Frequently Asked Questions about the October 2008 Rates

The Ontario Energy Board (OEB) approved changes to Union Gas’ rates effective Oct. 1, 2008.

Please go to Rates to view the rates specific to your area.

Are my rates changing in October?

Yes. Rate changes were approved for all Union Gas residential customers in Ontario and are comprised of two parts:

• Changes to the rates reflecting the forecast cost of natural gas during the next 12 months. This is part of our quarterly rate adjustment process to reflect ongoing changes in the market price of gas.

• Changes in the rates Union Gas charges customers for transporting gas.

The proposed rate change represents an approximate two per cent decrease in the total annual bill for an average residential customer who purchases gas from Union Gas. That means an average annual decrease of $25 to $32 dollars depending on location. The rates will remain in effect from Oct. 1 through Dec. 31, 2008.

As detailed below, customers living in Southwestern Ontario who purchase gas from Union Gas will see a price decrease of about $25 a year compared to rates in effect from July 1 to Sept. 30, 2008, depending on the amount of gas used. Customers living in Northern and Eastern rate zones who purchase gas from Union Gas will see a price decrease of about $32 to $27 a year compared to rates in effect from July 1 to Sept. 30, 2008.

Customers who purchase gas from a retail energy marketer in a bundled contract will see an annual rate increase of approximately $4 to eight cents per year, depending on rate zone, to reflect the increased cost of purchasing transportation services.

Gas Supply Costs
Gas supply costs include information on the “Gas Commodity Rate” and “Gas Price Adjustment” lines on your bill.

For customers in Southwestern Ontario, the net gas supply rate decreased by about $43 per year, or about two cents/m3, to about 35 cents/m3. This decrease consists of an annual decrease of about $112 in the gas commodity rate to reflect a decrease in Union Gas’ forecast cost to purchase gas for the next 12 months, and an annual increase of about $69 in the gas price adjustment to reflect the difference between forecast gas costs and actual gas costs from prior periods.

In the Northern, Eastern and Northwestern rate zones, the net gas supply rate has decreased by $35 to $31, or approximately one cent/m3, to about 36 cents/m3 depending on the delivery zone. This consists of an annual decrease ranging from $112 to $107 in the gas commodity rate to reflect a decrease in Union Gas’ forecast cost to purchase gas for the next 12 months, and an increase of about $76 in the gas price adjustment to reflect the difference between forecast gas costs and actual gas costs from prior periods.

Transportation Costs
Transportation costs refer to information on the “Transportation to Union Gas” and “Transportation Price Adjustment” lines on your bill.

For customers in Southwestern Ontario, the transportation to Union Gas rate increased by about $18 annually to reflect an increase in Union Gas’ forecast cost to buy transportation services for the next 12 months.

In the Northern rate zone, there’s an annual increase of about $5 in the transportation rate to reflect an increase in Union Gas’ forecast cost to purchase transportation services for the next 12 months.

Delivery Costs
There’s a minor decrease of about eight cents per year in the delivery price adjustment in Southwestern Ontario to adjust the difference between forecast costs and actual costs from prior periods.

There’s no net change in the delivery rates for Northern, Eastern or Northwestern Ontario rate zones.

Why is Union Gas Decreasing Rates?

This change in natural gas rates reflects a reduction in our forecast cost of purchasing natural gas supplies for the next 12 months plus an adjustment for the difference between forecast costs and actual costs from prior periods.

Will the Price of Natural Gas Continue to Decline?

Natural gas, like other commodities, is publicly traded and any significant event that impacts either supply or demand, such as extremes in weather across North America, can impact the market price. We can’t say for certain what the market price of natural gas will be in the future because of the number of forces that can influence market prices.

Do Rate Changes Impact Those Buying Gas from an Energy Marketer?

Customers purchasing natural gas from a retail energy marketer will see an increase ranging from $4 to eight cents a year, depending on location, to reflect the increased cost of purchasing transportation services.

If you purchase gas from an energy marketer, the price you pay for the gas commodity depends on the terms of your contract with the energy marketer. A three-year contract with a retail energy marketer averages about 40 cents/m3 (energyshop.com, Sept. 3, 2008). Union Gas’ commodity rates, which are adjusted every three months, are 35 cents/m3 from Oct. 1 to Dec. 31, 2008.

When Does Union Gas Change Rates?

As a Union Gas customer, you’ll see two general types of rate adjustments during the year. The first type takes place four times a year – on January 1st, April 1st, July 1st and October 1st – and reflects gas commodity and transportation price changes. This quarterly rate change helps ensure that you’re billed at a rate that more closely reflects the expected market price of gas and helps avoid large out-of-period adjustments. The second type of rate change takes place annually and reflects the overall costs to run a safe and reliable gas system. All rate changes are OEB approved.

Why is the Natural Gas Commodity Rate Adjusted Each Quarter?

We review and adjust our rates every three months to reflect ongoing changes in the market price of gas. Making adjustments quarterly brings forecast costs more in line with our actual costs. When actual costs differ from forecast, future rates are adjusted to refund or collect the difference from customers. These steps ensure you’re are billed at a rate that closely reflects the market price of gas, help minimize large out-of-period adjustments and smooth out peaks and valleys related to daily changes in the market price of gas.

What are Price Adjustments?

Price adjustments refund or collect the difference between forecast costs and actual costs from a prior period. The price Union Gas charges you for gas is based on a forecast of what the market price of gas will be for the next 12 months. This forecast is updated and approved by the OEB every three months to reflect changes in the market price of gas. Union Gas is not allowed to earn a profit on the sale of gas, so we track the difference between the price we charge for gas based on this forecast, and the actual cost of gas we purchase during the same period. When forecast costs differ from actual costs, Union Gas applies a price adjustment to refund or collect the difference. This way, we can ensure that the actual costs of gas is passed through to our customers.

Why did my Equal Billing Plan Rates Increase in September?

Your Equal Billing Plan (EBP) payment amount is based on a forecast of the amount of natural gas you’ll use over the course of a year and of what gas prices will be during that same period. We review your equal billing account each September and periodically throughout the year to determine if your equal billing payment is set at the correct level, and may adjust it up or down based on current information, which includes rate changes.

If you purchase your gas from a retail energy marketer, the rate charged by the marketer is taken into account when calculating your equal billing payment amount.

Does Union Gas Benefit when Natural Gas Prices Increase or Decrease?

No. Like a trucking company, Union Gas earns income on delivering and storing the product – natural gas – and not on the product itself. The rates we charge for our delivery and storage services are regulated by the OEB and have remained relatively stable for a number of years. Gas commodity and transportation rates, which make up the majority of your monthly bill, are passed through to you without mark up. Larger continental forces, like supply, demand and weather, influence the price of the gas commodity.

I Noticed the Same Line Twice on My Bill. Am I Being Billed Twice?

No, the billing period doesn’t begin and end on the first and last days of each month, but covers a period somewhere mid-month to mid-month. Consumption for the period prior to a rate change is billed at the old rate, and consumption after a rate change is billed at the new rate. The number of days at each rate depends on the monthly cycle in which your account is billed.

What Assumptions are Used to Calculate Typical Gas Use?

When calculating gas use for a typical residential customer, we define this as three people living in a 15 to 20 year-old house that measures about 2,000 square feet. The home includes a mid-efficiency natural gas furnace that’s approximately 81 per cent efficient, water heater and another gas-fuelled appliance such as a fireplace.

Factors Influence Gas Consumption Include:

Weather – Weather is the biggest factor affecting gas consumption. In cold weather, more natural gas is needed to heat your home.

Furnace Efficiency – High-efficiency furnaces are about 60 per cent more efficient that conventional low-efficiency furnaces. Mid-efficiency furnaces are about 33 per cent more efficient than conventional furnaces.

Home Size – It requires more energy to heat a bigger home and, the more people in a house, the higher the use of gas. Every 100 square feet of home size larger than 2000 square feet adds about 100 m3 of gas consumption annually on average.

The age and energy efficiency of your home also affect gas consumption. Each person in addition to the average three people per home uses approximately 200 to 400 more cubic meters of gas. The number of gas appliances and frequency of use also influence consumption.

Why are Rate Changes reflected on a Yearly Basis?

Customers told us they wanted to know the specific unit price and the dollar impact associated with the unit price for rate changes. It’s consistent and easier to compare price changes by using yearly dollar impacts. Each time rates change, we provide the effect of the rate change on the yearly gas bill using a current typical residential customer’s gas use of 2,600 m3 a year.

Is Natural Gas My Best Energy Value?

Absolutely, natural gas is the most cost-effective means of heating your home compared to electricity or oil. Using gas to heat your home is about half the cost of electricity.

How Can I Use Less Energy at Home?

You can use less natural gas and still enjoy the same level of comfort and convenience. You’ll find many energy-efficiency tips and suggestions at uniongas.com/energyefficiency

What’s Union Gas Doing to Help Me Manage my Energy Costs?

We know that fluctuating natural gas prices are a concern, and that reducing energy consumption is the best way to offset increasing energy prices. Union Gas provides extensive information about how you can reduce your energy consumption on our website, in intouch, our customer newsletter, through the media, at energy conservation clinics and energy forums, and by working with large retailers to share energy conservation tips with the public.

In addition, we distribute free Energy Saving Kits (ESKs) to our customers. Each ESK contains an energy-efficient showerhead, a kitchen and bathroom faucet aerator and foam pipe insulation for the water heater. The average Union Gas customer can expect to save up to $100 per year by installing all of the ESK components.

While Union Gas doesn’t control the cost of gas, we work very hard to manage the costs associated with delivering and storing gas for our customers. These rates have remained stable for a number of years and cost less than $1 a day.

Who Qualifies for Union Gas’ Program to Help Customers Who Can’t Pay Bills in Winter?

For several years now, Union Gas has partnered with United Way agencies to deliver a Winter Warmth Program to our customers. The Winter Warmth Fund provides one-time financial assistance up to $450 to Union Gas customers living at, or slightly above, the poverty line, and who’ve been disconnected or have received a disconnection notice, or are in arrears on their gas bill and have exhausted all other sources of financial support. Individuals who believe they meet the program criteria should contract their local United Way.

Union Gas also has several programs underway that help low-income customers manage their energy use in order to reduce gas bills.

Do You Disconnect Customers Who Can’t Pay their Bills in Winter?

We manage every case on an individual basis, and encourage customers who are having difficulty making utility payments to call us toll-free at 1 888 774-3111. We have a long history of working closely with our customers to make payment arrangements that can help them through the winter months. We also work with many social service agencies, church groups, municipal groups and elected officials to offer solutions.