City unveils January default utility rates

By COLLIN GALLANT on December 30, 2022.

cgallant@medicinehatnews.com@CollinGallant

Some of the numbers are in for Hatters mulling their options for utility rate contracts in 2023, and they are up there.

Ahead of contract option switchover on New Year’s Day, city administrators released both default and contract power and natural gas rates on Thursday.

That is about four days before it would typically do so on the first business day of the month.

It shows default power prices rolling even higher than record-setting amounts this fall, while a one-year fixed rate more than doubles the 2022 price.

Residences, small to medium businesses and farms in Medicine Hat franchise area with default pricing will pay 28.6 cents per kilowatt hour in January, as prices around the province all approach 30 cents. That is a far and away a record, about three and a half times the average price in 2018, as power prices continue to spike in the province.

It garnered special attention from the provincial government this month, which placed a temporary cap on default prices of 13.5 cents, though the difference will be paid back by default customers on bills stretched out until the end of 2024.

The default, or Regulated Rate Option, also compares to a new fixed-price offering from the city utility of 17.6 cents per kilowatt hour, which does not fall under the provincial cap.

That rate however, is available from Jan. 1 at anytime over the next three months, and would be in place for a full 12 months.

If that wasn’t enough to process, many Hatters still have until the end of business of Friday to lock in the 2022 rate of 8 cents until June.

The loophole is created by the city’s bylaw rate-setting process, which requires that existing fixed rates be honoured for six months, as per contract terms. After that period expires customers will move to default RRO pricing unless they sign up for either fixed rate of variable rate options.

Fixed rates are not new in the city, but with prices shooting higher they have become much more popular. Administrators said about half the customer base was on a fixed rate in the middle of 2022, which saw default and market rates vault above the fixed price for the entire year.

The city’s fixed power rate was established at 6.8 cents in 2017, when the provincial NDP also capped prices at the same level. That was removed by the United Conservative government, thereby providing more upside to consumers to evaluate the option. It moved to 8 cents for the 2022 calendar year, and was expected to rise again annually to better recover costs at the power plant.

Specifically, financial reports suggest higher prices for natural gas to fuel the power plant’s added $18 million in operating costs.

That led administrators to create several new rate contract options, which they say will add more resiliency to pricing system.

Now, prices published at the beginning of each quarter (starting in January, April, July and October), will be available but on 12-month set terms.

Natural gas will see changes in 2023, as well.

Where power default rate setting still consists of an average of other power distributors prices, default gas is based on the contract price the city secures for gas coming off the Alberta system.

That default rate for January will be $6.12 per gigajoule consumed, about even with the December price, when the averaging formula was employed. The 12-month fixed rate would be $6.61 per gigajoule.

Variable rate options that are also available to customers are determined at the end of each month, based on the actual market price average over the billing period, plus a premium.

The fixed rate for gas in 2022 was $4.35, and is subject to the same contracting system in power.

The power prices used to determine the local default price for January ranged from 27 cents per kilowatt hour from Direct Energy to 29.5 cents from Epcor for Edmonton customers.

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