Residential Energy Rates in Alberta: What to do? May 2022

By Cameron Mitchell

Solution 105 Consulting Ltd.

“FIX YOUR HOME UTILITY RATES”

High spot and forward market energy rates continue to dominate the news. April electricity rates settled around 12 cents per kWh for the month. May and June forward rates suggest those months’ will be coming in at around 11 cents per kWh. Balance of 2022 is presently in the 12 cent per kWh range. We highly recommend locking in a fixed electricity rate for your homes if you have not done so already. Retailers have started to increase their fixed rates, but the options are still better than floating.

The forward market for natural gas has continued to edge upwards – fueled by uncertainty in Russia/Ukraine and higher demand for non-Russian energy. Gas rates are expected to come in just over $7/GJ for May and June. Balance of calendar 2022 is trading around $7.60/GJ. This being the case, we highly recommend locking in a fixed rate for gas. Rates for calendar 2023 have jumped substantially to $5.70/GJ and 2024 to 2027 are in the $4.40/GJ range.

WE RECOMMEND:

Natural Gas Only: The best fixed rate option:

  • Encor by EPCOR $4.39/GJ on a five-year plan. Admin of $7.00 per month. Free termination.

Electricity Only: The best fixed rate option:

  • Encor by EPCOR has a 7.79 cents/kWh option. Rates stable for 5 years. $7.00/month admin. Free termination

AT MY HOUSE

I am currently on a 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). As there are no better options available at this time, I will stay with ATCO at my house.

If I didn’t have this plan in place, I would 100% go with the five-year Encor by EPCOR plan for electricity and gas as soon as possible. If rates drop or something better comes along in the future, the contracts can be terminated at no cost.

NATURAL GAS

Short-term pricing sits in the $7/GJ range, with the remainder of 2022 expected to land near $7.60/GJ. With that in mind, we highly recommend moving to a fixed rate. The Encor by EPCOR plan at $4.39/GJ is the best option we’ve found.

For May, the Direct Energy Regulated Services (“DERS”) default rate is $6.399 /GJ. Approximately $2.31/GJ of this figure is to recoup from previous undercharges. May’s rate would have been a further $1.84/GJ higher, but there was a $6,500,000 carry forward balance to alleviate what we believe would have been a severe natural gas rate shock for Albertans. If DERS plans to continue to carry forward a large balance, June’s DERS rate is likely to land just under $6.50/GJ. If they don’t, then the DERS rate will likely be upwards of $8/GJ.

ELECTRICITY

As the forward market is suggesting electricity rates will be 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 11 cents per kWh for May and June. April averaged about 12 cents/kWh. At this point, the forward market rates suggest the balance of the 2022 calendar year could average around 12 cents per kWh.

If I were to pick an electricity only option today, the five-year term with Encor by EPCOR is the obvious choice – even though they recently bumped it to 7.79 cents per kWh. It has a $7.00/month admin fee, and free termination.

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 no longer seeing better pricing for commercial users compared to residential users, but we can still help get the lowest rates for your business.