Utility chair Alison Van Dyke presides over a meeting on July 21. The city councillor says local customers have the option to sign up for substantial savings even though utility bills are rising.--News File Photo Collin Gallant
cgallant@medicinehatnews.com@CollinGallant
It may not seem like it, says the head of council’s utility committee, but Hatters who watched power and gas bills rise in 2022 are still getting a good value and direct benefit from city-owned utilities, including the ability to lock in a major rate discount.
Coun. Alison Van Dyke told the News that a route offered by the city’s billing department to lock in this year’s prices until mid-2023 presents major savings to customers compared to volatile electricity markets elsewhere in Alberta.
So large is the discount, she argued, that councillors may request an updated financial forecast for the power plant.
Those budgets were approved in late November, but along with a new rate-setting formula that allows most customers to avoid a rate hike until late spring.
“No other utility company in Alberta would offer that,” said Van Dyke, who chairs council’s utility and infrastructure committee.
“That is the real benefit of local rate setting in a publicly owned utility, and that was the benefit that people saw last year as well.”
Utility customers have reacted sharply to higher bills that spiked in early 2022. Default power prices are now setting records, and even higher prices are predicted in early 2023.
The province has offered $200 paid onto power bills and a natural gas cap as inflation assistance, and the city will institute a subsidy program for low-income earners.
On bare pricing however, this year the city’s fixed rate of 8 cents per kilowatt hour for power sat below default prices paid by most customers for the entire 12-month period.
A new fixed-rate formula, including rates updated quarterly and set 12-month terms, was approved by council in late November, to stand beside default prices.
A city advertising campaign this month is meant to inform local customers about options and protocols that come into effect in January.
City hall customer service officials said earlier this month that about 6,000 accounts had taken advantage of the 8-cent renewal rate.
Based on typical usage, the difference could amount to $30 per month for one-quarter of the city’s customers, compared to expected 2023 rates, for half the year.
Since those rates are set to recover costs, plus earn a rate of return, the end result of the early renewal program could be double-digit cuts to revenue projections.
“Given wild variations in commodity rates these days, it’s a bit hard to know,” said Van Dyke. “That was the thinking behind the new rate design; we’re trying to avoid a difference in prices (compared to) our costs of production.
“We’ll have to see what happens in the next few weeks, and potentially there may have to be an amendment.”
That residential portion of sales, called “retail” in city budgeting, makes up most of the base business model for the power plant. Along with local commercial and industrial customers, sales inside city limits make up about 75 per cent of revenue projections in the 2022.
In year-end results however, export sales to the grid will likely double forecasts thanks to high demand and high prices. Exports could wind up accounting for about 50 per cent of the power plant’s expected $265-million revenue.
After costs and adjustments, net earnings for the year were forecast to reach $84.5 million at August 31.
But, since the department typically builds its base budget weighted to sustaining operations on mostly internal city customers and very conservative estimates for high-priced exports, the effect may also act as a hedge.
Essentially, if local customers wind up getting a huge bargain compared market prices, those market prices would need to shoot higher. In that case, the city would likely be able to boost export sales to the higher-priced market.
