As the current pandemic continues to run its course, housing providers across Ontario have gone from responding and adapting to now transitioning to a “new normal.” Many of you are beginning to turn your minds towards recovery and moving forward with projects in your buildings that may have been put on hold. In this issue, we look at how certain building improvements can benefit both tenant health and energy efficiency, how leveraging gas pricing can help you manage costs in uncertain times and how the provincial energy data requirements have been updated for non-profit and co-operative housing providers.
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While you know that cutting energy use can save money, you may not realize that energy efficiency improvements can contribute to safer and healthier homes for your residents. This may become increasingly important in the aftermath of the current global pandemic, as considerations for reducing community spread of illnesses become more top of mind.
There is significant research showing that efficiency upgrades have positive health outcomes. In the American Council for an Energy-Efficient Economy’s recent review of 25 different studies, examples of health benefits related to energy efficiency projects included:
Other studies show that increased thermal comfort from improved insulation and air sealing can prevent drafts and temperature variations that can trigger various respiratory illnesses.
Looking at asthma as an example, we can see in this table how common weatherization upgrades can help address this health issue:
Source: American Council for an Energy-Efficiency Economy, 2019
For residents who pay their own utility bills, efficiency improvements that lower utility costs can also help reduce financial stress, and by extension, stress-related physical and mental health conditions. If you are considering doing an energy efficiency project, highlighting these added benefits will help you make a stronger case for a project and hopefully get residents and decision-makers onside.
Reducing your utility costs is challenging enough given weather, equipment, and tenant impacts; and it may seem next to impossible when energy prices are volatile or on an upward trend, as we have seen during the current COVID-19 pandemic.
Natural gas costs are particularly difficult to predict due to the wide range of factors that influence pricing, from production and storage, to local and international demand. But understanding gas pricing and the factors that affect it can help you get a better handle on your utility costs and budget for the coming year.
How You Purchase Gas
Purchasing natural gas is similar to selecting a mortgage rate. You can opt for a variable (market rate) by buying your gas directly from your gas utility or from an external vendor like HSC. Alternatively, you can purchase gas at a fixed price for a specific term through an external vendor. As with mortgage rates, each approach has pros and cons that depend on the gas market as well as your own risk tolerance.
Current Gas Market Trends
Natural gas prices tend to be very volatile, rising and falling month to month due to various influences such as supply, demand, storage, and weather. Under normal circumstances, market ups and downs are common in the near term. However, as the graph below shows, Canadian gas prices have been pushed upwards in recent months due to the impacts of COVID-19, with current market rates considered overpriced by some industry experts. HSC anticipates these prices will decrease into the fall and have adjusted our gas program renewal timing accordingly.
Gas market fluctuations can typically be mitigated by a fixed term contract. If you are billed at a variable market rate, these monthly increases and decreases will impact you from bill to bill. This rate option can benefit you when prices drop, or cost you when prices rise. By comparison, if you are in a fixed rate term through an external vendor like HSC, you are not impacted by the market’s volatility; you can budget knowing that you expect the same price every month, and, if the market rates rise, you are protected.
“Gas Used” versus “Transportation”
On a typical gas bill, you are charged one rate for the “Gas Used”, which represents the commodity or volume of gas used. You are charged another rate for “Transportation”, which represents the cost to move the natural gas to the Dawn Hub, the southern Ontario gas storage facility. The utilities charge for the additional delivery from the storage facility to your door, as well as storage and carbon tax fees. In recent years, transportation has become an increasingly significant piece of your bill, representing upwards of 50% of your overall gas costs.
Like gas commodity pricing, transportation rates depend on several factors, the most important of which is the storage location. In Ontario, most gas travels into the province through the Dawn storage hub near Sarnia. From there, it may be moved to the Greater Toronto Area through the Dawn-Parkway System, which interconnects to pipelines for eastern Canada as well. Parts of northern Ontario, however, are served by a different facility known as Empress out of Alberta. The transportation rate may vary depending on the facility through which your gas moves – Dawn or Empress.
Transportation prices fluctuate within the yearly cycle, but one thing we have noted is that, at the end of the year, transportation prices tend to rise as suppliers and producers tighten up operations for the winter months. Over the past decade, average annual transportation prices ranged from $0.60 to $2.00 per Gigajoule due to market volatility. Current pricing is low relative to prior years. Transportation pricing also tends to have an inverse relationship to commodity gas pricing. Historically, as gas prices increased, transportation pricing decreased.
It is also useful to know that transportation price trends are not tied directly to commodity price trends. For instance, on the commodity side, “AECO” is the Alberta gas trading price and is the benchmark for setting Canadian natural gas pricing. AECO’s prices have been increasing slowly over the last four to five months, yet the corresponding Dawn-based transportation rates have actually been decreasing slightly. So, while gas commodity prices are currently up, transportation prices are down, meaning that the total delivered cost of gas has not changed dramatically in the last six months.
Current market conditions may be putting further upward pressure on the AECO commodity pricing. These conditions include:
According to 2018 and 2019 forecasts, the one-year fixed term price for 2021 and 2022 has been volatile and has actually increased in recent months as seen in the graph below.
The Bottom Line
If you pay market rates, you may see your commodity price increase in the coming months. If you are on a fixed term, you will be protected from any increases, assuming the predicted conditions materialize. During the past few years of volatility, HSC has successfully secured favourable fixed-term pricing for both the commodity and transportation costs for providers in our Natural Gas Purchasing Program.
In addition to improving the energy efficiency of your building, being strategic about your gas purchasing can help you reduce your buildings’ overall utility costs. When market prices are low and stable, you can benefit from choosing a variable rate. If the market is volatile and prices are rising you can benefit from locking in at a set price for a fixed term. You’ll be protected from additional rises for the period of your term while at the same time achieving greater budget certainty.
Under Ontario Regulation 506/18 – Reporting of Energy Consumption, large building owners must report their building’s energy and water use once a year to the Government of Ontario. For social housing, this regulation applies specifically to non-profit and co-operative multi-family buildings, but not to municipal housing.
The Province has been rolling out this regulation in phases, beginning last year with multi-family residential buildings 100,000 square feet or larger. Earlier this month, the Province amended O. Reg. 506/18 to delay the roll-out of the regulation to buildings between 50,000 and 100,000 square feet until 2023, allowing three additional years for those building owners to prepare for reporting.
What Is Currently Required?
Non-profit and co-operative providers with multi-family buildings 100,000 sq. ft. or larger must report their total annual energy and water data to the Ministry of Energy, Northern Affairs, and Mines every year. The Province recently extended the deadline to submit your 2019 data to October 1, 2020 from the usual deadline of July 1.
The data must be submitted using the Province’s online portal, called EnergyStar Portfolio Manager. In the submission, you must include the “EWRB Number” for each building. If you haven’t already received this number by mail, you can call the ministry at 1-844-274-0689. You also need to include your property’s 15-digit Assessment Roll Number, which you can find on your property assessment or property tax bill.
Where Can I Go For Help?
Visit the Province’s Guide to Energy and Water Reporting webpage for more information of who needs to report, what’s required, and how to report.
Too much already on your plate? HSC has a low-fee Energy Reporting Service for providers who wish to have us complete the submission. Contact us for more information.
Other Topics? If you’d like to suggest a topic or want a one-on-one review with HSC staff, please contact email@example.com.