Alberta’s oil and gas sector is awash with cash and the province’s books could be headed back into the black this year, but residents of the energy-producing province are experiencing the downside of the commodity price boom on their utility bills.
Market prices for natural gas and electricity have surged to near-record highs after more than seven years of depressed prices, and that’s leading to some shocks to the wallet for homeowners.
Calgary resident Beverley Hejduk says she lost her normal composure when she opened her January utility bill this week and saw the $1,100 price tag.
“It’s outrageous,” said Hejduk, who lives in an 1,100-square-foot bungalow and says her monthly winter utility bills are typically $400 to $500.
“My first reaction was, ‘did I miss paying last month?’ And then I looked and no, that’s all for just one month.'”
Hejduk’s experience is not unique, said Consumers’ Coalition of Alberta spokesman Jim Wachowich. Homeowners who haven’t signed onto a fixed contract for their heating and electricity — instead choosing to pay a floating rate that fluctuates with market prices — are seeing a significant increase in costs this winter.
“We’re hearing lots of concerns from people saying their gas bill doubled, or their gas bill tripled,” Wachowich said. “We have what in essence is a rate shock.”
Joel MacDonald, founder of Edmonton-based energy rate comparison site EnergyRates.ca, said there are a number of factors behind the spike in prices, not the least of which was a January deep freeze which increased both demand and consumption of electricity and gas.
(According to Alberta-based utility provider ATCO Gas, Albertans use about two to three gigajoules per month of natural gas in the summer, but closer to 10 to12 GJ per month in the winter.)
The federal carbon tax also makes bills appear higher than they once were, though most people will receive a rebate on their income tax to offset that tax.
And in 2019, Alberta’s UCP government eliminated a legislated price cap that was designed to protect those Albertans who pay the floating regulated retail rate from volatile electricity prices.
But MacDonald said the biggest factor behind the startling bills consumers are receiving is the commodity boom. The price of natural gas in November 2021 was $4.57 per gigajoule, up 77.1 per cent from November 2020.
“We’re coming off a period of historical lows for electricity and natural gas, and switching onto a period of near-historical highs,” he said. “The swing has been extreme.”
That surge in the cost of natural gas, driven by global market forces and increased economic activity in the wake of the COVID-19 pandemic, is coinciding with Alberta’s rapid and dramatic progress to wean off of cheap coal-fired electricity. The conversion of coal power plants to cleaner-burning natural gas facilities is putting more pressure on electricity bills.
In fact, MacDonald pointed out that five years ago, more than 60 per cent of the charges on the average Alberta utility bill were related to transmission and distribution and other fees not related to the cost of the gas itself, such as customer service.
This winter, he said, that has switched, with the cost of the gas now making up the majority of the average Albertan’s bill. The resulting pocketbook pain is the flip side of the commodity surge that is giving Alberta-based energy companies reason to celebrate, and which could see the provincial government return to surplus this fiscal year on high oil and gas revenues after seven years of deficit.
“The Alberta (electricity) grid system is relatively unique,” MacDonald said. “Our economy is heavily fused to the oil and gas sector, so as oil prices go up, so does overall grid demand. It’s that double-edged sword, because overall grid demand will drive up utility prices.”
On Thursday, Alberta’s Associate Minister for Natural Gas and Electricity Dale Nally said he recognizes the financial pressure that high utility prices can place on Albertans.
“It is important to note that electricity rates are based on market conditions — namely supply and demand — which are outside of government’s control,” Nally said in an emailed statement.
Utility provider Direct Energy, one of the largest natural gas and electricity retailers in Alberta, said customers are free to change to a fixed price contract anytime without fees, and flexible payment arrangements and other billing options such as equalized billing are also available.
“We have been meeting with industry stakeholders, and we are working with the government to determine solutions that support customers,” said Direct Energy spokeswoman Estafania Joy in an email.