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Home My WebLink AboutINS-20-016 - Natural Gas RatesREPORT TO:Community & Infrastructure Services Committee DATE OF MEETING:October 19, 2020 SUBMITTED BY:Greg St. Louis,Director of Utilities, 519-741-2600 ext. 4538 PREPARED BY:Greg St. Louis, Director of Utilities, 519-741-2600 ext. 4538 WARD(S) INVOLVED:All DATE OF REPORT:October 8, 2020 REPORT NO.:INS-20-016 SUBJECT:NATURAL GASRATES ___________________________________________________________________________ RECOMMENDATION: That Kitchener Utilities’ natural gas rates be approvedas proposed in report INS- 20-016 - Appendix A, for all Kitchener delivery customers effective November 1, 2020. BACKGROUND: Kitchener Utilities provides safe, reliable and economical natural gas. A balanced approach to mitigate rate risks and provide rate stability for the gas supply program is followed. Kitchener Utilities natural gas rates have twocomponents: gas supply,andgas delivery.The gas supply program is responsible for the purchase of the gas commodity and transportation of natural gas to Kitchener andis a pass-through cost program. The delivery program is responsible for delivery of natural gas to customers. This includes billing, meter reading, capital, maintenance and operating costs of the distribution system. The following are key highlights of this natural gas rate change report: Kitchener Utilities is able to keep the natural gas supply rate stable at the current rate forsystem gas customers; The delivery components of the proposed natural gas ratesarerecommended to change as proposed in Appendix A; An average residential customer will see an overall rate increase of less than stst a dollar per monthor 1.5%, for the period November 1, 2020to October 31, 2021 with the proposed rate change. REPORT: Kitchener Utilities’ natural gas rates are set annuallyin October to provide certainty to gas consumers on natural gas rates as the heating season begins.There are two components associated with natural gas rates – gas supply and gas delivery. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 4 - 1 Gas Supply: The gas supply rates are impacted by natural gas supply, demand, and the weather.The purchase price of gas was forecastedto increase in 2020. Based on this, the gas supply rate wasprojectedto increase from 13.50 cents to 13.51 cents per cubic metreduring the 2020budgetprocess.However,demand of naturalgas in North America decreased lowering the cost to purchasegas. As a result, staff were able to secure natural gas at a lower priceand the associated savings are passed along to Kitchener Utilities customers with natural gas supply rate being held constant at the current rate of 13.5cents per cubic metreinto 2021. Gas Delivery: There are two components to the delivery charges: a daily fixed charge, and a variable rate. There are four Delivery Rate Groups: M1, M2, M4 and M5. These rates service customers of different volumetric requirements. The delivery components of the proposed natural gas rates are shown in Appendix A. As illustrated in Appendix A, the fixed rate per day remains unchanged.There is a requirement to raise the delivery M1, (residential)rate by 0.5 cents per cubic metre from 33 20.5871 cents per mto 21.0871cents per m,representing approximately 1.5% net impactto customers in the M1 system gas Rate Group.In addition, there is a requirement to increase M4 rate (Firm Industrial & Commercial Contract) fixeddemand charge from 52.9 cents per cubic meter to 56.9 cents per cubic meter. This is on the first 8,450 cubic meters of gas.This will impact five industrial and one commercial customer. The key drivers of delivery rate changes are the following: Gas delivery system capacity upgrades required to ensure critical minimum supply volumes are available to customers Gas meter purchases to meet regulatory requirements of Measurements Canada Inflationary increasesto operating and capital expenditures Measures to offset these impacts include holding maintenance programs at 2020 funding levels, reductions in marketing, efficiencies intraining, anddrawingfrom the gas capital reserve to address 2021and 2022capital pressures. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The recommendation of this report supports the achievement of the city’s strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: For an average system gas residential (M1) customer consuming 2,100 cubic meters annually, the proposed natural gas rates result in an increase tothe overall annual bill by $10.50 for the period November 1, 2020to October 31, 2021. The Government of Ontario is making funding available tosupport eligible residential, small business and charitable organization customers struggling to pay their energy bills as a result of COVID-19. COVID-19 Energy Assistance Programs is being delivered 4 - 2 directly by Kitchener Utilities following therules andprogram criteria laid out by the Ontario Energy Board (OEB). The program provides a one time, on-bill credit to eligible electricity and natural gas customers to help them catch up on their energy bills and resume regular payments. COMMUNITY ENGAGEMENT: Kitchener Utilities will work with the Corporate Communicationsand MarketingDivision to ensure that media outlets are provided with a press release to inform customers. An insert is being prepared to be distributed with utility bills in Novemberand information will be posted ontheKitchener Utilities’ and City website. An on-bill message will also appear on Novembernatural gas bills. INFORM – This report has been posted to the City’s website with the agenda in advance of the councilmeeting. ACKNOWLEDGED BY: Denise McGoldrick,General Manager, Infrastructure Services 4 - 3 APPENDIX A CORPORATION OF THE CITY OF KITCHENER NATURAL GAS GENERAL SERVICE RATEM1 Applicability To residential and non-contract commercial and industrial customersthat consume less than 50,000 m³ per year. Rate Daily Fixed Charge$ .7300 And VARIABLE DELIVERY SUPPLY COMMODITY NET RATE RATE 333 ¢/m¢/m¢/m 13.50007.587121.0871 Meter Readings Gas consumption by each customer under this rate schedule shall be determined by periodic meter readings, provided that in circumstances beyond the control of the Corporation, such as strikes or non-access to a meter,The Corporation may estimate the monthly consumption between the meter readings and render a monthly bill to the customer. Effective November1, 2020 Policy Relating to Terms of Service 1)Gas purchased under this rate schedule shall not be resold, directly or indirectly by the customer,unless resold as “motor vehicle fuel gas”, as that term is defined in Ontario Regulation 805/82. 2)Customers who temporarily discontinue service during any twelve consecutive months without payment of the monthly fixed charge for the months in which the gasis temporarily disconnected shall pay for disconnection and reconnection. 4 - 4 CORPORATION OF THE CITY OF KITCHENER NATURAL GAS GENERAL SERVICE RATE – M2 Applicability To residential and non-contract commercial and industrial customers that consume 50,000 m³ and more per year. Rate Daily Fixed Charge $2.3000 And SUPPLY COMMODITY VARIABLE DELIVERY NET RATE RATE 333 ¢/m¢/m¢/m 13.50006.437319.9373 Meter Readings Gas consumption by each customer under this rate schedule shall be determined by periodic meter readings, provided that in circumstances beyond the control of the Corporation, such as strikes or non-access to a meter,The Corporation may estimate the monthly consumption between the meter readings and render a monthly bill to the customer. Effective November1, 2020 Policy Relating to Terms of Service 2)Gas purchased under this rate schedule shall not be resold, directly or indirectly by the customer, unless resold as “motor vehicle fuel gas”, as that term is defined in Ontario Regulation 805/82. 3)Customers who temporarily discontinue service during any twelve consecutive months without payment of the monthly fixed charge for the months in which the gas is temporarily disconnected shall pay for disconnection and reconnection. 4 - 5 CORPORATION OF THE CITY OF KITCHENER NATURAL GAS FIRM INDUSTRIAL AND COMMERCIAL CONTRACT RATE – M4 Applicability To a customer who enters into a contract for a minimum term of one year, that specifies a daily contracted demand (CD)as follows: 33 Between 2,400 mand 140,870 m. Rate 1.Bills will be rendered monthly and shall be the total of: i)AFixed Demand Charge: 33 First8,450 mof the daily contracted demand,56.9000¢/m 33 Next19,700 mof the daily contracted demand,19.8000¢/m 333 All mover28,150mof the daily contracted demand,16.8000¢/m ii)A Variable Delivery Charge(incl. storage): 3 First 422,250 m3 delivered per month1.4000 ¢/m 3 Next volume equal to 15 days use of CD1.4000 ¢/m 3 Remainderof volumes delivered in the month1.4000 ¢/m iii)A Monthly Gas Supply Charge: 3 Supply Commodity 13.5000¢/m 2.Over-run Charge Authorized overrun gas is available provided that it is authorized by the Corporation in advance.The Corporation will not unreasonably withhold authorization.Overrun means gas taken on any day in excess of 103% of contracted daily demand. 3 Authorized overrun will be available April 1 through October 31, and will be paid for at the rate of 3.271¢/mfor the delivery 3 and, if applicable, totalgas supply rate of 13.5¢/m. 3 Unauthorized overrun in any month shall be paid for at the rate of 7.5871¢/mfor the delivery and total gas supply charge for 3 system-suppliedvolumes at the rate of 13.5¢/m. 3.Minimum Annual Charge In each contract year, the customer shall purchase from the Corporation or pay for a minimum volume of gas equivalent to 150days use of contracted demand.Overrun gas volumes will not contribute to the minimum volume.In the event that the customer shall not take such minimum volume, the customer shall pay an amount equal to the deficiency from the minimum 33 volume times a rate of2.00¢/m, and if applicable, a total gas supply charge of 13.5¢/m. In the event that the contract period exceeds one year, the annual minimum volume will be pro-rated for any part year. Effective November1, 2020 Policy Relating to Terms of Service Gas purchased under this rate shall not be resold, directly or indirectly by the customer. 4 - 6 CORPORATION OF THE CITY OF KITCHENER NATURAL GAS INTERRUPTIBLE INDUSTRIAL AND COMMERCIAL CONTRACT RATE – M5 Applicability To a Customer who: 3 A) Enters into a contract for a minimum term of one year that specifies a daily contracted demand between 2,400 mand 140,870 3 minclusive and, B) Has an alternate fuel supply and combustion system available. Rate 1.The price of all gas delivered shall be determined on the basis of the following schedules: i)Monthly Fixed Charge $620.00 a.and ii)Delivery Charge (incl. storage): Daily Contracted Demand Level (CD) 333 2,400 m<CD <17,000 m3.0539¢/m 333 17,000 m<CD <30,000 m2.7611¢/m 333 30,000 m<CD <50,000 m2.6859¢/m 333 50,000 m<CD <70,000 m2.6332¢/m 333 70,000 m<CD<100,000 m2.5955¢/m 333 100,000 m<CD <140,870 m2.5584¢/m iii)A Monthly Gas Supply Charge: 3 Supply Commodity 13.50000¢/m 2.Over-run Charge Overrun gas is available provided that it is authorized by the Corporation in advance. The Corporation will not unreasonably withhold authorization.Overrun means gas taken on any day in excess of 105% of contracted daily demand. 3 Unauthorized overrun gas taken in any month shall be paid for at the rate of 7.5871¢/mfor the delivery and total gas supply 3 charge for system-suppliedvolumes at the rate of 13.5¢/m. Unauthorized Overrun Non-Compliance Rate: Unauthorized overrun gas taken any month during a period when a notice of interruption is in effect shall be paid for at the rate of 235.6800 ¢/m³ ($60 per GJ) forthe delivery. 3.Minimum Annual Charge In each contract year, the customer shall purchase from the Corporation or pay for a minimum volume of gas equivalent to 150 days use of contracted demand.Overrun volumes will not contribute to the minimum volume.In the event that the customer shall not take such minimum volume, the customer shall pay anamount equal to the deficiency from the minimum 33 volume multiplied by3.654¢/mfor the delivery charge and if applicable, a gas supply charge of 13.5¢/m). Effective November1, 2020 Policy Relating to Terms of Reference Gas purchased under this rate shall not be resold, directly or indirectly by the customer. 4 - 7