To understand the best options with Natural Gas in Ontario, it’s useful to understand how the Utility sets the pricing every 3 months.
We often call Utility System Gas the “supplier of last resort”. In addition to the gas costs, the Utility includes other costs, including balancing costs in the price which are spread against all System Gas customers. As a customer, you have no control over your ultimate costs and are often subsidizing other costs that you shouldn’t have to carry.
Utility price is based on the current 3-month historical average of the AECO 5a Index. This is the Canadian Gas monthly average Index Rate.
The price includes the above-mentioned costs or losses, as well as any shortages on price from the previous quarter(s) which can be adjusted up to 24 months.
This means that the price you are paying for Natural Gas on Utility is not the actual commodity price at the time you use it, but an estimated price which can often be more than the actual commodity price.
ABC billing simply means that the commodity price is billed by the Utility. The actual price will be the AECO 5a Index price plus an adder (a fee to cover costs and margin for service), that is clearly stated on the contract.
NOTE: If you want to lock in to a Fixed Program during this time (for example, Fixed prices were decidedly favorable or for budget-setting purposes), this can be done, but not as quickly or as flexibly as with a Bundle T Program. It would likely take 30-60 days for a price change to take effect and then the new price would be for a 1-year minimum. In a Bundle T Program, we can fix pricing within days for terms as short as 1 month.
As per above, you would pay the AECO 5a Index price, but will also be billed directly from the supplier equally for the 12 months in a year. Since many users use most of their gas in the winter months, equal billing means you pay for less volume in the typically more expensive months which usually shows additional savings. You will still get a bill from the Utility for the delivery and other regulated costs, but the commodity and some or all of the transport is billed directly to you. This type of Program also shows lower Fixed transport costs for additional savings.
The other major benefit to this Program is its flexibility and lower pricing. For example, if for some reason, such as weather, the market was driving up, it’s possible to lock in for just 2 or 3 months at a time within a few days of lead time, whereas the ABC billed client would have to lock in for at least one year and it would take more time to fix the rate. You can also lock in just 50%, for example, (or even just 5%) with very little notice so you can be much more responsive to the market.
This type of Program requires more attention than a simple Fixed price, but for the savvy customer or for a larger volume customer, this can see additional savings and even less risk due to its flexibility.
Customers in this arrangement must meet credit and sign a Bundle T Industry Standard Gas EDI contract.
Through our 5 chosen suppliers, we can secure the lowest cost Fixed rates and shop your rate and volume. For Bundle T customers, rates can be Fixed for less than a year with the remaining on Index.
For ABC billed customers, the rates will be for 1 through 5 years. Additional contract benefits can include fully balanced (no load balancing) and other favorable contract terms depending on the type of contract. We always negotiate the best terms possible on behalf of our clients with our suppliers.
This type of arrangement is suitable for customers who are totally risk adverse or who require a firm budget to know what they will be spending on their natural gas.
Most suppliers will offer 50/50 load following gas options and of course, Bundle T customers can lock down at any percentage. This offers the benefit of some price certainty with less risk if the market suddenly drops.
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Onterra Energy Advisors is a wholesale brokerage firm that shops for the very lowest prices from our select suppliers ensuring the lowest cost options and most favorable contracts available for our customers. We work for you – not the supplier!