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HomeMy WebLinkAboutFIN-07-056 - Natural Gas RatesReport To: Finance & Corporate Services Committee Date of Meeting: April 23, 2007 Submitted By: Pauline Houston, General Manager of Financial Services & City Treasurer Prepared By: Loraine Baillargeon, 2532 Ward(s) Involved: All Date of Report: April 16, 2007 Report No.: FIN-07-056 Subject: NATURAL GAS RATES 1111� MEN That the supply component of the natural gas rates be increased to 31.3 cents per cubic meter from 29.9 cents per cubic meter for system gas customers of the City of Kitchener effective May 1, 2007, and f urther; That the transportation component of the natural gas rates be increased to 3.887 cents per cubic meter from 3.5213 cents per cubic meter for system gas customers of the City of Kitchener effective May 1, 2007 to reflect the interim rates charged by TransCanada Pipelines as previously approved by the National Energy Board, and further; That the delivery components of the natural gas rates be changed as proposed in Appendix A for a�: Kitchener delivery customers effective May 1, 2007. 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 has saved Kitchener customers approximately $25 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 April 1, 2007. The Ontario Energy Board ("OEB") approved Delivery rates as submitted for the Union South delivery area for implementation January 1, 2007. These rates result in a decrease in the variable Delivery rates and an increase in the Daily Fixed Charge. For most of the contract customers (large volume), there is a variable rate increase. 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 2006. 01:4 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 from $.299 to $.313 is required in our supply rate to meet the projected gas costs for this year and to ensure that our program is not in a deficit position overall. 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 increase from $0.035213/m3 to $0.03887/m3 effective May 1, 2007. 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 $0.065998 to $0.06101 while the Daily Fixed Charge will increase from $.46/day to $.53/day. FINANCIAL IMPLICATIONS: The combined impacts of the supply, transportation and delivery rates are expected to produce an increase of 4.8% or approximately $58 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. 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 May. Dwayne Quinn, P.Eng., MBA Director • Utilities Pauline Houston, CA General Manager of Financial Services & City Treasurer APPENDIX A CORPORATION OF THE CITY OF KITCHENER NATURAL GAS GENERAL SERVICE RATE Applicability To residential and non - contract commercial and industrial customers. Rate Daily Fixed Charge and $ .53 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 $17.50 per month for each additional meter so combined. This service is to assist in the administration of the blllin 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 Readlns 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 May 1, 2007 Policy Relating to Terms of Service 8) 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. 8) 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. VARIABLE COMMODITY & TRANSPORTATION NET RATE DELIVERY FUEL RATE ¢/m3 ¢/m3 ¢/m3 ¢ /m3 First 1,400 m3 6.1010 31.30 3.887 41.288 Next 4,600 m3 5.0736 31.30 3.887 40.2606 Next 1241000 m3 4.0168 31.30 3.887 39.2038 Next 270,000 m3 3.4052 31.30 3.887 38.5922 Next 400,000 m3 3.2287 31.30 3.887 38.4157 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 $17.50 per month for each additional meter so combined. This service is to assist in the administration of the blllin 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 Readlns 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 May 1, 2007 Policy Relating to Terms of Service 8) 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. 8) 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 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: a A Monthly Demand Charge First 8,450 m3 of the daily contracted demand, 45.6744 Next 19,700 m3 of the daily contracted demand, 19.8165 All m3 over 28,150m3 of the daily contracted demand, 16.4565 ii) I A Monthly Delivery Charge 1 .9291 23) A Monthly Gas Supply Rate Utility Sales Commodity &Fuel 31.30 Transportation 3.887 35.187 2. Over -run Charge Unauthorized overrun in any month shall be paid for at the rate of 41.288¢/m3 (6.1010¢/m3 for the delivery and 35.187¢/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 oven will be available September 01 through October 31, and will be paid for at the rate of 6.1010¢/m3 for the delivery and, if applicable, a gas supply rate of 35.187¢/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 1.2464¢/m3, and if applicable, a gas supply charge of 35.187¢/m3. In the event that the contract period exceeds one year, the annual minimum volume will be pro -rated for any part year. Effective May 1, 2007 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 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 $500.00 and A) Delivery Charge Daily Contracted Demand Level (CD) 4,800 m < CD ❑ 17,000 m 1.9019 17,000 m3 < CD 11 30,000 m3 1.7720 30,000 m3 < CD 11 50,000 m3 1.7037 50,000 m3 < CD 11 70,000 m3 1.6558 70,000 m3 < CD 11 100,000 m3 1.6215 100,000 m3 < CD 11 140,870 m3 1.5878 B) Gas Supply Rate Utility dales Commodity &Fuel 31.30 Transportation 3.887 35.187 2. Over -run Charge Over -run gas must be authorized by the Corporation in advance. The Corporation will not unreasonably withhold authorization. Unauthorized oven gas take in any month shall be paid for at the rate of 41.288¢/m3 (6.1010 ¢/m3 for the delivery and 35.187¢/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. Oven 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 2.2192¢/m3 for the delivery charge and if applicable, a gas supply charge of 35.187¢/m3). Effective May 1, 2007 Policy Relating to Terms of Reference Gas purchased under this rate shall not be resold, directly or indirectly by the customer.