Market changes for utility prices won’t be noticed for months

By COLLIN GALLANT on January 28, 2023.

cgallant@medicinehatnews.com@CollinGallant

Utility prices are in flux, but it might be months before the difference shows up on bills in Medicine Hat.

Last week city utility officials signalled deep declines in market prices for natural gas were on the way thanks to a much warmer than expected winter in Western Canada and Europe.

That showed up on February rates submitted by major distributors to utility regulators this week. Similar documents show open-market power prices will remain at record highs for the month ahead, though consumers are somewhat shielded by contracts or a provincial deferral program.

Natural gas, which moved above $6 per gigajoule for most residential consumers on default contracts in January, will fall to $3.72 in February – a drop of $3 highlighted in a press release by the provincial government. It capped the price at $6.50, about 4 cents higher than the average price in January.

That decline is due to warmer weather in the northern hemisphere, higher storage and the market catching up after speculation drove prices in 2022, said Brad Maynes, the city’s top utility administrator.

“It was expected to be double and triple to what we’re seeing today when it was predicated to be much higher,” Maynes told a council committee last week.

“Though you may expect our local prices to be driven by local factors, there is always an overlay of the global markets.”

City council and two committees are now undertaking an overall rate review, which councillors promise will look at both the structure of rates and how the municipal corporation sets and uses dividends from utilities in city budgeting.

But, that comes after substantial changes to how commodity rates are set and with several new options for longer-term contract prices.

For power, the city will set its default RRO rate at the average of other default rates in the province (for February the range is between 29.68 and 32.95 cents per kilowatt hour, a record and nearly four times higher than the local fixed rate from 2022).

For gas, it calculates its default rate linking it directly to the price it pays to take gas off the Alberta system to meet peak demand.

Those contracts however, are set months in advance, meaning gas deliveries in January were secured in the early fall at forecasted prices.

That means it will take 120 days for today’s lower market prices to affect the default price in the Hat.

Local administrators say that while fixed rates may be higher or lower than default prices in any given month, it should even out over the year and present a fair price to consumers looking for a stable rate month-to-month.

A provincial program will limit customer bill charges to 13.5 cents until April, after which the difference will be charged back onto default customers’ bills over 20 months.

The United Conservative government is also highlighting its gas price cap and payments totalling $200 over four months directly onto most resident bills as it combats rising prices for consumers.

The Opposition New Democrats responded to the power price estimates for February by noting utility prices have risen steadily since the UCP formed government in 2019.

“Rather than addressing sky-high electricity prices, the UCP has kicked the can down the road until after the election,” said the party’s agriculture critic Heather Sweet. “Albertans could be faced with sticker shock in the coming months.”

20
-19