1. Assessing Utility Mix Risks/Exposure
UCD Training
February 28, 2019

2. Risk Analysis
Purpose
To assess the potential long-term budget risks of future utility rate escalation
Three areas of risk:
Electricity prices
Natural gas prices
Carbon prices
Rationale
Balancing the utility mix will provide the ability to deal with potential future changes
e.g. planning to replace all electric heating with gas heating equipment:
carbon price and budget risk

3. Agenda Electricity e.g. policy change risk is a key driver Natural gas
short-term volatility drivers
e.g. weather
Carbon prices
e.g. policy – federal and provincial dynamic
2030 consensus that carbon needs to be US$100/tonne
Water
e.g. steadily increasing
~ 3 - 8% each year

4. Electricity Risk Policy Focus on reducing price
Limited options for real reductions
Potential changes to market rules like capacity markets
Changing mix of nuclear generation
Other
Local electricity distributor delivery costs moving toward fixed rates (from volumetric rates) i.e. from current $/kWh per month to $ per month.

5. Electricity Projection
Annual Change

6. Electricity Projection
Cumulative Annual Change

7. Natural Gas Risk Market
Prices remaining relatively steady for foreseeable future, however, weather and political events will lead to short-term volatility putting stress on budgets
e.g. spiking when current weather forecasts are updated, pipeline delivery constraints, extreme weather, fracking

8. Natural Gas Projection
Annual Change

9. Natural Gas Projection
Cumulative Annual Change

10. Natural Gas + Carbon Risk
Policy
Federal government introduced carbon tax beginning April 2019
Will result in increase to all fossil fuel costs
2030 consensus that carbon price needs to be US$100/tonne

11. Natural Gas + Carbon Risk
Carbon Tax vs Cap and Trade – Brief Background
Ontario had a Cap and Trade program from 2017 to Sept This market-based system set a price on carbon based on auctions
With the cancellation of the Cap and Trade system in the absence of an alternative pricing system for carbon, Ontario is subject to the federal Carbon Tax as of April 2019
A Carbon Tax puts a government-set price on a tonne of GHG emissions. In 2019 that is $20/tonne or about $0.039/m3 natural gas.
The federal price will increase by $10/tonne per year to $50 by 2022

12. Gas + Carbon Projection
Carbon price $20/tonne increasing to $130/tonne by 2030
Increases gas cost considerably
Annual Change

13. Gas + Carbon Projection
Cumulative Annual Change

14. Budget Impact Potential
For the following slides of board tables, these unit costs were used:
1 excluding carbon cost
Unit Cost $
2019
2025
2030
Electricity
0.176/kWh
0.187/kWh
0.218/kWh
Natural Gas1
0.21/m3
0.23/m3
0.27/m3

15. Budget Impact Potential
Small Board
Annual Electricity Consumption
(kWh)
Annual Electricity Cost
($)
Annual Natural Gas Consumption
(m3)
Annual Gas Cost
Total Annual Cost
10,000,000
$ 1,760,000
2,000,000
$ ,000
$ 2,180,000
Year
Electricity Cost
($/kWh)
Natural Gas Cost
($/m3)
Natural Gas + Carbon Cost
Annual Electricity Cost
($)
Annual Natural Gas Cost
Annual Natural Gas + Carbon Cost
Total Annual Cost (incl. Carbon)
Cost Increase
(%)
Ratio Elec/Gas Cost
2019
0.18
0.21
0.25
1,757,633
414,600
492,800
2,250,433
4.2
2020
0.20
0.26
398,600
515,900
2,273,533 1%
4.4
2025
0.19
0.23
0.38
1,865,506
449,400
762,200
2,627,706
16%
2030
0.22
0.27
0.53
2,183,547
546,000
1,054,300
3,237,847
23%
4.0

16. Budget Impact Potential
Medium Board
Annual Electricity Consumption
(kWh)
Annual Electricity Cost
($)
Annual Natural Gas Consumption
(m3)
Annual Gas Cost
Total Annual Cost
25,000,000
$ 4,400,000
3,000,000
$ ,000
$ 5,030,000
Year
Electricity Cost
($/kWh)
Natural Gas Cost
($/m3)
Natural Gas + Carbon Cost
Annual Electricity Cost
($)
Annual Natural Gas Cost
Annual Natural Gas + Carbon Cost
Total Annual Cost (incl. Carbon)
Cost Increase
(%)
Ratio Elec/Gas Cost
2019
0.18
0.21
0.25
4,394,081
621,900
739,200
5,133,281
7.1
2020
0.20
0.26
597,900
773,850
5,167,931 1%
7.3
2025
0.19
0.23
0.38
4,663,766
674,100
1,143,300
5,807,066
12%
6.9
2030
0.22
0.27
0.53
5,458,868
819,000
1,581,450
7,040,318
21%
6.7

17. Budget Impact Potential
Large Board
Annual Electricity Consumption
(kWh)
Annual Electricity Cost
($)
Annual Natural Gas Consumption
(m3)
Annual Gas Cost
Total Annual Cost
50,000,000
$ 8,800,000
10,000,000
$ 2,100,000
$ 10,900,000
Year
Electricity Cost
($/kWh)
Natural Gas Cost
($/m3)
Natural Gas + Carbon Cost
Annual Electricity Cost
($)
Annual Natural Gas Cost
Annual Natural Gas + Carbon Cost
Total Annual Cost (incl. Carbon)
Cost Increase
(%)
Ratio Elec/Gas Cost
2019
0.18
0.21
0.25
8,788,163
2,073,000
2,464,000
11,252,163
4.2
2020
0.20
0.26
1,993,000
2,579,500
11,367,663 1%
4.4
2025
0.19
0.23
0.38
9,327,532
2,247,000
3,811,000
13,138,532
16%
2030
0.22
0.27
0.53
10,917,736
2,730,000
5,271,500
16,189,236
23%
4.0

18. Forewarned is Forearmed
Analyze your mix of electricity and gas intensities
Scenario 1
Electricity: high
Natural gas: low
Which leaves you most vulnerable?
How should this influence your energy efficient investment decisions?
What activities should be prioritized to reduce costs and risks?
Intensity
Electricity
Natural gas

19. Forewarned is Forearmed
Analyze your mix of electricity and gas intensities
Scenario 2
Electricity & Natural gas:
similar intensity
Which leaves you most vulnerable?
How should this influence your energy efficient investment decisions?
What activities should be prioritized to reduce costs and risks?
Intensity
Electricity
Natural gas

20. Forewarned is Forearmed
Analyze your mix of electricity and gas intensities
Scenario 3
Electricity: low
Natural gas: high
Which leaves you most vulnerable?
How should this influence your energy efficient investment decisions?
What activities should be prioritized to reduce costs and risks?
Intensity
Electricity
Natural gas

21. Water Risk
Market
Most municipalities have recognized that their water service infrastructure is underfunded
Electricity costs are also increasing
The result is increasing costs for water supply and sewage
Rates are expected to increase at around 3 - 8% per year for the next several years for many municipalities
e.g. City of Ottawa rates projected to rise 4.4 – 5.2% per year over the next 10 years

22. Assessing Utility Mix Risks/Exposure
Send your questions to the UCD Help Desk
Phone: (416) ext. 115