Panel recommends increase in SaskEnergy delivery rates
The Saskatchewan Rate Review Panel (the Panel) has recommended an increase in the delivery portion of energy bills for SaskEnergy customers. On average, residential customers would see their bills increase by approximately $1.42 per month, or $17 annually. If approved by Cabinet the rate changes will take effect November 1, 2017.
SaskEnergy’s rate application proposed a 3.6% increase to the average delivery rate, which would be $1.65 per month for a residential customer. The proposed rate increase for small commercial customers would be 2.4% or $2.84 per month. Large commercial customers would go up by 3.5% or $40.00 per month, and small industrial customers would increase by 2.4% or $103.00 per month.
In its application SaskEnergy stated the need for an increase in the delivery charge is due to increased capital spending, transportation and storage costs, and an increase in net income that would allow the Company to achieve an industry comparable Return on Equity of 8.3%.
The average increase recommended by the Panel would be 2.95%. The increase for residential customers would average 3.3%, and will be made up of a $0.75 increase to the basic monthly charge, and a small increase to the volumetric charge for a total average monthly bill increase of $1.42. For the small and large commercial classes, and small industrial customers the increase would be applied to the volumetric charge.
SaskEnergy purchases natural gas from suppliers in Saskatchewan and Alberta in energy units (gigajoules) and then delivers that gas and bills it in cubic meters. Since gas from different sources has different heat values, the fixed conversion factor from gigajoules to cubic metres creates inequities for customers in different regions. Since the delivery rate also has a volumetric component, this also results in a loss or gain to the company. Billing by volume also requires SaskEnergy to forecast this conversion value far in advance of the actual delivery.
The Panel, therefore, is recommending that the company pursue measures to commence billing in heat value to ensure equity and fairness to all customers, as well as protecting the company from abnormal swings in the heat value of the gas purchased and delivered to customers.
As commented in prior reports, the Panel is concerned about the increases in Capital expenditures. Overall annual spending on Capital has gone from an average $90.0M in the 2012 to 2014 period to a forecast average $128.2M in the 2018 to 2020 period. The Panel has indicated this would have a significant impact on future rates, and must be closely monitored to ensure that these impacts are manageable.
The mandate of the Panel is to review the application and provide an opinion on the fairness of the rate adjustments requested, considering the best interests of the customer, the Crown Corporation and the public. The Panel believes these recommended rates, and the heat value recommendations, represent a fair balance of the interests of the affected parties.
