By Collin Gallant on October 10, 2018.
The rollout of automated utility meters in Medicine Hat could take 18 years to “pay for itself” — a decade longer than projected when the program was first proposed as a cost-saving modernization.
A presentation to the city’s energy and utilities committee on Oct. 4 states total costs and annual savings of the program that saw 82,000 gas, water and power meters switched over in 2016 now that the project is entirely complete.
Administrators also point to a number of intangible benefits — such as easier billing, better emergency response and other operational measures — that have made the project a “success.”
The chair of the committee however, says if utility requires modern infrastructure or upgrades to provide good service, it shouldn’t be sold as cost savings, especially if they don’t materialize.
“The meters have a lot of advantages over just cost savings,” said Coun. Phil Turnbull, who sat on the committee in 2013 when the project was approved, then was returned to council in 2017.
“At some point we were going to have to do it. But I don’t want administration to tell us it will pay for itself if it won’t.”
He said he specifically requested a wind-up report into the initiative, and credits current administrators with bringing it forward.
There were higher than expected capital costs, lower than expected savings and a longer than expected process to install the meters, including “contractor quality issues,” according to the report.
Financially, the equipment reduces operating costs by about $1.2 million per year, but the cost of $21.9 million was $3 million more than originally proposed.
At that rate, the installation cost would be covered by about 2034.
The original proposal cited between seven and nine years as when cost savings would eclipse the capital cost.
Jaret Dickie, manager of the city’s utility business support office, said the project provides an array of benefits.
“It’s a very unique application … to successfully integrated three utilities and then into our billing system,” he said.
“Some of the assumptions in the business case, it’s taking best information at the time … It won’t meet the term, but there are significant other benefits, beyond the financial benefits.”
Officials say the move to automated meter reads from 82,103 service connections eliminated estimated reads, improved responses to outages, provides more data to customers, has reduced workplace injuries and enhanced customer service.
That data allows the city’s power load to be managed better, said Dickie, including time-of-use billing for large-scale commercial and industrial customers, and in some cases, lower rates.
The presentation lays out actual cost savings of about $1 million per year on wages for 15 meter readers and hours for billing staff.
Because all meters were updated, about $115,000 per year will be saved because fewer replacements will be needed in the near future. Also, the automated nature of the readings, means troubleshooting can take place remotely, meaning about $70,000 is saved due to fewer service calls, bringing the annual savings just under $1.2 million.
That actual is close to the projected savings when the plan was greenlit in 2012, stated to be $16 per meter per year.
The original budget proposal totalled $18.9 million, but that was later amended higher as the rollout continued and cost rose to $22.9 million, thanks partly to problems of marrying new meters to aging connectors in homes. The so-called “hot socket” issue affected about 150 customers and led to more testing, and the unusual expense of covering the cost of customer upgrades.