Panel recommends overall decrease in SaskEnergy rates and change to billing based on Heat Value
The Saskatchewan Rate Review Panel (the Panel) has recommended an overall decrease in energy bills for SaskEnergy customers. On average, residential customers would see their bills decrease by approximately $2 per month, or $28 annually. If approved by Cabinet the rate changes will take effect November 1, 2016.
SaskEnergy’s rate application proposed a 14% DECREASE to the overall commodity rate, combined with an 8.6% INCREASE in the delivery rate. The combined effect of these changes would be an average reduction of approximately 3% for an average residential customer.
In its application SaskEnergy stated that the decrease in the commodity rate reflects the continued decrease in the market price of natural gas, while the increased delivery charge is due to increased capital spending, transportation and storage costs, and also an increase in net income that would allow the Company to achieve an industry comparable Return On Equity.
SaskEnergy proposed to implement a heat cost variance account, which would allow the company to recover losses from customers or refund gains to customers due to the varying amount of heat value of natural gas from different sources. SaskEnergy purchases natural gas from suppliers in Saskatchewan and Alberta in energy units (gigajoules) and then delivers that gas and bills it in cubic metres. 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 value far in advance of the actual delivery. The proposed heat cost variance account would allow SaskEnergy to adjust for these differences between the forecast and the actual heat value.
The Panel’s recommendations include the following:
- The Panel recommends that the Commodity Rate be reduced by 13%, rather than the 14% proposed, subject to using a higher conversion factor for Heat Value
- The Panel recommends that the Delivery Rate increase be approved at 8.6%, subject to the same Heat Value factor used in the Commodity Rate
- The Panel recommends that the proposed heat cost variance account not be approved.
