CALGARY — Consumers can expect to save on their household utility bills for the foreseeable future with natural gas prices hovering at their lowest level in more than 10 years.
Natural gas prices were just under $2 per 1,000 cubic feet on the New York Mercantile Exchange on Thursday — the lowest they’ve been since early 2002.
The Canadian Gas Association estimates consumers have saved an average of $500 on natural gas over the past five years, and the trend is expected to continue.
“The signals are awfully strong that it’s going to stay very affordable,” said Timothy Egan, CEO of the CGA.
Huge supplies of natural gas are gushing from shale rock formations throughout the continent. Without any meaningful way to export it to energy-hungry markets overseas — along with mild weather and sluggish economy dampening demand — a major supply glut has been depressing prices for some time.
That’s bad news for companies trying to turn a profit by drawing natural gas from underground, but good news for the end users of the fuel.
“When it’s this abundant, and prices are as low as they are, that affordability picture just improves and that’s a good news story for Canadians,” said Egan.
The natural gas price flows directly through to the consumer, with no mark-up by the natural gas distribution company. Each province and territory has its own formula to calculate how the commodity price filters through onto a monthly bill.
“It is regular and it is constantly under review,” said Egan.
“Utilities aren’t making money on the commodity…So the consumer is benefiting as the price declines.”
Other costs on the bill include transportation and distribution of the gas.
The commodity component has fallen by half from a year ago, said Cameron Gingrich, senior manager of gas services for Ziff Energy in Calgary. With the other two main costs remaining steady, that translates into a roughly 20 to 25 per cent drop in overall bills compared to last year, he said.
“If you’re a natural gas user in Canada, then low gas prices mean lower monthly bills for folks,” he said.
However, that’s as long as consumers have not signed contracts that lock them into a higher price.
Ontario and Alberta each account for about a third of natural gas demand in Canada, so people in those provinces are most likely to benefit.
Because Alberta is where much of the natural gas is produced, it has a shorter way to go for consumers in that province.
“In Western Canada, where we’re close to the natural gas source, we’ll benefit a bit more than folks in Ontario or Quebec, who are further away and have to use pipelines, which increase the cost of gas to them,” said Gingrich.
“But it’s a net benefit for most of the people using gas in Canada.”