Council is determining what, if any, relief should be offered to rate payers amid another year of expected ballooned power profits. The City of Medicine Hat's main power plant is shown on the banks of the South Saskatchewan River.--NEWS FILE PHOTO
cgallant@medicinehatnews.com@CollinGallant
Power bill relief might be on the way for Medicine Hatters, but prospects for an overarching review of utility rates are still murky.
The issue arose Monday night as council received interim financial statements that forecast a $184-million profit could be recorded in the city-owned power plant this year.
That’s largely due to sales on to the Alberta power grid where record prices are expected to continue at least through September, but councillors led by Andy McGrogan and Darren Hirsch voted 6-3 directing staff to devise options to lower the hit to power users this summer.
Council members called for a review of how rates are devised since approving a new schedule of rate offerings last December.
But that effort stalled as administrators called for more clarity, whether council wanted a campaign to promote the benefits of publicly owned utilities or a rate resetting.
Debate on Monday also touched on the issue, and it is back in the hands of staff.
“No matter how we try to message this, it comes across as, the bottom line is we’re making record profits and asking people to make a choice they don’t want to make,” said McGrogan.
“I think we need a simplified approach, and for these profits … our stakeholders will see a tangible benefit.
“I think we’re confusing the owners of the utility by taking record profits and in some cases double electric rates for some people. It’s not reaching the average citizen.”
The audit committee heard on June 6 that power revenue expectations would likely wind up three times higher than predicted due to record pricing and high demand on the Alberta market.
Documents also revealed that a special six-month rate offering to begin 2023 at last year’s prices will likely trim a total of $60 million off local bills.
But that discount ends with June’s bills, while new contract rates could be double and floating default prices up to three-times higher.
Audit chair Coun. Darren Hirsch said June 6 when the results were made public that it could jolt council into discussing rebates, but the full financial picture must be considered.
“Everyone we talk to says we can’t expect record profits for very long,” said Hirsch on Monday. “That said … I want options on the table.”
In early 2022, council instituted a discount program for low-income earners, and in 2021 released $4.8 million in reserve funds to be spread among all utility customers, resulting in individual debits of about $136.
City manager Ann Mitchell said the options could be developed in short order, but council needs to decide on the scope of the utility review.
“We’ve heard it loud and clear from customers, and it’s very timely,” she said.
Coun. Robert Dumanowski said the city needs to forecast rates that earn a profit, but should also respond when pricing hurts consumers.
“We’re all hearing it and feeling it,” he said. “A more comprehensive rate review still has to be on the table. That’s the mechanism where we could respond more nimbly not knowing where rates are going to go in the future.”
Coun. Alison Van Dyke, the chair of both committees that could handle the review – energy and economic, strategic planning – said she opposes major payouts.
“I caution against making a significant rebate mid-year in a very volatile market,”she said. “There is a lot of energy that is coming onto the market that will drive prices down.”
She also said that in terms of budgeting, council also approved moving forward with renewable energy transition and carbon capture and storage initiatives, but hasn’t yet dedicated funds.
“These are costs that we know are coming,” she said.
Administrators told the audit committee that the commodity division dividend (determined after profits and losses of power and gas production are blended), could be $138 million this year. That will largely be assigned to a capital reserve and used generally in extinguishing future liabilities, such as site reclamation of the city’s river valley power plant in a decade or more.
Another destination for the additional funds is heritage savings reserves.
An expected $35-million deposit this year would provide an additional $1 million in funds to the city’s operations budget each year, based on the current formula.
The deposit would bring the total value of that fund, set to be tapped as an ongoing endowment starting in 2025, could approve $200 million by year end.
The city projects drawing up to 3.5 per cent return above inflation for operations.
Mayor Linnsie Clark said Hatters need to be shown the direct line to the city’s reserves and tamping down tax rates.
“That’s foundational,” she said.
Coun. Ramona Robbins said she sees the fund as a better long-term investment.
“History tells us this (electricity market) will not last,” she told council. “Power rates go up and go down,” but the interest-bearing account will continue to pay out.
