A Market-Based Method
Here at Direct Energy Regulated Services, we have been providing Albertans with natural gas since 2003. Our rates are based on current market prices for gas and are reviewed by the Alberta Utilities Commission (AUC) so you can rest assured that what you are paying is set at a fair market price.
The regulated natural gas rate is also known as the Gas Cost Flow Through Rate, or GCFR. We know that’s a bit of a mouthful, but here’s what it means for you.
We have a small but mighty team of buyers and schedulers who forecast how much natural gas we will need to serve our customers each month, along with the expected price of that natural gas based on market conditions. Our base purchase of gas each month takes into account the number of customers we serve and the 10-year average weather across Alberta for that month. Once we have our forecast level of natural gas that needs to be purchased, we make daily adjustments using the wholesale market throughout the month. This ensures we have the right amount of natural gas required to keep your house toasty in the winter or ready to fuel your grill for a delicious meal.
The prices that you pay for the gas you use are forecast one month ahead. While we have a very skilled team creating these price forecasts, market conditions can and do change each month. With the regulated natural gas rate (or GCFR as we called it above), you can rest assured that you won’t have to pay more just because we expected prices would be higher in the month but actually end up lower. Because we are regulated, government legislation and AUC direction means that we make adjustments to the following month’s rates to account for any variance in the previous month’s rate. So if the rate forecast was a little high and we over collected from you, that extra amount is subtracted from the next month’s rate (of course, the opposite is also true).
With Direct Energy Regulated Services, you are never locked into a rate that may result in you paying more than you should over time. You always get the market rate. Because we have some protection from market volatility by adjusting differences from previous months, we don’t need to charge our customers a risk premium like the large premium our fixed rate competitors need to build into their prices. Even on variable or floating rates, other retailers add a dollar or more per gigajoule to wholesale prices – whereas we only add pennies. As an example, for the month of October 2021, the commodity charge for Direct Energy Regulated Services breaks down as follows:
Other providers out there that offer floating gas rates charge a lot more than Direct Energy Regulated Services. If the wholesale price of gas is $4/GJ, you will actually have to pay between $4.99 to $6 per GJ with our major competitors. At that price, other charges and fees such as staffing, return margin, credit charges and risk margin make up between 20 to 33 per cent of your rate. Those percentages actually go up when the wholesale price of gas goes down. As you can see in the chart above, staffing and other charges make up little more than 2 per cent of our rate.
We calculate our natural gas rates as close to the month you will be needing the gas as possible. Our rates are submitted to the AUC five days before the start of the month, giving you as close to real time market prices as we can. The AUC then looks at our submission to ensure our numbers are accurate, giving our customers the assurance that they are getting a great rate.
If you have been a Direct Energy Regulated Services customer, you have likely saved a bundle of money! Did you know that over the past two years, our average price has been 20% lower than any current fixed price competitor?
Gas is measured in gigajoules (GJs) and how much the typical customer uses is highly seasonal. Most natural gas in your home is used by the furnace, but gas ranges and natural gas barbecues will also account for a portion of your usage. The average customer in Alberta uses 119 GJ over the year, but most of that is used in the winter months as seen below.
It’s important to remember that natural gas is only one portion of your bill, with your distribution company, local access fees, carbon tax and GST making up the majority. Distribution fees and the carbon tax are directly related to how much natural gas you use. One of the simplest ways to reduce your total bill is to conserve how much energy you use.
With Direct Energy Regulated Services, you can rest assured that we have you covered with natural gas prices that are set using a transparent and market-based method. We also offer a convenient budget billing option that allows you to spread out the cost of your higher winter gas usage over the lower usage summer months. This predictable bill is easy to set up using your Online Account or by talking with one of our friendly customer care agents (1-866-420-3174). Natural gas service from Direct Energy Regulated Services has been, and will continue to be, a great option to keep your home energized all year long.