September, 2005 saw Sask Energy request a raise in the rates for natural gas by an average 27%. At that time Sask Energy explained the request as:

"Sask Energy does not profit over time from the sale of gas. Sask Energy buys all of its customers' natural gas on the open market and sells it to customers at cost, as per normal regulatory practise for natural gas utilities in Canada. Any difference between projected and actual costs, positive or negative, is captured by the Gas Cost Variance Account (GCVA) which is regularly monitored by the Provincial Auditor."

(emphasis mine)

In November, 2005 Sask Energy created the "Saskatchewan Energy Share Plan". The purpose of the plan was a short term, 5 month protection, from rising prices in the Natural Gas sector. While Sask Energy had cause for concern about the price of natural gas leading up to the plan, serious questions must be asked about the merits of the plan after the announcement.

Here is a chart that reflects the AECO-C(Alberta Energy Company) spot prices surrounding the Sask Energy's Share Plan:

As you can see, less than two months after the announcement natural gas prices fell and continued to fall.

Here is a chart comparing Sask Energy vs the Spot Price of AECO from January 2006 until the end of January 2007.

Sask Energy's prices are in blue, the AECO spot prices are in red. It is evident that Sask Energy's gas price was much more expensive over the course of 2006. This flies in the face of Sask Energy's claim that it "sells it to customers at cost".

But how much over cost?

The Natural Gas Index lists prices in Gigajoules, Sask Energy bills out by the cubic metre. Terasen Gas offers us a simple conversion:

A Gigajoule of natural gas is about 25.5 cubic metres at standard conditions.

So, every 100 cubic metres of natural gas equals about 4 Gigajoules.

Update: I'm just in the middle of a conversation that puts this assumption to a large test. From a source:

TransGas (TG) - your provincial natural gas pipeline/distribution network - has standards for gas that enters its' pipe for energy - better known as 'heat content'. Typically, this should be 37.8GJ/103m3.

Assuming above mentioned source is correct, that will significantly alter the calculations and the amount of money that Sask Energy consumers are being hosed for. At $0.91/Gj (over AECO spot price), 38 Gj per 100 cubic meters is a completely different story than 4 Gj/100 cubic meters.

By taking the daily difference from Sask Energy's price and the Spot price Sask Energy comes out $360.34 above. Averaging the difference out over the year gives us a $0.91 per Gigajoule. Based on the average spot price and the average Sask Energy price, Saskatchewan residents are paying 114% of cost for their natural gas.

What is Sask Energy doing with the extra 14%? Would that be part of the dividends going into the General Revenue slush fund? Why are Saskatchewan residents and businesses paying this extra tax when Sask Energy explicitly said they don't do this?

Why are we getting ripped off?

Why after a full spring, summer and fall of raking in money did Sask Energy get approval for another 5.4% increase?

The data doesn't seem to indicate a need. Indeed, as the source who supplied me with this data asks:

I would like further explanation of the price increase that was asked for in September 2006. With the spot price of natural gas on September 13th, 2006 being at a four year low and SaskEnergy charging $2.05 more per Gigajoule (Gj) than the going rate for natural gas, they had the audacity to apply for a rate increase, even though they were charging 43% more than the market price. While the Saskatchewan Rate Review Panel (SRRP) was contemplating this proposed rate hike the price of natural gas went down to $2.69/Gj. That means SaskEnergy was making a 153% profit that day. On October 11th the SRRP agreed to the increase, at that time SaskEnergy was making a 29% profit on its natural gas sales. How is this increase possibly justified?

Update: The data in Openoffice.org 2 ods format (184k).

Cheers,
lance

Posted at: 12:52 | Comments (5) | [sask] | G