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HomeMy WebLinkAboutINS-2021-13 - 2022 Natural Gas Rates REPORT TO: Special Council DATE OF MEETING: November 30, 2021 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 15, 2021 REPORT NO.: INS-2021-13 SUBJECT: 2022 NATURAL GAS RATES ___________________________________________________________________________ RECOMMENDATION: That the supply component of the natural gas rate be increased to 16.0 cents per cubic meter from 13.5 cents per cubic meter for system gas customers of Kitchener Utilities effective January 1, 2022; and, That variable and fixed delivery rates be approved as proposed in report INS-2021-13 - Appendix A, for all Kitchener delivery customers effective January 1, 2022. BACKGROUND: Kitchener Utilities is committed to delivering natural gas rate stability for the citizens of Kitchener. We follow the Council endorsed Gas Purchase Policy for the procurement of natural gas supply. It outlines how much of our natural gas portfolio can be purchased in advance and on the market. The policy provides the ability to blend our natural gas rate with fixed and market price natural gas. The blending of fixed and market price natural gas is used to reduce volatility in prices to keep rates stable for customers. Other natural gas utilities regulated by the Ontario Energy Board purchase natural gas on the market and adjust rates quarterly, due to the volatility of natural gas. This strategy provides rates that are more reflective of market prices, but also includes more frequent rate fluctuations. Kitchener Utilities customers have indicated a preference for rate stability. Kitchener Utilities delivers rates which soften spikes in market and provides longer range rate stability. This offers customers easier and more reliable annual budgeting for energy costs. The global pandemic has also impacted the natural gas market. As the world began to shut down with the onset of the pandemic, less natural gas was needed globally. This created a market with excessive supply and declining demand. As a result, prices quickly *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. began to drop. Due to these market conditions, and along with increasing policies promoting low-carbon energy, the refinement of new natural gas supply decreased. Now as the economy is reopening, demand for natural gas is increasing but supply has not kept up with demand. This and other factors are creating a rising natural gas market. Kitchener Utilities is in a very good storage position of natural gas entering the heating season. Knowing that natural gas prices are rising, we have purchased natural gas and have delayed changing rates this fall, to hold lower rates for customers. REPORT: Kitchener Utilities natural gas rates have two components: gas supply, and gas delivery. The gas supply program is responsible for the purchase of the gas commodity and transportation of natural gas to Kitchener and is 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: Natural gas supply rate increase for system gas customers; Variable and fixed delivery rate increase as proposed in Appendix A; An average residential customer will see an overall rate increase of approx. stst $74 or 10%, for the period January 1, 2022 to December 31, 2022 with the proposed rate change. Gas Supply: The gas supply rates are impacted by natural gas supply, demand, and the weather. During the 2021 budget process the purchase price of gas was forecasted to increase in the fall of 2021. The market prices have risen sharply which is necessitating an increase to 16 cents per cubic metre into 2022. This rate increase is required projected stabilization reserve to an appropriate position. 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. The key drivers of delivery rate changes are the following: Natural gas delivery system capacity upgrades required to ensure critical minimum supply volumes are available to customers Natural gas meter purchases to meet regulatory requirements of Measurements Canada Inflationary increases to operating and capital expenditures Inflationary increases within the 2022 budget have been limited to salaries/wages and internal charges, in order to offset the impacts of the increase in natural gas costs and to limit the increase in gas rates required. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: 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 to the overall annual bill by approx. $74 for the period January 1, 2022 to December 31, 2022. This excludes the Federal Carbon Charge. Kitchener Utilities supports the Waterloo Region Energy Assistance Program. This program offers support to customers facing challenges paying their utility bills. The program is administered by the Region of Waterloo and offers support for both electricity and natural gas bills. COMMUNITY ENGAGEMENT: Kitchener Utilities will work with the Corporate Communications and Marketing Division to ensure that media outlets are provided with a press release to inform customers. An insert will be distributed with utility bills along with information will be posted on the and City website. An on-bill message will also appear on January natural gas bills. INFORM of the council meeting. ACKNOWLEDGED BY: Denise McGoldrick, General Manager, Infrastructure Services APPENDIX A CORPORATION OF THE CITY OF KITCHENER NATURAL GAS GENERAL SERVICE RATE M1 Applicability To residential and non-contract commercial and industrial customers that consume less than 50,000 m³ per year. Rate Daily Fixed Charge $ .7600 And VARIABLE DELIVERY SUPPLY COMMODITY NET RATE RATE 333 ¢/m ¢/m ¢/m 16.0000 8.0871 24.0871 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 January 1, 2022 Policy Relating to Terms of Service 1)Gas purchased under this rate schedule shall not be resold, directly or indirectly by the customer, unles 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. 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 $2.4500 And SUPPLY COMMODITY VARIABLE DELIVERY NET RATE RATE 333 ¢/m ¢/m ¢/m 16.0000 6.8523 22.8523 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 January 1, 2022 Policy Relating to Terms of Service 2)Gas purchased under this rate schedule shall not be resold, directly or indirectly by the customer, u 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. 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 m and 140,870 m. Rate 1.Bills will be rendered monthly and shall be the total of: i) A Fixed Demand Charge: 33 First 8,450 m of the daily contracted demand, 61.9000 ¢/m 33 Next 19,700 m of the daily contracted demand, 22.8000 ¢/m 333 All m over 28,150m of the daily contracted demand, 16.8000 ¢/m ii) A Variable Delivery Charge (incl. storage): 3 First 422,250 m3 delivered per month 1.5000 ¢/m 3 Next volume equal to 15 days use of CD 1.5000 ¢/m 3 Remainder of volumes delivered in the month 1.5000 ¢/m iii)A Monthly Gas Supply Charge: 3 Supply Commodity 16.0000 ¢/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¢/m for the delivery 3 and, if applicable, total gas supply rate of 16.0 ¢/m. 3 Unauthorized overrun in any month shall be paid for at the rate of 8.0871 ¢/m for the delivery and total gas supply charge for 3 system-supplied volumes at the rate of 16.0 ¢/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 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 33 volume times a rate of 2.00 ¢/m, and if applicable, a total gas supply charge of 16.0 ¢/m. In the event that the contract period exceeds one year, the annual minimum volume will be pro-rated for any part year. Effective January 1, 2022 Policy Relating to Terms of Service Gas purchased under this rate shall not be resold, directly or indirectly by the customer. 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 m and 140,870 3 m 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: i) Monthly Fixed Charge $680.00 a. and ii) Delivery Charge (incl. storage): Daily Contracted Demand Level (CD) 333 2,400 m < CD < 17,000 m 3.1539 ¢/m 333 17,000 m < CD < 30,000 m 2.7611 ¢/m 333 30,000 m < CD < 50,000 m 2.6859 ¢/m 333 50,000 m < CD < 70,000 m 2.6332 ¢/m 333 70,000 m < CD < 100,000 m 2.5955 ¢/m 333 100,000 m < CD < 140,870 m 2.5584 ¢/m iii)A Monthly Gas Supply Charge: 3 Supply Commodity 16.00000 ¢/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 8.0871 ¢/m for the delivery and total gas supply 3 charge for system-supplied volumes at the rate of 16.0 ¢/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 235.68 ¢/m³ ($60 per GJ) for the 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 an amount equal to the deficiency from the minimum 33 volume multiplied by 3.654¢/m for the delivery charge and if applicable, a gas supply charge of 16.0 ¢/m). Effective January 1, 2022 Policy Relating to Terms of Reference Gas purchased under this rate shall not be resold, directly or indirectly by the customer.