Rates and formulas for city utilities are changing in 2023, but the city is offering longer-term users of fixed rates for power a chance to lock in a highly discounted rate for the first six months of the new year.--NEWS FILE PHOTO
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Utility bills are set to change for Medicine Hat power and gas customers in the new year but the change-over could allow most customers to lock in a substantial discount while the process plays out.
The city utility will begin offering a new set of contract options to customers starting Jan. 1, and is expected to begin an educational campaign soon.
The changes includes a new variable rate, while fixed rates and default rates will have term lengths and new rate-setting formulas.
The fixed power and gas rates in 2023 will also rise to reflect market conditions and be reset every month for the contract term of the next three months.
But, before the existing system elapses on Dec. 31, customers who are not currently in the first six months of an existing fixed contract, could lock in the 2022 rate (8-cents per kilowatt hour) for the next six months.
That would mean a 50 per cent discount on power until May 2023 compared to the incoming fixed rate in January (15 cents) and 60 per cent compared to the default rate power in December (23 cents).
“There is a window here (for customers) to capitalize,” said Coun. Robert Dumanowski, vice-chair of the utility committee, who cast the deciding vote last month to bring in a new rate schedule called for by administrators.
They argued the changes increased customer choice and would make the operation more resilient and better recover bare costs.
A minority preferred holding changes until a greater rate review is completed in February.
Dumanowski said the city hears a lot of criticism about utility bills, that it takes a hard-headed direction on pricing.
“It’s not is anyone’s best interest to pull the wool over anybody’s eyes,” he said.
“These rates won’t be here forever, and that will significantly challenge (our profitability). We’ll be back to more normal markets soon.
“(On the vote) my thinking was that we have to keep the business whole (recover our costs), then we can look at any profit windfall to do some creative things (on bills).”
Default power rates, which will still be set by averaging rates in the province, are expected to go higher in January after a record-setting year in 2022.
City administrators stressed on Thursday the new system will allow the publicly owned utility to better manage risks in the future.
They hope to better avoid rate shocks like the one in natural gas this year that drove up the city’s costs to buy home-heating fuel for resale as well as natural gas to fuel the city’s power plants.
Much of the public discussion has been negative toward having to research rate options and re-sign contracts after a decade of the city simply publishing a default rate monthly, or more recently offering a whole-year set rate.
“It will take some time for (customers) to adapt,” said Travis Tuchscherer, manager of utility marketing and analysis for the city utility.
The department is expected to put out more information on how the system works in a release today, then quickly produce literature to go out with bills and an explanatory website soon.
“We will do our best to put out good information to get ahead of any confusion,” said Tuchscherer. “Residents do have options that they can decide from and whether they want to sign a new contract.”
The city’s franchise area includes all residential, commercial and industrial customers in the city limits, Redcliff and a small portion of Cypress County.
The city will abandon default rate setting for gas in 2023, and instead move to charging a default rate based on market pricing from the previous 120-days.
“That will be matched to our costs of buying gas,” said Tuchscherer of the city’s practice of contracting gas purchases months before delivery.
“It’s how the other (major) gas distributors set their rates.”
In the existing contract system, customers can sign a fixed-rate contract in 2022 for either gas or power for a minimum of six months and remain with that rate until the customer requests a change.
Conversely, the city is also required to provide the rate for a minimum of six months to fixed-rate customers.
Therefore all fixed-rate customers who are beyond the six-month period will see their contract expire at the end of the year.
Customers who signed contracts between August and the end of December however, will carry the 2022 rate into 2023 until the six-month period ends.
