Clearing the confusion with a handful of more mud
By COLLIN GALLANT on January 16, 2021.
cgallant@medicinehatnews.com@CollinGallant If you thought your power bill was confusing, then wait until you get into a “strategic assessment” of the city’s place in the utility sector. How the city exists in the market, how it makes money interacting with the provincial grid, its requirement to operate under special status, the economics and logistics of power, and the morphed and melded way cash is used in city budgeting is all up for inquiry. Got all that? Operations at the City of Medicine Hat are often called unique, but citizens looking to figure out how, if and why the city would sell its power plant better put on a pot of coffee. In terms of power, it is a grandfathered municipal power provider in a deregulated provincial energy market that in itself is like no other in North America. Interestingly this seems to come up about every 20 years. In 1980, when the Calgary Light and Power made overtures to enter the area to provide backup power supply (required safeguard and requirement of maintaining the local franchise), the city responded by expanding the power plant. In the late 1990s, when the province deregulated the grid, council worked to maintain its historic territory with limited ability to export. Now, those export profits are threatened by the coming wave of renewable power across the province. Didn’t expect that? Any Hatters who think green energy is hooey probably didn’t. Folks have tended not to believe the line that power prices are cheaper here either. The current “asset valuation” – which could conclude with a sale to private interests – comes after several years of the city revisiting its portfolio. So, should we be surprised? This column noted three years ago that it didn’t look like the city had enough cash and borrowing room to do all it wanted to do without some major changes. Since then the majority of gas wells have been sold or slated for closure. As well, the Canadian Taxpayers Federation dropped “what should have been a bombshell” last summer stating the city should exit public owned utility operations. City-owned gas, land and power are essentially in the town’s mythological DNA, but there was but a game defence from elected officials, mostly about strong financial oversight. We’ll wait to see if citizens are prepared to put up a stronger defence. Another question The city’s new dividend policy, passed last week, is based on the notion that profits from the generating company will cover ongoing and unavoidable costs as gas wells are closed over the next five to seven years. Most of the operational costs will come out of the budget in two years, but surface lease and local tax payments continue until the land is certified reclaimed. Based on a very sparse outline of what the dividends forecast of a now combined generation (Genco) and gas production (Prodco) division (Comco), the operating costs of the gas shutdown could top $80 million when the current abandonments are all wrapped up. That’s apart from $135 million in capital costs that is funded separately in a reserve and debenture plan. A look ahead The CCDA budget and a public hearing that has implications for the business group’s future will be front and centre at Monday’s council meeting. As well, the utility division’s capital budgets for the coming year will be introduced. If you’ve been under a rock: Wednesday is Inauguration Day in Washington. 100 years ago Locally, Chamber of Commerce members voted 30-1 in favour of forming the Medicine Hat Southern Irrigation District, the News reported in January 1921. The United Farmers of Alberta met in Edmonton to decide the new political party’s election platform. Farmer organizations across the West called on “co-operative marketing of wheat” governed by farmers as opposed to marketing boards under provincial or federal marketing control. In the oddities file, two women named Mrs. Helen White were murdered on the same day in Buffalo, N.Y. Seemingly unrelated, one was killed by her husband and the other shot by an “insane musician” of whom she was a benefactor. Word arrived from London that the cabinet of coalition government would include Winston Churchill as secretary of state for the colonies. Collin Gallant covers city politics and variety of topics for the News. Reach him at 403-528-5664 or via email at cgallant@medicinehatnews.com 33-32
