City power crews prepare to replace a pole in an alley on the Southwest Hill on June 23. Hatters are weighing options ahead of the release of a new term contract rate next week.--News Photo Collin Gallant
cgallant@medicinehatnews.com@CollinGallant
A deal on power prices for Medicine Hatters is set to expire Saturday, but most city customers will have a bit more time to decide what to do with their bill.
A new system this year offers year-long fixed-rate contracts or staying on a default price, but both are well above an 8-cent per kilowatt hour rate that Hatters could lock in at the end of 2022.
That six-month term however, ends after six billing cycles since Dec. 31, bringing a choice between locking in a fixed-price expected to be double, or accept a default rate that could be quadruple this summer before it is forecast to moderate in 2024.
Some analysts point to clear advantages of going with a fixed rate, while the city utility department’s policy is to not advise customers on which option is best.
Either way, said officials, the choice doesn’t likely have to be made by month end.
“Our billing department usually sees a rush on the first of the month, when prices come out, but there’s no need to panic,” said Terra Petryshyn, a communications officer with the city.
Because individual billing periods don’t align with calendar months, customers don’t have to make a decision on the first of each month, but rather by their billing date, to capture rates posted during the month.
The 12-month fixed-rate price is updated quarterly and the next is due July 4, after the long weekend, and could be moving higher.
“The market has been high this year and we’re forecasting a very high prices this summer,” said Travis Tuchscherer, the city’s manager of energy business and analysis.
Those rates are developed, say city administrators, to determine one rate that will average out over the year to be comparable to predicted default rates.
“When we price a contract we look at the full 12-month (ahead) curve,” said Tuchscherer. “Prices are expected to come off next spring, where a (fixed-rate) customer could be paying more than market (RRO) price at that point.”
He says that since their fixed rates are determined using a 12-month price forecast, the actual difference overtime could be negligible.
“We don’t have a crystal ball, and can’t guarantee one will be a better deal for the customer, but we’re indifferent,” he said.
Other analysts however, make it clear that avoiding a major price swing up this summer would be prudent even if energy markets level out and drop next swing spring providing savings.
“Fixed for now is the clear winner,” said Blake Shaffer, an economics professor at the University of Calgary who comments on Alberta’s electricity market and consumer options.
Up to a third of city power customers locked in a six-month term of 8 cents per kilowatt hour when the rate-setting regime was changed at the end of 2022, about half the city’s fixed rate offered in early 2023, and at times a quarter of the floating price, though a deferral program from the province was in effect.
Now, some customers were defaulted to the RRO price in June when their six-month contract ended, but most will see it expire at the end of June’s billing cycle.
While new rates will be published early next week, the indication is the cost will double or quadruple from the 8-cent rate, depending on whether a customer chooses a new 12-month rate term or automatically reverts to a regulated rate option.
The fixed rate in the second quarter of 2023 was near 16 cents per kilowatt hour, and a new rate will be announced Tuesday.
The RRO, which is reset each month based on the Alberta market price, could approach 30 cents as the provincial market is forecast to spike this summer.
Essentially, having an RRO rate in July or August could mean paying nearly 30 cents for power during a high-use period, plus a payback of a couple cents to cover the cost of a provincial deferral program (typically one to two extra cents per kilowatt hour) each month.
A fixed rate could be half that but require a 12-month contract while the Alberta power market is expected to soften in 2024 due to new gas and renewable power generation coming on line.
