Natural Gas PricingCommodities continue to experience strong global demand resulting in higher prices and volatility. As you plan for this heating season, please review these frequently asked pricing questions.
Frequently Asked Questions
What’s causing an increase in gas prices?
We’ve seen a trend of increased energy prices over the past few months. When it comes to natural gas, a large part of this has to do with sustained high demand for North American liquefied natural gas (LNG, super-cooled natural gas that is stored in insulated tanks, for shipping to foreign markets).
The energy crisis in Europe is the primary driver for higher natural gas prices. The war in Ukraine has driven unprecedented demand for non-Russian natural gas as Russia has historically been a critical natural gas supplier to Europe. Many European countries are trying to move away from the Russian gas supply and secure LNG exports from other parts of the globe, like North America.
Aside from the energy crisis, inflation has risen dramatically in the past year, weakening the Canadian dollar, and driving higher prices for consumer goods such as groceries, fuel, etc.
What does this mean for customers?
Eastward Energy will continue to take measures to secure a reliable and affordable supply of natural gas for our customers. Over the last several years, we have secured long-term transportation contracts (15+ years) to bring natural gas to Nova Scotia from regions of North America where natural gas prices are more stable and affordable. These contracts are helping to protect our customers from even higher price increases as these natural gas supply sources demonstrate lower prices and reduced volatility.
Did you see this coming? If so, why didn’t you warn customers about the price increase?
These price increases have been a result of the energy shortage happening in Europe. Due to Europe’s intent on decreasing its reliance on Russian energy sources, North America has now become a significant supplier of LNG to Europe and is now the largest exporter of natural gas in the world. Unfortunately, there is no accurate way to predict the exact amount prices will settle at, but as we’ve seen with commodities such as groceries and gasoline prices, inflation is heavily affecting the prices of these everyday items and we encourage our customers to budget for higher energy costs this winter as high costs are forecasted to persist.
What are you as a company doing to make natural gas prices more reasonable?
Eastward Energy has entered into long-term transportation contracts on behalf of all our customers to help smooth price instabilities – a portion of our customer’s forecasted winter usage will be secured under fixed-price contracts this Fall, which provides price stability for our customers. Even with these contracts, energy costs are still expected to remain high.
Can we expect to see natural gas rates increase further this winter?
It’s difficult to predict if energy costs will remain high due to the unpredictable nature of current market demand. A warm or cold winter will impact both demand and price. If we have a warm winter and demand is low, this could result in lower prices. Alternatively, if we have a cold winter and demand increases, there is a strong chance gas pricing may also increase.
How do you determine the Gas Cost Recovery Rate (GCRR)?
The price of the natural gas commodity is determined by a fundamental concept called supply and demand. Supply is impacted by gas production rates, gas storage, and transportation accessing production and storage. Demand is influenced by weather (heating and cooling) and economic (industrial) activity. The cost of natural gas is not regulated by the Nova Scotia Utility and Review Board. When demand is high in the market, prices typically rise. When supply is high, prices typically drop. We purchase natural gas from the wholesale market and pass this cost to our customer – the customer pays no more than what we’ve paid for the product. The Gas Cost Recovery Rate (GCRR) is a pass-through charge, meaning Eastward Energy does not add any additional markup.
How do you make money if you’re charging the same amount for gas as you paid for it?
We earn a return through our regulated delivery rates we charge customers. The delivery charges cover the expense to deliver natural gas to your home and business, so it’s always available when you need it. These rates are regulated and approved by the Nova Scotia Utility and Review Board.
How can customers manage these price increases throughout winter 2022/2023?
As all energy costs are expected to be higher this winter, it will be important for homeowners and businesses to conserve energy. Energy conservation is key to decreasing your overall energy cost and is easier than you think. Installing programmable thermostats, energy-efficient heating equipment, ensuring your windows and doors are properly insulated, and adding additional insulation to meet new building codes will all help to reduce energy use now, and over the long term.