Hatters stroll along a utility corridor in South Ridge on Friday afternoon. Local power and gas customers will have new rate options to consider in 2023 as prices for power hit all-time highs.--News Photo Collin Gallant
cgallant@medicinehatnews.com@CollinGallant
Utility rate analysts are urging Albertans to consider signing new long-term fixed contracts to save money as Alberta’s power rates surge in early 2023 – unless you live in Medicine Hat.
But, that’s only for the time being and not necessarily a critique of local offerings, but the result of particular local policy, stressed University of Calgary professor Blake Shaffer.
“Medicine Hat’s (12-month) fixed rate is set roughly where the forward market price is, but I wouldn’t recommend it,” Shaffer told the News on Friday. Instead, he suggests any Hatter still without a contract wait for lower prices before locking in, despite a seeming disparity right now.
“It’s higher than the (provincial deferred default cap), so that’s a better option for three months, but then you have to make a decision on fixed price.
“All things being equal, you’d expect (rates) to be lower in the spring.”
Here, the city-owned gas and electrical utility has unveiled a new fixed-rate offering in January.
It is a substantial departure from how commodity rates were previously offered in the protected franchise area where local power and gas consumers can only deal with the city as provider.
Most power customers in Medicine Hat had the option in December to sign a new six-month fixed-rate contract at 8 cents, – “a very good rate,” said Shaffer – but those who didn’t, or who signed six-month contracts in later 2022, will go back on default prices this winter just as prices spike.
While the current long-term rate in Medicine Hat (17.3-cents) is lower than the so-called floating rate (26.8-cents) offered as a default, the default rate is currently subject to a deferral program offered by the province. It will see no more than 13.5 cents charged on bills, but the difference will be charged back later to the remaining pool of default customers.
Those deferred amounts will be recovered from only customers still on the default rate, also known as the Regulated Rate Option.
The basic strategy, said Shaffer, is that customers without a fixed contract right now should take advantage of the default cap, then sign a long-term contract to avoid paying back the difference.
A new 12-month fixed rate will be published quarterly by the city’s utility department, with the next due on April 1, just as the provincial cap expires.
The City of Medicine Hat billing department states it does not give specific advice to customers about which rate option is right, but rather explains options and provides information.
Shaffer recommends the same stance for long-term rates versus default rates for natural gas, which are $6.61 per gigajoule for 12 months, or defaulted to $6.17 for January. The province’s cap for gas is $6.50, but again, only for default customers.
“It’s a risk, and everyone has their own risk tolerance,” said Shaffer.
For several years he has used social media to comment on power prices, the power market and tried to inform Albertans about how the unique power and gas markets affect them.
“In other parts of the country, they aren’t having these types of discussions,” he said, adding that he understands frustrations ratepayers can feel, but hopes they can use a better understanding of billing to their benefit.
“You don’t have to feel like you’re playing the market … but fixed rates over the last few years have saved people thousands of dollars.”
Based on average use, each penny of difference for power is cumulatively worth between $6 and $7 per month.
During high-use months for gas, $1 difference in price can add up to $20 or more.
