Mild weather could ease natural gas costs for city, consumers

By MEDICINE HAT NEWS on January 21, 2023.

https://www.medicinehatnews.com@MedicineHatNews

Volatile prices for natural gas have calmed in January, the head of a city utility division told a council committee this week, and that could benefit consumers and the city’s power plant if mild weather persists.

“It’s just a function of weather, primarily,” said Brad Maynes, managing director of the city’s utility and infrastructure division.

In a regular commodity update Thursday, he told councillors that gas storage is higher than expected, both in Alberta and Europe, where fears of a shortage drove the price of gas much higher last year on world markets.

Both regions have been warmer that expected this winter.

“It could change quickly if there’s a rapid shift get to colder weather, but if it persists … that’s good news for consumers and for our power business,” said Maynes. “The price for electricity is not as severe as predicted, and a lot of that is being driven by the price disconnect (with gas, which fuels power plants).”

Maynes stated the price for gas purchases delivered in the winter has fallen to the $2 to $3 per gigajoule range. Rates of $6 were being charged in the fall and forecasted into mid-2023.

The Alberta Electrical System Operator reported on Friday that prices for power on the Alberta grid averaged $127 per megawatt hour from Jan. 12-18.

That is less than half the amount charged as a default power price by regulated utilities in the province, including the city.

Utilities set the regulated prices at the beginning of each month, then are required to adjust rates up or down in future months to “true-up” the cost to consumers.

The average for the year so far is $140 per megawatt, again, lower than the $163 average for all of 2022. The Alberta grid price ended the year near $300 per megawatt hour, or 30 cents per kilowatt hour, as extreme cold through December strained the grid, but has since dissipated.

“As a result we have natural gas trading quite a bit lower than the vast majority of the market predicted,” said Maynes, who added that long-term power prices are still predicted to remain higher than in previous years – in some cases double – but falling off after 2023.

The utility department launched a new array of fixed-rate options for gas and power customers in 2023.

The city now sets its default gas rate for consumers based on the average price of gas contracts it signs over the 120 days prior to the start of the month.

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