Higher gas prices mean jump in Canadian heating bills
05:46 p.m Oct 13, 1998 Eastern
By Jeffrey Jones
CALGARY (Reuters) - Canadian consumers may face the highest heating bills in several years this winter as natural gas prices climb after an end to a long-standing glut of supply.
Some major gas utilities have had double-digit increases in rates approved by provincial regulators -- or are bracing their customers for coming jumps -- as the gas producing industry struggles to pump out enough volume to meet new demand.
Utilities are implementing the increases as meteorologists predict a return to more frigid Canadian weather this winter after last year's unusually warm El Nino conditions.
''My recollection is that the commodity portion (of the rates) right now is the highest its been since deregulation,'' said George Dann, director of gas supply services for major Ontario utility Enbridge Consumers Gas, a unit of Calgary-based Enbridge Inc. , formerly IPL Energy. The industry was deregulated in 1986.
Enbridge Consumers serves about 1.2 million residential customers.
Wholesale spot natural gas at the Alberta border, the commodity portion of the consumer price, is currently C$2.69 a gigajoule, up 37 percent from last year. The one-year supply contract is valued at C$2.77 a gigajoule, up 54 percent.
''These are commodity prices that residential clients have not seen for several years,'' said Roland George, analyst with energy consulting group Pervin & Gurtz in Calgary.
Higher utility rates, expected to hit western Canadian consumers most dramatically, are a result of a jump in wholesale gas prices as newly expanded pipelines to rich U.S. markets start operations within the next few weeks.
George said the new pipeline capacity would bring prices in the producing provinces of Alberta and British Columbia more in line with those in U.S. after years of a glut, the result of a bottleneck for gas at the Alberta border.
Analysts have also pointed out that low crude oil prices have constrained producers' cash flow to the point where their ability to drill a spate of gas wells has been reduced, meaning new supplies would be slow in coming.
About 47 percent of Canadian homes are heated with natural gas, compared to 34 percent with electricity and 14 percent with fuel oil, according to the Canadian Gas Association. The average Canadian residential customer with a gas furnace and water heater uses about 150 gigajoules a year.
''We're giving people a heads-up because rate increases are coming. Certainly, in our humble estimation, it will be double digits, somewhere around 15 percent,'' said Jan Marston, vice-president of gas supply for BC Gas Inc. unit BC Gas Utilities Ltd.
The Vancouver-based utility serves 732,000 residential and commercial customers on the British Columbia mainland.
That one-year rate for residential customers would be about C$5.60 per gigajoule, based on the 1998 rate of C$4.86. In neighboring Alberta, where most of Canada's gas is produced, Canadian Western Natural Gas, a unit of ATCO Ltd. , has applied to the Alberta Energy and Utilities Board for a winter price of C$2.57 per gigajoule, about 22 percent higher than last winter's average.
''This is the highest rate in a while that we've filed with the board,'' said Ralph Trovato, manager of pricing for Canadian western, which serves about 355,000 residential customers in Calgary and the surrounding southern Alberta region.
The average price a typical customer of Enbridge Consumers in Ontario will pay in 1999 is estimated at about C$6.87 a gigajoule, up 12 percent from the beginning of last year.
About a third of the price a residential Enbridge Consumers customer pays is commodity price. The rest reflects the cost of transporting the gas from western Canada on the TransCanada PipeLines Ltd. mainline and distributing it.
($1-$1.55 Canadian)
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