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October 2018

Deregulation 101

Deregulation 101 2000 667 Olympus Energy

 

Albertans pay some of the lowest energy prices for their homes and businesses in North America. Why? Deregulation… that’s why.

Deregulation is among the most confusing topics to take on. It’s like trying to understand chemistry or the tax system. There’s a lot to it. I’ll try to keep it as simple as possible.

Deregulation is choice. More technically, it is when the government backs off from limiting the number of companies or setting mandatory prices in the utility industry. This means we have more open access to the natural gas and/or electricity market and lower prices generally because more companies are able to compete for our business. When this happens, more companies can compete for our business which tends to lower the cost to us Albertans. We have a choice. Deregulation can be empowering – pun intended.

Alberta has the most deregulated energy market in Canada. Our open market lowers our utility prices. Why would the government move to deregulate their natural gas and electricity markets? A healthier economy and happier voters. The healthy economy comes from more businesses in operation which provide more jobs and more companies and employees paying taxes to the government.  It’s a real win-win for all of us. There are still laws in place to ensure fair business and limits on production. Alberta is a leader in energy prices because they championed deregulation.

Alberta deregulation opened up the ‘spot market’ for both natural gas and electricity. These spot markets allow the utility companies to buy energy commodities in real-time instead of buying once every month or once a year. This real-time access reflects lower prices on our floating rate utility bills. A good analogy for the spot market is being able to decide what clothes to wear by looking outside and checking the current forecast. If we didn’t have the spot market, it would be like deciding what to wear 45 days from now, using long-range forecasts. You would need to carry extra clothing with you just in case the weather changed. The spot market trims out bulky forecast prices because there is no need to carry around the extra prices. Without the spot market, energy providers must account for unforeseen circumstances and buy the energy at a higher price just in case there are major fluctuations. The increased risk of a regulated energy market pushes the prices higher in general to consumers. The spot market is a real-time market with no unnecessary guesswork. We are always getting the lowest possible rates on our utilities with this deregulated system.

Still, think you are paying too much on your utility bill? Call Olympus Energy to beat your current rate. If we can’t give you savings, we’ll give you $100 cash.

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Why Does My Energy Bill Fluctuate?

Why Does My Energy Bill Fluctuate? 1300 957 Olympus Energy

It makes sense that the more electricity and natural gas you consume, the higher your utility bill is, but why do the actual price of the gas and electricity jump around so much?

On one hand, the ‘pay for what I use’ principle is very simple: The more I use – the more I pay makes sense. For example, my natural gas heating bill is much higher in winter because.. well.. its colder in winter and I don’t own a Snuggie. The same can be true of electricity usage in the summer for air-conditioned consumers in Alberta. Some months I use more electricity, so I pay more. That’s totally understandable.

On the other hand, however, why does the wholesale price for these commodities, (take electricity rates for example) go from 4.405 cents per kWh in September 2017 to 10.051 cents per kWh in August 2018. I use the same amount of electricity, but one month i’m paying $56 more than the other. How can this happen?

The answer? Market prices.

Follow this link for a more technical explanation: http://www.auc.ab.ca/pages/energy-charges.aspx

Basically, the energy charge is determined through a wholesale market. A wholesale market is just like any market you are familiar with. (There’s one for electricity and another for natural gas.) The buyer in this case is called a utility retailer. They come to the market and buy the commodity in order to later sell to customers – you and me. Both the retailer and the customer hope for the lowest prices possible. Just as in all markets, the product price depends on how much there is in reserve and how costly it is to produce at the time. This cost does notinclude the price to deliver the energy to your home or business. Think blueberries. You can buy them cheaper when they are bursting off the bushes in the growing season, and they are costly when they aren’t. It is the same with Natural Gas and Electricity, but less seasonally driven than blueberries.

In the electricity department, for example, Alberta has mostly privately run electricity producers. They decide what plants to build and are responsible for operating them safely and efficiently in order to produce the electricity. There is wind, coal, solar, natural gas, hydro and other generating companies in our province. They are each responsible to comply with Alberta Utility Commission standards. These companies ‘farm’ the electricity and bring it to market for the retailers to buy.

It is the same idea for natural gas producers.

If the commodity is cheap to make, the price goes down. If there is plenty in stock, the price also goes down.

Let’s say there is a particularly cold winter. More natural gas would be burned to heat our homes and businesses. This would deplete the gas supply and drive the price of natural gas upward. What if there’s a tornado that takes out a power plant? That would drive up the prices also. If the Government decides to reduce coal-driven power, that limits the supply of power from those previously functional coal plants. Essentially, it’s a supply and demand market thing.

Whatever happens, Albertans can be assured their energy charges are at the best available prices if their prices are linked to this variable price spot market.

There are other factors that determine the price of energy I didn’t mention. Look for them on your energy bill. There are Transmission and distribution charges (T&D) which are the distributor’s costs for delivering the product to your home. A Carbon Levy (Natural Gas only) which came into effect January 1, 2018 charges $1.517/GJ on your natural gas bill. These are just two examples.

Knowing what causes your energy bill to fluctuate is useful for keeping calm when it’s bill time.

CHECK OUT olympusenergy.ca for a quote to beat your current retailer’s electricity and natural gas prices.

 

How To Read Your Utility Bill?

How To Read Your Utility Bill? 1920 1280 Olympus Energy

 

Reading the utility bill can be comparable to finding Where’s Waldo. You open the page, and standing there in bold font.. is the amount owing (Waldo). Ok, so more like a beginners game of Where’s Waldo. But have you ever ventured past the amount owing section of your utility bill?  If you have, you know what dread and bewilderment feel like. Most people are so overwhelmed, they rarely come to even a basic understanding of the utility bill.

 

Follow this link for a brief video from the Utilities Consumer Adocate on understanding your bill: https://ucahelps.alberta.ca/understanding-your-bill.aspx

 

You, yes you, can learn how to read a bill and understand it! Lets get started:

 

The Government of Alberta requires the following information on every utility bill. If you may find it helpful to open up one of your bills and follow along.

 

FRONT PAGE – Name and contact information of energy retailer, amount owing, when payment is due, summary of new charges and recent payments, optionally there’s a graph showing 12 months usage history.

 

Name and Contact information of the energy retailer. This is important especially if there is an emergency such as a gas leak or a power outage. It’s also important for notifying the retailer of a move or change of status.

 

Amount Owing and Payment Due Date. You are an expert at this one!

 

Summary of New Charges and Recent Payment transactions. This is an extension of the amount owing total. It confirms the retailer received your previous payment and divides the total amount into electricity, gas, fees and GST. It also repeats the date late fees will be applied.

 

Graph showing your electricity consumption over the past 12 months. Summer energy consumption is typically much less than our cold Alberta winters.

 

BACK PAGE – The detailed breakdown of the charges. Including the meter reading, energy charges and fees, gas charges and fees.

 

Meter Readings at the beginning of the billing cycle and the end of the billing cycle, showing the total amount of energy used. Electricity is measured in kilowatt hours (kWh) and Gas is measured in Giga Joules (GJ). For example,  electricity meter reading: 15430.555 kWh at the beginning of the month – 15980.655 kWh at the end of the month = 550.100 kWh.

 

Rates include the charge to buy the electricity or gas from the retailer. Take this cost and multiply it by the meter reading. For example, electricity charge: 550.100 kWh x $0.08/kWh = $44.008.

 

Fees are the costs to administer the product to the home or business. These are the most confusing part of the bill. It takes a lot to get power and gas into a home. The fees include Transmission and Distribution charges: https://ucahelps.alberta.ca/electricity-transmission-and-distribution-charges.aspx

 

  1. Transmissioncharges are fees which include installingoperating, and maintaining the of gas infrastructure and electrical grid.

 

  1. Distributioncharges constitute between 23% and 52% of a customer’s total bill*. These include administration staff to look after you the customer, rate rider charges, land use fees, and carbon tax levies. A brief breakdown of rate riders, local acess, and carbon levy fees are listed below:

 

  1. Rate Ridersare the difference between what the utility costs were projected to be and what they actually turned out to be. This rider accounts for the ups and downs of the gas and electricity costs throughout the month. Sometimes the utilities turn out to be cheaper than expected and sometimes more. This rate rider accounts for that.

 

  1. Local Access Feespay for the use of the land the utility lines occupy in the province.

 

iii. Carbon Levy is only charged on the gas portion as part of the provincial carbon tax.

 

This concludes the tour of your energy bill.

 

For more information, go to the link posted earlier in this post.*