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.

Natural Gas in Halifax

The Provincial Government has played a pivotal role in bringing Natural Gas to the Halifax peninsula, and helped the supplier, Heritage Gas secure an "anchor" client in Capital Health. This change will bring a reduction in GHG emissions, since natural gas does burn cleaner than the source it is replacing, heating oil, however, I would hardly agree with the statement from Heritage Gas that it is "environmentally friendly" nor do I think it is a wise investment for the future of Halifax.

Natural Gas gets off easy when it comes to fossil fuel's affect on the environment, even though it is a highly exhaustible source (just like oil) that still emits lots of GHG emissions. The Government press release noted that this conversion will reduce GHG Emissions by 20,000 tonnes, which is a good thing, but installing 4 utility scale wind turbines would have the same effect with much less cost.

The people of Halifax and Nova Scotia must also stop to think if this is a wise investment economically. The price of natural gas is still highly volatile, and most of the worlds reserves have been found and are being extracted. Even our own offshore reserves are in decline. NS has done well exporting natural gas to New England, and why have we mostly exported it?? because it is more expensive than our current sources. Rather than exclusively being a seller of a limited resource with large price fluctuations, our provincial government and Heritage Gas are spending millions of dollars making the people of Nova Scotia buyers of it has well. The price of natural gas has come down over the past two years, but it only takes a basic understanding of supply and demand to realize that when supply is limited, price will go up. Where does Premier MacDonald and Minister Dooks think the price of natural gas will be in 10 years? or 25 years? It is increasingly expensive to run our health care system due to shifting demographics, and yet our government is investing millions to guarantee that the costs of operating our health care facilities will continue to increase. Not only will the price continue to increase, but the price of natural gas is actually more volatile than the oil it is replacing. All it would take is one big storm or one terrorist attack, and it could mean drastic increases in the cost to Nova Scotians to run our hospitals overnight.

In order to be truly environmentally friendly, and economically wise, the government needs to support using renewable energy sources to power our businesses, institutions and residences. Energy Minister Bill Dooks said in the government's press release "Nova Scotia has tremendous natural-gas potential -- we've got it, let's use it". Why doesn't "we've got it, let's use it" apply to renewable sources?? Not only do we have a far greater resource potential than natural gas in both wind and tidal , it doesn't require millions of millions of dollars of government infrastructure subsidization to succeed. All it needs is the opportunity to compete.