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Home My WebLink AboutFIN-06-006 - Natural Gas Rates ) db KITCHENER Financial Services ~ Report To: Date of Meeting: Submitted By: Prepared By: Ward(s) Involved: Date of Report: Report No.: Subject: Finance & Corporate Services Committee March 6, 2006 Pauline Houston, General Manager of Financial Services & City Treasurer Loraine Baillargeon, 2532 All February 28, 2006 FIN-06-006 NATURAL GAS RATES RECOMMENDATION: That, the supply component of the natural gas rates be increased to 31.9 cents per cubic meter from 27.7 cents per cubic meter for system gas customers of the City of Kitchener effective April 1 ,2006; That, the transportation component of the natural gas rates be decreased to 3.529 cents per cubic meter from 4.076 cents per cubic meter for system gas customers of the City of Kitchener effective April 1, 2006 to reflect the interim rates charged by TransCanada Pipelines as previously approved by the National Energy Board; BACKGROUND: That, the delivery components of the natural gas rates be changed as proposed in Appendix A for all Kitchener delivery customers effective April 1 , 2006; Kitchener Utilities began a gas supply program in April 1998 to arrange supply for Utilities' customers who did not choose to buy from a gas marketer. The program was initiated with the goals of mitigating the impact of the natural gas price volatility and eliminating retroactive billing that had become common place with our past provider. Our system gas program uses a disciplined economic approach to secure natural gas contracts in a portfolio to strive for a low risk, reasonable cost alternative to the current retail offerings. The supply program is a cost-based service and does not cross-subsidize with other Utilities profits. Since the beginning of the supply program, we have been able to keep rates at some of the lowest levels in Ontario. In fact, the program is projected to save Kitchener customers over $31 million since 1998 versus the previous supply arrangements. We continue to mitigate the risk of price volatility through management of the portfolio, contracting for fixed prices for a majority of the volumes of gas required TransCanada Pipelines applied to the National Energy Board and received approval for interim rates to be effective March 1,2006. The Ontario Energy Board ("OEB") approved Delivery rates as submitted for the Union South delivery area for implementation January 1,2006. These rates result in a decrease in the variable Delivery rates. For most of the contract customers (large volume), there is a variable rate decrease. The ultimate impact will be based on a customer's consumption. There will also be various rate changes to the City's wholesale rate. These rates were last changed in April 2005. REPORT: The natural gas commodity markets continue to be very volatile. A large part of our portfolio is at fixed prices and we continue to pursue buying opportunities that would keep our supply rate constant. An increase is required in our supply rate to meet the projected gas costs for this year. In order to uphold the historical practice of establishing the transportation component of our natural gas rates by using the National Energy Board ("NEB") approved rate for TransCanada Pipelines tolls, the Transportation component of our Natural Gas Rates will decrease from $0.04076/m3 to $0.03529/m3 effective April 1, 2006. The City's past practice has been to match the base Delivery rates approved by the Ontario Energy Board ("OEB") for use by Union Gas in the Southern delivery area. The OEB approved the rates on the attached Rate Schedules for implementation in the Union South area during a rate freeze period for Kitchener customers. This is the first opportunity to propose the implementation that would not cause undue confusion to our customers. The variable delivery rate will decrease from $0.067316 to $0.065998. FINANCIAL IMPLICATIONS: The combined impacts of the supply, transportation and delivery rates are expected to produce an increase of 7.8% or approximately $92 per year for the average residential customer. In all estimations, we use a 2600 m3 annual consumption as an average residential customer consumption. The impact on large volume and contract customers will depend upon their consumption and contract demand parameters. COMMUNICATIONS: The Utilities Division will work with the Communications Division to ensure that media are provided with a media release to inform our customers and an insert is being prepared to be distributed with utility bills in April. Dwayne Quinn, P.Eng., MBA Director of Utilities Pauline Houston, CA General Manager of Financial Services & City Treasurer APPENDIX A CORPORATION OF THE CITY OF KITCHENER NA TURAL GAS GENERAL SERVICE RATE Aoolicabilitv To residential and non-contract commercial and industrial customers. Rate Daily Fixed Charge and $ .46 VARIABLE COMMODITY & TRANSPORTATION NET RATE DELIVERY FUEL RATE It/m3 It/m3 It/m3 It/m3 First 1,400 m3 6.5998 31.90 3.529 42.0288 Next 4,600 m3 4.9849 31.90 3.529 40.4139 Next 124,000 m3 3.7928 31.90 3.529 39.2218 Next 270,000 m3 3.0572 31.90 3.529 38.4862 Next 400,000 m3 2.9133 31.90 3.529 38.3423 Suoolemental Service to Commercial and Industrial Customers Under Grouo 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 $17.50 per month for each additional meter so combined. This service is to assist in the administration of the !ill!i!!g 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 Readim!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 Company, such as strikes or non-access to a meter. The Company may estimate the monthly consumption between the meter readings and render a monthly bill to the customer. Effective April 1, 2006 Policv Relatim! 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. CORPORATION OF THE CITY OF KITCHENER NA TURAL GAS FIRM INDUSTRIAL AND COMMERCIAL CONTRACT RATE Aoolicabilitv 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: wi i) Demand Char e 8,450 m3 of the daily contracted demand, 19,700 m3 of the daily contracted demand, 28, 150m3 of the daily contracted demand, 46.9922 17.5809 13.8932 ii) 1 A Monthly Delivery Charge .74921 iii) A Monthly Gas Supply Rate Utilit Sales Commodity & Fuel Transportation 31.90 3.529 35.429 2. Over-run Charge Unauthorized overrun in any month shall be paid for at the rate of 42.0288<t/m3 (6.5998<t/m3 for the delivery and 35.429<t/m3 for all gas supply volumes purchased). Authorized overrun gas is available provided that it is authorized by the Corporation in advance. The Corporation will not unreasonably withhold authorization. Authorized overrun will be available September 01 through October 31, and will be paid for at the rate of 6.5998<t/m3 for the delivery and, if applicable, a gas supply rate of 35.429<t/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 .9973<t/m3, and if applicable, a gas supply charge of 35.429<t/m3. In the event that the contract period exceeds one year, the annual minimum volume will be pro-rated for any part year. Effective April 1, 2006 Policv Relatinl! 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 NA TURAL GAS INTERRUPTIBLE INDUSTRIAL AND COMMERCIAL CONTRACT RATE Aoolicabilitv 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 and $500.00 wi A) Delivery Charge Dailv Contracted Demand Level (CD) 4,800 m3 ~ CD 0 17,000 m3 1.8368 17,000 m3 ~ CDO 30,000 m3 1. 7069 30,000 m3 ~ CD 0 50,000 m3 1.6386 50,000 m3 ~ CD 0 70,000 m3 1.5907 70,000 m3 ~ CDO 100,000 m3 1.5564 100,000 m3 ~ CDO 140,870 m3 1.5227 B) Gas Supply Rate Utility Sales Commodity & Fuel Transportation 2. Over-run Charge Over-run gas must be authorized by the Corporation in advance. The Corporation will not unreasonably withhold authorization. Unauthorized overrun gas take in any month shall be paid for at the rate of 42.02881t/m3 (6.5998 It/m3 for the delivery and 35.4291t/m3 for all gas supply volumes purchased). 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 2.08491t/m3 for the delivery charge and if applicable, a gas supply charge of 35.4291t/m\ Effective April 1, 2006 Policv Relatinl! to Terms of Reference Gas purchased under this rate shall not be resold, directly or indirectly by the customer. 90-1f?VV 90-J?VV 90- u? {' 90-/1 0 N 90- deS 90-ln{' 90-1f?VV 90-J?VV 9 O-U? 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