
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 Acorn Energy floating rate for gas and the Acorn Energy 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 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 March, the Direct Energy Regulated Services (“DERS”) rate is $2.133/GJ. Approximately $0.32/GJ of this figure is to recoup previous period undercharges. We expect April’s DERS rate to be approximately $2.00/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 below 9 cents per kWh in place.
Forward pricing currently suggests index residential rates will come in around 6.5 cents per kWh in March and around 8.5 cents per kWh in April. The remainder of 2024 is trading at roughly 7.5 cents per kWh. February averaged about 8.5 cents/kWh on the floating index.
As the forward market is suggesting rates below 9 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 of 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 Acorn Energy 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.