City of Medicine Hat utility customers are urged to look into whether a retroactive fixed rate on natural gas would make financial sense for them.--NEWS FILE PHOTO
cgallant@medicinehatnews.com@CollinGallant
Hatters are now contemplating whether to take advantage of a utility department offer to retroactively apply fixed commodity rates to their January bills, but the math is easier done for power rates compared to gas.
Council approved the program this week, allowing customers currently on default rates to sign up for a fixed rate that would be applied to January’s billing cycle.
For power that would mean receiving a credit for almost half of the power used during the month – about $40 for the average house – as the difference between the two rates.
For gas however, the fixed rate of $4.35 per gigajoule was actually higher than the floating rate in January ($3.64), creating a somewhat counterintuitive situation.
Administrators say they were aware of the situation when the program was determined, but the two sides are being treated similarly, and a switch would make financial sense in certain circumstances.
“It all depends on the renewal date on your bill,” said corporate services managing director Dennis Egert.
“We really recommend that folks contact our customer service desk and ask for the calculation.”
Because the billing cycle doesn’t align with calendar months, some gas paid for in January was used in December and charged at that month’s rate of $4.79.
That means some customers will see greater upside than others, but also puts them into the fixed rate for a minimum six months in 2022, after which they could cancel and move back to monthly price setting.
The March default rate for gas is due Tuesday, but initial analysis of posted rates – on which Medicine Hat finds the average – shows it should be close to the $5 mark for gas.
Power is “a more compelling case” for customers, according to Egert.
The fixed rate would see customers pay 8 cents per kilowatt hour for power used in January – and months going forward – compared to a current record-high variable price of about 16 cents.
The potential cost to the utility if all customers switch would be $2.2 million related to the one-month rebate, while the city will also waive late penalties from the month and cancel some other fees.
About 42 per cent of the city’s 27,000 utility accounts use fixed-pricing for power, compared to 38 per cent for gas. It will also extend credits to Hatters who qualify for home energy audits toward reducing consumption.
Coun. Robert Dumanowski said a consideration for the long-term financial strength of the utility division must be a factor when operating the business.
“The sensitivities are not lost on us,” he said. “But (rising utility bills) are not a Medicine Hat phenomenon, it’s happening throughout the province, nationally and internationally.”
This month the city’s communications office published a “Q&A” on customer concerns, but councillors said more should be done to provide answers to Hatters concerned about high bills, especially feeds and charges beyond how much power or gas is used.
“I think people understand the commodity rates, but don’t know why the other rates go up,” said Coun. Shila Sharps.
Top officials said fees for administration and maintenance of the distribution system are a matter of cost-recovery common to all private and public utility companies.
“They are based on a cost of service model,” said Rochelle Pancoast, acting city manager and former head of the utility business support office.
She said non-commodity fees, such as administration, delivery and system charges, are based on recovering the city’s costs of running and maintaining distribution systems, and those fees rose by less than the general rate of inflation in December when they were last updated.
“Fixed rates for the commodity chard is set,” she said, but “total cost may rise because of consumption.”
The city has offered fixed prices for several years, but they were not very popular in power until a rate cap on prices was lifted by the UCP government in 2019. Very few customers signed up for the fixed gas rate until last spring when the market price throughout North America began to rise from a decade-long trough.
