City under pressure to rethink utility formula

By MEDICINE HAT NEWS on February 2, 2022.

https://www.medicinehatnews.com@MedicineHatNews

Utility bills are rising in Medicine Hat, and so too are calls for the city to reopen how it sets rates and fees, according to some city council members.

Default power prices will remain at record highs in Medicine Hat in February, while the monthly natural gas rate is up as well.

Both rates, set Tuesday by the city’s utility department, are well above fixed-rate options, but even those sit above average of prices from the past few years.

That, compounded by extremely cold stretches of weather this winter, has sent bills higher and reignited debate in the community about price setting in Medicine Hat’s publicly-owned utility and a call for reduced fees.

The head of council’s utility committee told the News she expects the issue to be discussed thoroughly at a division meeting Thursday, but any changes will only come after the public and recently elected council members are fully apprised of how business is currently done.

“I’d like to see the reasons behind why we’re setting rates the way we are,” said Coun. Alison Van Dyke, who said the public is calling for clarity as well, but stressed that rate setting and utility bills in general is very complex.

“Council may have a discussion about whether this is the right way of doing things, but councillors need that education too about how and why we do it this way.”

Power used this month will be charged at 16.18-cents per kilowatt hour – just one-hundredth of a cent less than January’s, which set an all-time local record.

That’s compared to a fixed-rate price, set at 8-cents available to customers in the Medicine Hat franchise area, including Redcliff and some small areas of Cypress County.

The gas fixed rate was set at $4.35 per gigajoule for 2022, which is lower than the current cost of $5.05, but the market price was below the fixed mark in December.

Administrators warned last autumn they saw higher commodity rates on the horizon and encouraged consumers to explore the fixed-rate options.

Last week, finance officials told a council committee that currently about one-third of the city’s 30,000 gas and power accounts are on fixed-rate pricing.

That allows ratepayers to lock in a commodity rate charged against usage, which rises during cold weather months.

Administrators have said fixed rates don’t necessarily keep bills from rising or falling, if usage changes.

They also stress delivery and administration fees are determined by city administrators, but need to be approved by the Alberta Utilities Commission.

Medicine Hat’s ability to avoid Alberta-wide transmission charges keep local bills much lower than elsewhere in the province.

The city brought in monthly rate setting based on averages from across the province in 2009. Since 2013 a fixed rate has also been available, though administrators generally discouraged customers as they were generally higher that floating price.

Since late 2019, fixed-rate power became more popular after the provincial government eliminated a consumer price rate cap.

Gas prices in Alberta have risen steeply in later 2021, and since the city imports gas for both home heating in peak demand, as well as to produce power year round, the city’s cost recovery calculation is tied to the larger market gas price.

The comparable rates used in local default rate setting for gas in February were $4.84 per gigajoule from Direct Energy and $5.26 from Apex Utilities (formerly AltaGas).

Default power rates ranged from 15.68 cents for Epcor’s rural customers to 16.56 cents from Direct Energy.