February 28th, 2024

Natural gas hits highest rate in decade

By MEDICINE HAT NEWS on June 2, 2022.

Higher default pricing across Alberta has dragged Medicine Hat's natural gas to $8.70 per gigajoule, the highest it has been since 2012.--NEWS FILE PHOTO

https://www.medicinehatnews.com@MedicineHatNews

The retail price for natural gas approached $10 per gigajoule in parts of Alberta for June, according to default rates released Wednesday, dragging up the price in Medicine Hat to $8.70 per gigajoule.

That is the highest local default rate since 2012 and double the rate paid by Hatters not on fixed priced contracts.

That led to a greater call for Hat utility customers to consider signing up for the price of $4.35 for gas, as well as power, which rose as well for the month of June when both commodity prices typically drop.

City administrators addressed the high prices at the early May meeting of the utility and infrastructure meeting, where division head Brad Maynes told councillors analysts expect gas prices to stay high into next year.

“It’s really surprising prices that we’re seeing in the commodity markets, which we watch daily, and I can assure you there is no shortage of natural gas in Alberta,” he told the committee.

Instead, he said, price pressure was the result of market reaction to uncertainty facing Europe caused by conflict and tensions with major supplier Russia.

That has led to ramped up exports from the United States of liquid natural gas affecting the integrated North American market place, said Maynes.

“It’s a perception, but it’s a strong perception and it’s having a real effect on pricing,” said Maynes.

That coupled with a lack of new drilling generally in North America, which would typically ramp up in response to high prices, hasn’t provided more supply to dampen prices.

After high power prices this winter added to local bills, council directed administrators to review rate setting policy, but proposals are not expected until at least late this year.

A provincial government utility rebate program, announced in March, is still without a set timeline.

Meanwhile the price of natural gas is hitting highs previously thought unreachable.

The price has rarely risen above $5 since 2012, and averaged just $2.83 for five years between 2012 and 2017.

Before last month, the price only previously rose above $6 during a severe polar-vortex in the eastern seaboard of the United States which caused the price to double to $8.35 in February 2014, before receding again.

This month, major distributor Apex Utilities put their price to $9.36 per gigajoule, in part to help recover losses from April when its forecasting prices were low.

Two rates determine the average price where Medicine Hat puts its local default price. The other is Direct Energy’s rate, which rose to $8.04 for June. Both companies scaled back proposals to “true-up” their rate and recover previous months’ losses. That resulted in the city lowering its announced rate in May by about $2 to $6.44.

The increase comes at a time of year when natural gas prices typically fall as spring is normally a low-demand period due to warmer temperatures.

However, a larger portion of the provincial power grid is now supplied by gas-fired power plants.

Power prices also remained unseasonably high, with the local floating rate rising to 11.70 cents per kilowatt hour, up almost 15 per cent from May, thanks to higher average default prices.

The high price among major retailers was 12.07 cents in Edmonton from Epcor, and the low was Direct Energy’s offering of 10.98 cents.

The average grid price in May was 12.14 cents, which is used to determine floating rates for a small number of large industrial customers in Medicine Hat.

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