Missing text in bylaw means rebate for default gas customers
By COLLIN GALLANT on March 1, 2023.
cgallant@medicinehatnews.com@CollinGallant A misstep in bylaws updating how the City of Medicine Hat now sets default natural gas prices will lead to a $485,000 rebate to customers without a fixed price after two months in practice. And, such customers could see lower prices on their bills until the measure is corrected. The city made the announcement Tuesday, stating it will revert to previous practice after the text of a new formula to use a 120-day rolling average was left out of bylaws passed last December. It was meant to bring in a system of better cost recovery on gas sales, but now the utility will again set its local default price at an average of province-wide prices, a practice used for the previous 10 years. “Council didn’t get to vote on the changes or approve them,” said Rochelle Pancoast, the city’s managing director of strategic management and analysis. “While errors are unfortunate, we learn from them and take the opportunity to improve our processes.” Her office, which oversees utility business support, prepared two amendments in late 2022 for gas and electric rate bylaws, each creating fixed-rate contract options for customers as well as altering the default rate calculations. Eventually those two amendments were again divided into four – two each for both gas and power, but in the translation, officials omitted the new calculation for gas default rate, also known as the Regulated Rate Option. The previous gas formula, charging the average rate in Alberta as an RRO, will go forward but also apply retroactively to Jan. 1, and a rebate for the difference will appear as a credit on utility bills. Pancoast said the impetus of the change was to better align costs to amount recovered through rates – the city now buys 90 per cent of its gas off the market in peak demand periods – and the formula may be re-introduced for formal adoption this year. Travis Tuchscherer, the city’s manager of energy marketing and business analysis, said the previous averaging formula is a responsible interim fix but cost recovery should be the determining factor. “The intended change represented an opportunity to better manage risk by aligning rates to the local cost of purchasing fuel to serve city customers, rather than on third-party market benchmarks as before,” he said. Changing back comes as natural gas prices are falling steeply on the Alberta market as the end of the winter heating season approaches, and could mean a bigger discount in months ahead. The new formula for default gas was to set the local RRO rate based on the rolling price of gas contracted by the city for resale in the previous 120 days – the common forward contracting period. In practice that would mean price drops would take longer to flow onto bills, but also last longer. It replaced a long-standing practice of charging the average of other regulated rate option prices across the province, but also saw new local rates rise above the provincial average in early 2023. The local RRO rate in January was $6.117 cents, compared to a provincial average of $6.42, but market gas prices began to fall in January. The February local RRO price was $5.218, while the highest RRO rate outside Medicine Hat was $3.751. Local rates for March are due Wednesday, with the RRO average sitting in the $2.50 range, according to filings to regulators by Apex and Direct Energy. 21-20
