HomeMy WebLinkAboutINS-15-067 - Natural Gas Rates Staff Rport
I r rc'.�► t .R Infrastructure Services Department wmkitchener.ca
REPORT TO: Finance and Corporate Services Committee
DATE OF MEETING: October 19, 2015
SUBMITTED BY: Wally Malcolm, Director of Utilities, 519-741-2600 ext 4538
PREPARED BY: Wally Malcolm, Director of Utilities, 519-741-2600 ext 4538
WARD(S) INVOLVED: All
DATE OF REPORT: October 2, 2015
REPORT NO.: INS-15-067
SUBJECT: NATURAL GAS RATES
RECOMMENDATION:
That the supply component of the natural gas rates be decreased to 10.5 cents
per cubic meter from 19.0 cents per cubic meter for system gas customers of the
City of Kitchener effective November 1, 2015; and,
That the transportation component of the natural gas rate be increased to 4.0
cents per cubic meter from 3.0 cents per cubic meter for system gas customers
of the City of Kitchener effective November 1, 2015; and
That the delivery components of the natural gas rates be changed as proposed in
INS-15-067 - Appendix A for all Kitchener delivery customers effective November
1, 2015.
BACKGROUND:
Kitchener Utilities began its natural gas supply program in April 1998 to arrange natural
gas supply for Kitchener Utilities' customers who did not choose to buy natural gas from
a marketer. The program was initiated with the goals of mitigating the impact of the
natural gas price volatility and eliminating retroactive billing; which had become
commonplace with the past provider, Union Gas. The revised Natural Gas Purchase
Policy will continue with these goals along with moving the natural gas supply rate
closer to the natural gas market rate.
The system natural gas program uses a disciplined economic approach to secure
natural gas contracts in a portfolio. The supply and transportation programs are cost-
based services and do not cross-subsidize with other Kitchener Utilities programs.
***This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
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REPORT:
Natural gas rates are set annually, based on customer preference for rate stability.
Natural gas rates are impacted by supply, demand, and weather. Kitchener Utilities
natural gas rates have three components, gas supply, gas transportation, and gas
delivery.
Gas supply rate is the charge for the natural gas commodity, fuel, and administration.
The gas supply rate is determined based on committed gas purchases, forecast
consumption, overhead, and gas inventory carryover. The total dollar value is divided by
the forecast consumption to determine the rate required to recover the costs.
Projected results compared to budget will be affected by the proposed rate change, as
the supply budget rate is higher than the proposed supply rate. Lower natural gas
market prices during the past year have contributed to the decrease. Currently, the
budget is favourably affected, as actual costs are lower than the revenue received. The
proposed rate decrease is required to bring the program's projected stabilization
reserve to an appropriate position at the end of the upcoming winter season.
The natural gas purchase policy approved last year, to yield a more market responsive
price for the system natural gas supply portfolio, has resulted in greater rate volatility
and variances from budget.
Gas transportation rate is the rate charged to bring gas supply purchased to Ontario.
Projected results compared to budget will be affected by the proposed rate change, as
the transportation budget rate is lower than the proposed transportation rate. Currently,
the budget is negatively impacted, as actual costs are higher than the revenue received.
The proposed rate increase is required to bring the program's projected stabilization
reserve to an appropriate position at the end of the upcoming winter season.
Gas delivery rates are the rates charged for delivering gas to the customer's meter. This
includes transmission within Ontario, storage costs, pipeline infrastructure,
maintenance, meter reading, and bill processing. There are two components to the
delivery charges, a daily fixed charge, and a variable rate. Currently, the variable
delivery rate for M1 customers with annual volume consumption up to 50,000 cubic
meters has three tiers based on volume consumed. The proposed variable delivery rate
for M1 customers collapses the three tiers to a single tier providing a revenue neutral
impact to the City. The collapsing of rate tiers is favourable to the average residential
customer.
The delivery components of the proposed natural gas rates are shown in Appendix A.
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.
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FINANCIAL IMPLICATIONS:
The combined impacts of the supply, transportation, and delivery rates are expected to
produce a decrease of 18% or approximately $160 annually for the average residential
system gas customer using 2,100 m3 of natural gas in a calendar year.
COMMUNITY ENGAGEMENT:
INFORM — This report has been posted to the City's website with the agenda in
advance of the council / committee meeting.
CONCLUSION:
Kitchener Utilities will work with the Communications Division to issue a media release
to inform customers of the new rates, an insert will be distributed with n November utility
bills, an alert will be printed on bill envelopes regarding rate changes, and notices will
be posted in the paper and on our website.
ACKNOWLEDGED BY: Dev Tyagi, Deputy CAO, Infrastructure Services
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APPENDIX A
CORPORATION OF THE CITY OF KITCHENER
NATURAL GAS
GENERAL SERVICE RATE Ml
Applicability
To residential and non-contract commercial and industrial customers that consume less than 50,000 m3/year.
Rate
Daily Fixed Charge $0.73
and
VARIABLE DELIVERY RATE COMMODITY TRANSPORTATION NET RATE
¢/m3 ¢/m3 ¢/m3 ¢/m3
7.1543 10.5 4.0 21.6543
Supplemental Service to Commercial and Industrial Customers under Group Meters
Combination of readings from several meters may be authorized where meters are located on contiguous pieces of property of
the same owner not delivered by a public right-of-way. In such cases, an additional service charge shall be rendered each
month in the amount of$15.00 per month for each additional meter so combined. This service is to assist in the administration
of the hg!ing for multiple meters on the same property. It does not contemplate amalgamating the consumption readings for
the purpose of qualifying for lower delivery rates.
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
November 1,2015
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 gas is temporarily disconnected shall pay for disconnection and
reconnection.
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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 $2.30
and
VOLUME VARIABLE COMMODITY TRANSPORTATION NET RATE
DELIVERY
RATE
o/m3 o/m3 o/m3 o/m3
First 1,000 m3 6.6466 10.5 4.0 21.1466
Next 6,000 m3 6.5677 10.5 4.0 21.0677
Next 13,000 m3 6.3326 10.5 4.0 20.8326
All over 20,000 m3 6.0505 10.5 4.0 20.5505
Supplemental Service to Commercial and Industrial Customers under Group Meters
Combination of readings from several meters may be authorized where meters are located on contiguous pieces of property of
the same owner not delivered by a public right-of-way. In such cases, an additional service charge shall be rendered each
month in the amount of$15.00 per month for each additional meter so combined. This service is to assist in the administration
of the hg!jag for multiple meters on the same property. It does not contemplate amalgamating the consumption readings for
the purpose of qualifying for lower delivery rates.
Meter Readin!s
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
November 1,2015
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.
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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 as follows:
Between 4,800 m3 and 140,870 m3.
Rate
1. Bills will be rendered monthly and shall be the total of:
i) A Monthly Demand Charge
First 8,450 m3 of the daily contracted demand, 45.90
Next 19,700 m3 of the daily contracted demand, 19.80
All m3 over 28,150m3 of the daily contracted demand, 16.80
ii) A Monthly Delivery Charge
First 422,250 m3 delivered per month 0.4
Next volume equal to 15 days use of daily contracted demand 0.4
For remainder of volumes delivered in the month 0.4
iii) A Storage Charge
All volumes 0.4
Note: For billing purposes,"Storage"component is added to "Monthly Delivery Charge".
iv) A Monthly Gas Supply Rate
Utility Sales
Commodity&Fuel 10.5
Transportation 4_0
14.5
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.
Authorized overrun will be available April 1 through October 31, and will be paid for at the rate of 2.0640 ¢/m3 for the
delivery and,if applicable, a gas supply rate of 14.5¢/m3.
Unauthorized overrun in any month shall be paid for at the rate of 6.6466¢/m3 for the delivery and total gas supply charge
for system-supplied volumes at the rate of 14.5¢/m3.
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 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
volume times a rate of 4.5¢/m3, and if applicable, a gas supply charge of 14.5¢/m3.
In the event that the contract period exceeds one year,the annual minimum volume will be pro-rated for any part year.
Effective
November 1,2015
Policy Relating to Terms of Service
Gas purchased under this rate shall not be resold, directly or indirectly by the customer.
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CORPORATION OF THE CITY OF KITCHENER
NATURAL GAS
INTERRUPTIBLE INDUSTRIAL AND COMMERCIAL CONTRACT RATE—M5
Applicability
To a Customer who:
A) enters into a contract for a minimum term of one year that specifies a daily contracted demand between 4,800 m3 and
140,870 m3 inclusive.
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:
Monthly Fixed Charge $560.00
and
A) Delivery Charge
Daily Contracted Demand Level(CD)
4,800 m3 < CD 11 17,000 m3 2.2039
17,000 m3 < CD 11 30,000 m3 2.0611
30,000 m3 < CD 11 50,000 m3 1.9859
50,000 m3 < CD 11 70,000 m3 1.9332
70,000 m3 < CD 11 100,000 m3 1.8955
100,000 m3 < CD 11 140,870 m3 1.8584
B) Storage Charge
Storage 0.2
Note: For billing purposes,"Storage"component is added to"Delivery Charge".
C) Gas Supply Rate
Utility Sales
Commodity&Fuel 10.5
Transportation 4.0
14.5
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 105% of contracted daily demand.
Authorized overrun will be available April 1 through October 31, and will be paid for at the rate of 2.0640 ¢/m3 for the
delivery and,if applicable, a gas supply rate of 14.5¢/m3.
Unauthorized overrun in any month shall be paid for at the rate of 6.6466¢/m3 for the delivery and total gas supply charge
for system-supplied volumes at the rate of 14.5¢/m3.
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 which will not be less than 700,000 m3 per annum. 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 an
amount equal to the deficiency from the minimum volume times 4.5¢/m3 for the delivery charge and if applicable, a gas
supply charge of 14.5¢/m3).
Effective
November 1,2015
Policy Relating to Terms of Reference
Gas purchased under this rate shall not be resold, directly or indirectly by the customer.
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