The following article is a developing story. We have covered as much as we can at the time of publishing, but we may update this article as needed.
How the 2022 Provincial Budget May Affect Natural Gas and Electricity Bills
On February 24th, 2022, the Alberta provincial budget for 2022 was announced by Minister of Finance Travis Toews. While the budget proposed features many energy-adjacent strategies including further investment in Alberta’s Oil and Gas sector as well as diversification into new energy sectors including Hydrogen energy, many Albertans may be unsure how the budget affects them personally.
The new budget comes in a time of uncertainty, where inflation rates have soared across many markets. Energy costs, in particular, have skyrocketed, elevating concerns over increased utility bills, with both electricity and natural gas prices increasing steadily during the course of 2021. With investment in oil & gas and other energy sectors taking such a key point of the UCP’s fiscal policy going forward, you might be unsure how the new budget will impact your energy bill.
If you are in Alberta and need help figuring out the energy market or what energy plans work best for you, EnergyRates.ca is here for you.
Natural Gas Price Protection and your Natural Gas Bill
In their budget speech, Toews introduced natural gas consumer price protection “to alleviate the fear of spiralling utility costs, and to allow Albertans to benefit from an owned resource”. The rebate, available to consumers using less than 2,500 GJ annually, will kick in if regulated natural gas companies charge rates above $6.50/GJ between October 2022 and March 2023. The rebate is called The Energy Affordability Program.
At the time, Alberta’s Natural Gas prices and trends suggested this number was higher than expected rates. We wrote: “barring significant increases above the expected price of natural gas in 2022/2023, it seems unlikely that Albertans will see significant protection from increased energy prices as a direct result of this price protection mechanism.” When the program was announced, energy experts were skeptical of natural gas prices hitting this level. However, since this article’s publication, regulated rates for natural gas have reached heights not seen since 2008, reaching rates as high as $9/GJ.
While the Energy Affordability Program will not take effect until October, current projections suggest that this number is easily reachable since the demand for natural gas typically goes up in Fall and Winter months.
One thing to note is that the conflict in Eastern Europe may play a major factor in the prices of natural gas. The European gas crisis has seen Russia’s natural gas exports to Europe decrease, with the United States exporting more natural gas to Europe and consequently Canada exporting more natural gas to the US. An increase in demand for Canadian natural gas exports has been one such factor behind the increases in natural gas.
Other factors, such as increases in the Carbon Levy in April, may also mean higher than normal Natural Gas Bills in 2022.
If you’re looking for ways to save on your natural gas bill, we got some strong advice for you here.
What’s Up with the Balancing Pool and Electricity Prices?
Despite electricity prices doubling throughout 2021, and 2022 seeing an all-time Alberta high for electricity (above 16 cents/kWh), one major thing that was not covered in the 2022 budget was helping-out Albertans with their soaring costs of electricity.
A combination of factors has led to the drastic increase in electricity prices throughout 2021. One of note is the expiry of Power Purchasing Agreements (PPAs) held within the Balancing Pool.
When the electricity market in Alberta first de-regulated in the late nineties, the government entered into PPAs with generators, managed by the Balancing Pool, guaranteeing a set price for a certain volume of electricity to be produced. With the expiry of the Power Purchasing Agreements occurring on Dec 31st, 2020, energy prices have been less stable and smaller market drivers like extreme weather and decreased supply to the grid have had a more amplified impact on prices ever since, leading to the rates we see today.
Another factor that has played a significant role in the increase of electricity prices includes the decommissioning of coal-fired power plants.
During Alberta’s throne speech, Premier Jason Kenney stated that “the balancing pool no longer serves any useful purpose”. While the Balancing Pool provided price stability for Albertans in the past, without managing PPAs, the impact of the Balancing Pool on consumer energy prices is negligible.
However, the Balancing Pool is “required to extinguish its net liability by 2030” and is projected to provide a significant amount of revenue for the 22/23 fiscal year (112 million per year) until 2024/25 to generate net income in order to do so (2022-25 Fiscal Plan, pg. 114). Due to the closed book nature of the Balancing Pool, it is unknown where this revenue will be generated from, outside of fees collected by energy providers. While in the time being, it seems like the Balancing Pool is here to stay until 2025, it is unlikely The Balancing Pool will help keep electricity prices down.
Since the budget was announced, Jason Kenney has stated that electricity prices are too high and suggested potentially using the $250-million contingency fund to offset utility costs. However, as of right now, nothing has been established to protect from the sticker shock of current electric bills.
With new electricity generation set to come online in late 2022 or early 2023, there may be more energy supply before the end of the current budget year, but otherwise, it is uncertain if we will see a reprieve from high electricity costs soon.
Going forward
Rising oil prices have given the Alberta government an opportune moment to balance its budget for 2022. While oil and gas production has been a cornerstone of the Alberta economy, diversification of both the Albertan economy and how Albertans power their homes are both commitments this government is making.
Between pipeline development, further development of green carbon and carbon capture technologies, the decommissioning of coal, and a $40 million dollar investment into a “Clean Hydrogen Centre of Excellence,” the Albertan government is building an economy that both utilizes natural resources and diversifies the local economy and energy sources. However, as Alberta becomes a better place for energy companies to do business, there are still justified concerns about further Albertan investments coming at expense of consumer energy bills.
