Nova Scotia Natural Gas Prices Hit 6 Year High

The December prices for Heritage Gas customers were announced today.  The news was not good.  The cost for residential customers in NS is the highest it has been in almost 6 years. Essentially the highest prices since Heritage Gas started in Nova Scotia. Residential Customers will now pay a total of $19.88/GJ.

In Nova Scotia, prices for Natural Gas are a combination of two numbers.

The Base Energy Charge cost is a representation of the cost to install and maintain the Natural Gas infrastructure and pipelines. This figure is set annually by the UARB.

The Gas Cost Recovery Rate is a straight pass-through of the commodity cost of Natural Gas.  This price corresponds to the market cost for Natural Gas in New England.

The current Base Energy Charge (for 2012) is $7.982/GJ and the December Gas Recover Rate is now $11.99/GJ ($7.982 + $11.99 = $19.88).  The December rate is almost twice the November rate of $6.17/GJ.

While Natural Gas prices fluctuate throughout the year, and are traditionally highest in the winter months, there are two main reasons for prices being the highest in 6 years.

First, demand is increasing.  There are many reasons for this, which include the historically low prices of natural gas in the past few years, and short term availability of other sources such as nuclear and oil due to events such as Hurricane Sandy.

Second, there have been supply issues with production at Sable and delays with Deep Panuke.  In late November, this led to what I believe is a first: the Maritimes Northeast Pipeline which connects Nova Scotia to the North American Natural Gas Grid was reversed to import gas to NS rather than export.  (Allnovascotia.com – November 30, 2012 – “Absent Panuke, Expect more Gas Price Spikes”)

Demand going up + supply going down = Prices Increasing

The bad news for Heritage Gas customers is that November is only the start of the peak season, and 2013 will bring further increases in the Base Energy Charge in addition expected increases in the Gas Recovery Rate.

The bad news for all Nova Scotians is that the biggest Natural Gas consumer in the province is Nova Scotia Power.

What "Sustainable Prosperity Act"?

How quickly Premier MacDonald has forgotten his own party's work from the Spring Session. Our government was one of the first in North America to pass legislation focusing on Sustainability, yet our Premier has put his faith in the oil and gas industry to lead this province into the future. MacDonald wrote a column in todays Chronicle Herald (link) proclaiming that our "future looks bright" because Deep Panuke might happen. If Encana decides to proceed with this large offshore project, (which I imagine they will), they will spend 3 years building the facilities, and 13 years pumping Natural Gas from the ocean floor. This may seem like a long time, but every turbine that is installed in the next two years in response to NS Power's RFP will last longer than this offshore project.

The PC Government seems hell bent in pushing the oil and gas industry for more exploration off our coasts, going as far as traveling to Houston and Dallas (home of such sustainability experts as Exxon and Halliburton) to beg them to come to Nova Scotia. Do we want a Premier that is in Texas promoting Oil and Gas, or perhaps one that goes to Denmark and Germany to see how they became world leaders in renewable energy. The Sustainable Prosperity Act pledges that Nova Scotia will become a "world leader in environmentally sustainable technologies" (Bill 146 3b). Did Premier MacDonald think the Texas Oil Patch was the place to start looking for these technologies?

Our government's bias towards Natural Gas has been clear for a while. Earlier in the summer, Premier MacDonald and Energy Minister Dooks pledged $3Million to help Heritage Gas pay for infrastructure costs. Heritage Gas is now giving the KeyNote address at the Green Energy 2007 conference sponsored by the Department of Energy. Natural Gas isn't green, and it isn't sustainable.

Both the Natural Gas industry and the Renewable Energy industry are starting to blossom in Nova Scotia. If a government wanted to be environmentally friendly, and sustainable as well, which industry should it support? Our government has put it's money on the table: 3Million for basic Natural Gas infrastructure, $75 thousand for the NS Wind Atlas.

Minister Dooks recently added in the Chronicle Herald (link) that the Department of Energy has to "protect electricity consumers". Natural Gas is well known to be more expensive than wind energy for electricity production. All year, NSPower has been burning $80/barrel oil at Tuffs Cove because it's still cheaper than Natural Gas. (CORRECTION: since earlier in 2007, Natural Gas has been used instead of Oil, which had been used for the past few years). The argument that renewables must be contained to protect consumers is completely false... it's only the existing fossil fuel interests that it protects.

Despite all this, the funny thing is that the renewable energy industry doesn't need all the handouts and bait money the oil and gas industry gets. All that the renewable energy industry needs is access to customers, something our PC government promised it would do in 2002. My recommendation is to let our poorly funded and under-performing schools have the money, and let renewable energies lead this province into the future.