NATURAL GAS – Price takes nosedive below 80 cents
While consumers will enjoy paying 79.6¢ per gigajoule this month, prolonged periods of rock-bottom prices will be troublesome for the city’s bottom line
Natural gas prices for home heating have fallen below 80 cents in the month of May, making it the lowest price since at least the year 2000.
Since 2006, when gas surged to a record $14 per gigajoule, the city has based its local price offering on the average charged across Alberta.
That calculation this month returns a retail price to consumers of 79.6-cents, down from the price of $2.082 per gigajoule in April. The new rate is also 25 per cent below the recent record low of $1.04 from June 2016.
Such an “unprecedented low” is the result of huge supply of natural gas on North American systems, according to Jaret Dickie of the city’s utility business support office.
“Even in April spot prices were very low due to oversupply, and the forecast for May is what they see in terms of production, storage and demand,” he told the News. “Obviously, May is a (lower-use) shoulder season for loads and lower demand.
“As of today, June’s (price) forecast looks about the same.”
The price of power for homes and small- to medium-business use, as well fell for May, to about 5.5 cents per kilowatt hour.
In April a provincial price cap of 6.8 cents per kilowatt hour went into effect for the first time while the actual rate formula came in at 8.21-cents. The difference was made up to utility companies from carbon levy revenue.
While power demand, and therefore prices, are generally rising in Alberta, gas is extremely low at a time when prices should be firm after a cold winter and supplies should theoretically be low.
Coun. Phil Turnbull, chair of the utility committee, told the News he can’t recall a price for gas this low. He said like many Hatters, he only really started paying attention when it spiked several times about a decade ago.
Since then though, hydraulic fracture drilling techniques have brought on massive volumes of gas both in Canada and the United States.
“There’s a lot of gas in Western Canada and there’s no place for it to go — we’ve gone to some horrendous highs and lows,” Turnbull said Tuesday.
“It’s good for genco, not so good for NGPR,” he added, referring to the city’s power plant, which benefits from low fuel costs, as well as the Natural Gas and Petroleum Resources production unit.
He notes gas prices were fairly stable through the winter, which might be enough to offset several months of rock-bottom prices. “You can’t base the whole year on one month,” he said. “We’ve worked hard to get production costs lower, but if it stays at 80 cents, it will not be good.”
The low price of gas will benefit consumers, but how much, in a historical sense, is hard to determine.
Head-to-head comparisons are difficult because previously the city charged a higher rate for the first gigajoule to account for service fees, then a lesser per gigajoule rate up to certain hurdles.
City officials told the News they expect power prices to top the 6.8-cent mark at least one more time this year, based on current price forecasting.
That could likely occur when demand surges in the summer months of July or August, said Dickie.