City earns win toward Saamis Solar plan but could now deal with a legal challenge

By Collin Gallant on November 28, 2024.

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The City of Medicine Hat has won a key regulatory point in its pursuit to buy the Saamis Solar Park project, but is now facing a potential legal challenge on the larger application to take over the renewable energy project inside city limits.

An opinion procured by the Alberta Utilities Commission outlines that the renewable power should not be counted as part of the city power complex’s capped production limits, and even states that an initial phase of the huge solar array would help meet peak demand.

That was a key condition on the sales agreement with private sector developer DP Energy for the huge proposal north of Crescent Heights.

Division officials say the project makes economic sense and will strengthen the publicly owned power company.

On the other issues in the AUC application however, the Medicine Hat Utility Ratepayers Association has registered as an intervenor and argues through law firm McLennan Ross that the “transfer of ownership” application is unique and should include the economic merits of the project.

A letter to the commission, carbon copied to MHURA leadership group including former regional MLA Drew Barnes, states the 250 members have serious concerns about the economics of the project.

Had the city’s interest in buying the project been known at the time of an AUC hearing and decision process last summer, a submission argues, MHURA would have made its concerns known at that time.

Concerns “include the lack of transparency and public consultation by the city in regards to taking over ownership of the Saamis Project. Specifically, MHURA is greatly concerned with the city’s failure to consult with taxpayers on such a monumental financial investment,” the letter reads.

The AUC is expected to make a ruling on the “transfer of ownership” application within 120 days of the early September filing.

Typically, such an application would evaluate whether the applicant is a qualified utility operator in the province.

The city currently operates gas-fired generators with 300 megawatts of capacity, and has operated the municipally owned enterprise since the early 1900s.

The city announced in late August it had finalized a conditional agreement to buy the project after the initial permit and application was approved by the AUC in July.

City councillors have told the News more will be made known after the ownership application is dealt with by regulators and further budget decisions come to council for approval.

Energy division officials have defended the project, stating it is a low-risk investment that will strengthen financials and operations at the power business in the face of increasing regulation and carbon costs.

“Our existing natural gas (turbine generating) assets are critical to the supply of the city today,” division head Rochelle Pancoast told council during a presentation on low-carbon strategies in September.

“We have no intention of shutting those down prematurely, and we’ll continue to advocate for their continued usage as long as we can it terms of being economically viable and compliant with regulations

“But we need to identify to start managing that regulatory risk and diversify when we can, and only if we see a path that’s economically favourable and affordable on scaled phases.”

The city has stated it intends to begin with a 75-megawatt phase of the 325-megawatt planned facility, potentially by the end of 2027.

Along with sales revenue from the power produced and lower amortization on gas-powered generators, the solar phase would provide an estimated $7.2 million per year in carbon offset credits in 2027.

That would increase in subsequent years as the province’s TIER carbon levy is set to escalate and be applied against TIER payments made on CO2 emissions at the gas power plant.

The AUC application is with the transfer of ownership of the project, a request to alter the proposed construction plan and for an initial ruling on how the facility would be considered against a production cap that is imposed by the city’s electrical charter.

The city is required to keep enough generating capacity on hand to meet peak internal demand from customers in the franchise area, but is allowed to overbuild and instal backup capacity in case a main generator is offline.

Though intermittent, solar power would produce most efficiently in July and August when the city traditionally experiences its highest demand from customers.

“The city has established a need for further generating capacity to reliably meet the needs of its customers,” reads the opinion, provided by contracted independent assessor, Dentons. “The additional generating capacity under the proposal will meet this need.”

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