Reduction in Commodity Charges Coming to Customers in Ontario, Canada: What to Know This Week
What You Need to Know About Energy Prices This Week
Residential and small business customers in Ontario, Canada, will see on average a 25% reduction of their electricity bill beginning July 1.
For customers who have elected to receive supply through their utility under the Regulated Price Plan (RPP), the government’s Fair Hydro Plan will reduce their rate through a combination of measures. The plan calls for a refinancing of the Global Adjustment (to extend the payout period), shifting the Rural and Remote Rate Protection program and Ontario Electricity Support Program to the broader tax base, and eliminating the provincial portion of the harmonized sales tax (HST). Customers that are on third-party supply contracts, but are otherwise eligible for the RPP, will also receive a credit against their GA costs of roughly equivalent value.
While the Fair Hydro Act will provide some short-term relief for customers on their electricity bills, it is important to note that most of the costs are simply being shifted around and not eliminated. Customers who receive GA charges based on their demand during the five system peaks will likely also see some relief due to the refinancing efforts, but it is unclear exactly how much.
A Brief Primer on Energy Markets
Every week, EnerNOC’s energy intelligence team analyzes the market developments driving energy prices. In this weekly article, you’ll see a lot of discussion about energy generation sources, such as natural gas, coal, nuclear, and some renewable and distributed energy resources. You’ll also see a lot of talk about the factors affecting generation: weather, production, storage levels, natural disasters, geopolitical events, and so on.
The connections between the drivers and the energy markets are complex, but here’s what you should know in a nutshell. Weather is a key driver because it has a direct impact on demand for electricity and natural gas. Temperature extremes cause spikes in demand for natural gas, either directly for home heat or indirectly as a fuel source to generate electricity for air conditioning. Similarly, unexpected natural disasters or geopolitical events could suddenly affect supply, which has a similar downstream effect on pricing. And, of course, any change in pricing is going to affect your organization’s energy costs. Keeping up with new developments in the market is important to ensuring you don’t miss opportunities that could save significant money for your business over the long term.
If this is all still a little confusing, talk to an energy procurement expert to learn why the factors affecting energy markets actually matter to your business. Or check out our other content to learn more about what drives energy prices and how you can turn temporary low-price opportunities into long-term savings.
What's Driving the Market Up?
In the short term:
- Natural gas consumption continues to rise due to increased cooling demand
- Natural gas injection into storage was below the five-year average
- Temperatures expected to be higher than usual
In the long term:
- US Department of Energy (DOE) approves first US floating LNG export facility, which is expected to come online in 2021 or 2022
- Rover Pipeline project suffers delays
- DOE gives approval to the Golden Pass LNG liquefaction terminal for exporting 2.21 Bcf/day of LNG for the next 20 years
- Cheniere Energy, the operator of the Sabine Pass terminal, received authorization from FERC to commence liquefaction and export activities from Train 3
- US Energy Information Administration (EIA) projects 4% year-over-year growth in gas used to generate power
- According to the EIA, US is on its way to being a net energy exporter
- Liquefied natural gas exports are expected to average 1.8 Bcf/d in 2017, up from about 0.6 Bcf/d in 2016
- PJM’s board of directors has approved higher tariff rates through 2024 to help cover operating and administrative costs
- Expected 21 GW of generating capacity to retire by 2020
What's Driving the Market Down?
In the short term:
- Natural gas rig count increased by 1 to 186
- Net imports of natural gas from Canada increase after maintenance to the Alliance Pipeline was completed
In the long term:
- The White House has directed the DOI to allow oil and gas drilling in federally owned offshore areas
- Atlantic Sunrise Project wins FERC approval
- Nuclear industry targets 30% cost reduction by 2018 in order to increase competitiveness in the market
- FERC has approved the construction of capacity enhancement for the Rockies Express Pipeline
- Pipeline flows from the Algonquin Gas Transmission’s Incremental Market project started on November 1
- The US electric grid is expected to add almost 55 GW of generating capacity, most of which will be wind, solar, and natural gas
- 28,607 MW of natural gas capacity is expected to come online between 2015 and 2017
- Strong growth from shale gas is expected to continue
How Are Natural Gas Prices Trending?
This chart shows how month-ahead prices for natural gas are settling on the New York Mercantile Exchange. It is a good indicator of where the market is, relative to where it has been over the past four years.
What Do Forward Natural Gas Markets Look Like?
Henry Hub represents a main distribution center for natural gas. Activity at the Henry Hub is considered a benchmark for natural gas prices in markets across the country, including the NYMEX and OTC Global Holdings. This chart shows how Henry Hub forward prices for natural gas have trended over the past calendar year.
1 Year Trend of Power Around-the-Clock Calendar Year Prices
Prices for power are constantly fluctuating, and it can be difficult to know exactly when they are going to spike or plummet. These charts show how future power prices have trended over the past calendar year for New England (ISO-NE), the mid-Atlantic region (PJM), New York City (NYISO Zone J), and Northern Illinois.
1 Year Trend of Natural Gas Calendar Year Prices
While the Henry Hub provides the benchmark, prices tend to vary based on regional factors. These charts show how forward prices are trending over the previous calendar year at the hubs for New England (Algonquin), New York (both Transco Z6 NonNY and Transco Z6 NY) and Chicago (Chicago City Gate).
Extreme swings in weather can significantly impact energy prices. These maps depict forecasts courtesy of the National Oceanic and Atmospheric Administration. Blue shading indicates areas with a high probability of seeing below-average temperatures, and red shading shows areas that are likely to see above-average (white areas are most likely to see average temperatures for their climate). The darker the shade of either color, the higher the probability that the corresponding area will see abnormal weather.
For questions about this week's article, contact EnerNOC Energy Analyst Ricky Ghoshroy.