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HomeMy WebLinkAboutFIN-08-029 - Natural Gas RatesILREPORT Report To: Finance & Corporate Services Committee Date of Meeting: March 3, 2008 Submitted By: Pauline Houston, General Manager of Financial Services & City Treasurer Prepared By: Loraine Baillargeon, 2532 Ward(s) Involved: All Date of Report: February 27, 2008 Report No.: FIN -08 -029 RECOMMENDATION: Eiubject: NATURAL GAS RATES That, the supply component of the natural gas rates be decreased to 28.0 cents per cubi meter from 31.3 cents per cubic meter for system gas customers of the City of Kitchene effective April 1, • That, the transportation component of the natural gas rates be increased to 4.114 cents per • from i i cents per • for gas customers of of Kitchener effective April 1, 2008 to reflect the interim rates charged by TransCanada Pipelines as previously approved by the National Energy Board; That, the delivery components of the natural gas rates be changed as propos e- d- in Appendix A for all Kitchener delivery customers effective April 1, 2008; 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 ("NEB") and received approval for interim rates to be effective January 1, 2008. The Ontario Energy Board ("OEB") has not issued its decision on the final rates application as submitted and approved for the Union South delivery area for implementation April 1, 2008. It is expected that the Order will be issued based on industry support for the changes. These rates result in an increase 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 decrease. The ultimate impact will be based on a customer's consumption. There will also be various albeit negligible rate changes to the City's wholesale rate. These rates were last changed in January 2007. 10140 0 0 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 stable. A decrease from 31.30/m3 to 28.00/m3 is indicated in our supply rate to meet the projected gas costs for this year and to ensure that our program is not in a significant surplus or deficit position overall. In order to uphold the historical practice of establishing the transportation component of our natural gas rates by using the NEB approved rate for TransCanada Pipelines tolls, the Transportation component of our Natural Gas Rates will increase from 3.8870/m3 to 4.1140/M3 effective April 1, 2008. The City's past practice has been to match the base Delivery rates approved by the OEB for use by Union Gas in the Southern delivery area. The OEB approved a split in the rates for general service customers (between smaller, mostly residential customers and larger commercial/industrial customers) for implementation in the Union South area effective January L 2008. Our billing system is not currently able to accommodate such a split. We continue to work on our billing system and will return to Council this Fall with a report regarding the implementation of the split rate. In the meantime, we propose a 1.5% increase in variable delivery rates which will closely align our rates to those used by Union. The variable delivery rate will increase from 6.101 0/m3 to 6.1860/m3 while the Daily Fixed Charge will increase from $.53/day to $.56/day. FINANCIAL IMPLICATIONS: The combined impacts of the supply, transportation and delivery rates are expected to produce an decrease of 5.3% or approximately $66 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 April. Pauline Houston, CA Barry Nash General Manager of Financial Services Acting Director of Utilities & City Treasurer Loraine Baillargeon Manager, Asset Optimization Utilities A PPF.NnIX 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 $ .56 and 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 billing 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 April 1, 2008 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. VARIABLE COMMODITY & TRANSPORTATION NET RATE DELIVERY FUEL RATE ¢/m3 ¢/m3 ¢/m3 ¢/m3 First 1,400 m3 6.186 28.00 4.114 38.300 Next 4,600 m3 5.144 28.00 4.114 3 7.25 8 Next 1241000 m3 4.071 28.00 4.114 3 6.18 5 Next 270,000 m3 3.450 28.00 4.114 35.564 Next 400,000 m3 3.271 28.00 4.114 35.385 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 billing 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 April 1, 2008 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. 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: i) Lk lvlontmy ijemana k_:narge First 8,450 m3 of the daily contracted demand, 44.8685 Next 19,700 m3 of the daily contracted demand, 19.4669 All m3 over 28,150m3 of the daily contracted demand, 16.1662 ii) I A Monthly Delivery Charge 1 .9277 iii) A Monthly Gas Supply Rate utility dales Commodity &Fuel 28.00 Transportation 4.114 32.114 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 6.186¢/m3 for the delivery and, if applicable, a gas supply rate of 32.114¢/m3. Unauthorized overrun in any month shall be paid for at the rate of 6.186¢/m3 for the delivery and total gas supply charge for system supplied volumes at the rate of 32.114¢/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 1.245¢/m3, and if applicable, a gas supply charge of 32.114¢/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, 2008 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 $501.10 and o/M3 A) Delivery Charge Daily Contracted Demand Level (CD) 4,800 m3 < CD ❑ 17,000 m3 1.9398 17,000 m3 < CD ❑ 30,000 m3 1.8099 30,000 m3 < CD ❑ 50,000 m3 1.7416 50,000 m3 < CD ❑ 70,000 m3 1.6937 70,000 m3 < CD ❑ 100,000 m3 1.6594 100,000 m3 < CD ❑ 140,870 m3 1.6257 B) Gas Supply Rate Utility Sales Commodity & Fuel 28.00 Transportation 4.114 32.114 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 38.3000/m3 (6.186 0/m3 for the delivery and 32.1140/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 2.2571 0/m3 for the delivery charge and if applicable, a gas supply charge of 32.1140/m3). Effective April 1, 2008 Policy Relating to Terms of Reference Gas purchased under this rate shall not be resold, directly or indirectly by the customer.