Rising natural gas prices: Why are natural gas rates so high in Alberta?
Over the past few months, Albertans have been receiving extremely high natural gas bills. If we examine the historical natural gas prices between 2021 and 2022, we can see that the price has skyrocketed to as much as approximately $5.3/GJ in November 2021 (see the bottom of this post for tables comparing historical regulated natural gas rates for 2020-2022). Overall, the average natural gas rates have increased.
One major factor is extended cold snaps – constant freezing temperatures are a sure way to increase our consumption of natural gas. However, prolonged cold weather isn’t the only reason for increased natural gas prices. If you have questions such as ‘why are natural gas prices rising so fast?’ or ‘what’s going on with natural gas?’, we’ve got you covered.
Read on to learn more about what causes high natural gas rates in Alberta; the list below is not in a specific order.
1. Higher Oil and Gas Demand
An increase in demand for Canadian natural gas exports has been one such factor behind the increases in natural gas. As the economic activity across the globe picks up, the need for natural gas also increases fast. Overall, the main driver of gas has been the European gas crisis. In particular, the war in Ukraine has played an additional role in increasing oil and natural gas demand. According to a Global News article, Russia is a critical supplier of natural gas in Europe and oil in global markets. Hence, an increased price of oil and natural gas.
As Russia reduces the volume of gas heading into Europe, the United States is exporting large volumes of LNG to Europe and consequently, Canada is exporting more gas down south to the US.
2. Extreme Winter Weather
Due to the deep freeze in late December and early January, heating was used more frequently and extensively in addition to increased electricity demand. During cold snaps, the average home uses 40% more natural gas and 8% more electricity for every 10°C drops below zero.
Alberta hit an all-time electricity usage record of 11,939 MW on January 3rd, 2022 due to a cold snap that lasted for about a month between December 2021-January 2022. The province also broke its summer record for electricity demand (11,414 MW on June 28, 2021) due to a heatwave in Western Canada.
Additionally, a colder and longer-than-expected winter in Eastern Canada and in the United States also resulted in above-average demand for natural gas, further increasing Alberta’s exports of natural gas.
While improved storage levels of natural gas storage can help with natural gas futures, they weren’t enough to put a ceiling on recent rises in natural gas pricing, according to a CBC news article.
3. Utility Payment Deferral
As a result of the pandemic, many Albertans couldn’t afford to pay their utility bills. As such, the province of Alberta put the Alberta Utility Bill Deferral into place between March 18 and June 18, 2020. Any remaining payments would then be added as a temporary rate rider to all customer utility bills. This charge appeared on residential electricity bills from November 1, 2021, and was set to last until March 1, 2022.
For natural gas, the rate rider was set at $0.78 per month, which was based on the average residential energy use of approximately 21 GJ.
4. Carbon Levy
A carbon levy is intended to put a price on carbon pollution – in Alberta, the Carbon Tax has been increasing over time. Every April, the tax adds $1.049/GJ to natural gas usage. While increased energy charges comprised 50 to 60% of the annual increase in default rate tariff (DRT) bills in each service area, the April 2021 increase in the carbon levy on natural gas also contributed to DRT bill increases, comprising around 20% of the increase, according to the Market Surveillance Administrator’s Quarterly Report for Q4 2021.
Below, you can see the increase in Alberta’s Carbon Tax over the years:
|January 1, 2020||$ 1.0499523/GJ|
|April 1, 2020||$1.5762711/GJ|
|April 1, 2021||$2.1025899/GJ|
|April 2, 2022||$2.6289087/GJ|
Albertans use significantly more natural gas in winter, so the effects of these carbon tax increases are usually felt some months later, during the colder seasons. This means Albertans will probably be able to clearly notice the April 2022 increase in winter 2023. Natural gas usage is much lower in summer, so people usually don’t feel the effects of the carbon levy right away.
In 2030, the federal government expects these costs to be at $8.94/GJ.
5. Wrong Bill Estimates
If for whatever reason wire service providers are unable to read your natural gas meters, they will estimate your consumption based on your historical usage in previous months. However, many consumers, especially those who consume large amounts of natural gas, have noted that their natural gas estimates are incorrect.
Here are a few steps consumers can take if they believe their natural gas estimates are off:
- Check your in-house numbers to what your meters are reading – make sure to take note of any new appliances as well as making sure your meters are accessible.
- Contact your utility provider about your concerns or file a complaint with Measurement Canada. However, note that if your meter is determined to be working, your utility provider may require you to pay a testing fee.
- Some providers such as EPCOR or Enmax Power allow for customers to provide meter readings online – you can see a list of providers that allow online reading here.
Will the natural gas price cap protect my natural gas bills from rising this winter?
In the 2022 Alberta provincial budget, it was announced that there would be natural gas consumer price protection for consumers using less than 2500 GJ annually that will come into play if gas companies charge rates above $6.50/GJ between October 2022 and March 2023. The natural gas consumer price consumption comes in the form of a rebate called The Energy Affordability Program.
However, it’s difficult to forecast if this price protection will activate over the course of the next year – based on 2021, natural gas market prices peaked at $4.87/GJ, while the highest regulated rate price (RRO) was $5.328/GJ.
A week later, the provincial government also announced an electricity rebate.
Natural Gas Averages in Alberta: Tables
|Date (Month-Year)||Regulated Rate|
|Date (Month-Year)||Regulated Rate|
|Date (Month-Year)||Regulated Rate|
Now that you’ve learned about the increasing natural gas rates in Alberta, you’re probably wondering how you can cut your utility costs. One of the easiest ways is to compare the providers in your area and their rates.
Our team at EnergyRates.ca can help both businesses (small, large and industrial) and residential consumers save on natural gas rates by comparing different plans and helping them find the utility provider with the lowest rates in their area.
To get started, just fill in the form at the top of this page with the required information.
For an explanation of why Alberta electricity bills are getting higher, check our electricity-focused guide.