Varcoe: Coming soon to a bill near you — Alberta eyes fast-tracking natural gas rebate as prices soar


Natural gas prices are surging this month, prompting the Alberta government to consider accelerating a rebate program to shelter consumers from hefty utility bills.

Premier Jason Kenney indicated Tuesday the UCP government is looking to advance a provincial natural gas rebate program that was first announced in its February budget, but was not slated to begin until the fall.

The rebate was set to run from October until March 2023, if the regulated rate for Alberta natural gas climbs above $6.50 per gigajoule.

The province said most households, farms, small industrial and commercial businesses would be eligible for the relief, but the regulated rate was sitting below $5 per gigajoule at the time and it was uncertain if the proposal would even matter.

However, prices for natural gas across North America have spiked in recent weeks. Alberta spot prices closed at $7.52 per gigajoule on Tuesday, down from higher levels to start the week.

“Cabinet just made some decisions about this a few hours ago and we will be having an announcement about the details shortly,” Kenney said Tuesday when asked if his government was prepared to introduce the rebate sooner than October.

“We recognize that consumers are struggling with all of the increases in the cost of living, especially energy inflation that drives so much else.”

The premier said details are still being finalized. The province is expected to introduce legislation Wednesday to enable utility rebates.

Energy prices are spiralling higher this year, squeezing consumers and businesses, while prompting the Alberta government to announce three measures to buffer some of the financial hit.

It included lifting the provincial tax of 13 cents a litre on gasoline, beginning April 1, at an estimated price tag of $1.3 billion. There are plans for a $150 retroactive rebate for consumers on their electricity bills to cover increased power costs through the first three months of the year, costing the treasury about $280 million.

FILE PHOTO: Gas prices continued to rise at the pumps in Calgary on Monday, March 7, 2022.
FILE PHOTO: Gas prices continued to rise at the pumps in Calgary on Monday, March 7, 2022. Photo by Darren Makowichuk/Postmedia

The province also decided to bring back natural gas rebates, which were previously offered by the Klein government in the early 2000s and ended in 2009. If Alberta natural gas prices hover around $7 to $7.50 per gigajoule this year, the new rebate would cost a “few hundred million more dollars,” Kenney said.

Natural gas prices have been climbing in recent months because of low storage levels, rising demand and geopolitical factors, including the invasion of Ukraine by Russia, the world’s largest gas exporter.

Analysts expect strong prices to persist throughout the year, although not necessarily at these recent levels.

U.S. benchmark prices hit a 13-year high on Monday before falling by 8.2 per cent on Tuesday, but they still closed at $7.18 per million British thermal units (mmBTU).

“I was blown away with the prices that we saw, and the near-term fundamentals in my humble opinion do not justify $8 gas for the summer,” said Martin King, senior analyst at RBN Energy in Calgary, adding prices in the $6 range are reasonable.

“With Alberta prices higher, it certainly will mean a higher gas bill for consumers, there’s no doubt about it.”

For consumers, the regulated gas rate through Direct Energy is $5.28 per gigajoule for the month of April.

NDP MLA Kathleen Ganley said news of the provincial rebate program being accelerated “would be great to see — if it’s true.”

“We will be looking to make sure that it’s substantive and it’s actually going to help Albertans,” she said.

“People are struggling now.”

NDP energy critic Kathleen Ganley.
NDP energy critic Kathleen Ganley. Photo by Brendan Miller /Postmedia, file

Higher energy prices have been a key factor driving Canada’s inflation rate to its highest level since the summer of 1991.

Rising prices across the board for energy have contributed about 1.5 percentage points to the national inflation rate, which sat at 5.7 per cent in February, noted University of Calgary economist Trevor Tombe.

It is the single largest factor behind the current rate of inflation, he said.

The Alberta government is seeing the benefits of higher energy prices this year through increased royalty payments and taxes.

The provincial budget projected Alberta natural gas prices will average $3.20 per gigajoule this year. Every 10-cent increase in gas prices over the course of the year adds $10 million to provincial coffers.

This lift gives the province the ability to provide some relief to consumers, said energy economist Blake Shaffer with the University of Calgary’s School of Public Policy.

The government will need to make clear if the rebates will be offered to all residential consumers or just those on regulated rates, and if there will be a limit to the size of the benefit.

“Prices have now gone to the point where this is relevant,” Shaffer said.

“It would be pretty hard to defend if we are sitting through a summer of $7 or $8 gas prices and why isn’t the rebate happening now? People would start to clamour for it.”

Gas producers are seeing the effect of rising energy markets on their cash flow levels after suffering through several lean years with feeble prices.

Alberta spot prices for AECO natural gas traded below $2 per gigajoule for much of 2017 and 2018, and were mired below $1 during the summer of 2019.

“It is refreshing, for sure,” said Michael Belenkie, CEO of Advantage Energy, a Calgary-based natural gas producer. “If you asked us a year ago what prices we’d love, we would have said $3.”

Belenkie said colder weather, chronic global underinvestment for gas — driven by investor pressure and ESG concerns — and a lack of increased supplies are all affecting energy markets, along with higher demand for LNG.

And prices this year are moving up.

“It’s the topic of the day . . . a lot of small things are coming together here,” said analyst Jeremy McCrea with Raymond James.

“It is amazing, just how high the prices are.”

Chris Varcoe is a Calgary Herald columnist.

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