Angry ratepayers filled a meeting on the Stampede grounds this week to protest high power bills are planning to gather in front of city hall on Tuesday when council debates extending relief options to utility customers.--News Photo Collin Gallant
cgallant@medicinehatnews.com@CollinGallant
Medicine Hat’s unique place in the Alberta market allows it to market exclusively to customers in a franchise area of Medicine Hat, Redcliff and parts of Cypress County.
But, in Alberta’s unique provincial power market it can also sell power to the grid and make major profits when demand and prices spike.
It has created dizzying profits over the years, but Hatters facing higher bills are now asking what is their share of expected record-breaking profits this year.
Initial indictions come from four-month financial statements released in May.
They show that while staff estimates most of the power plant’s sales this year will come from local utility bills, a greater portion of huge profits will come from those outside the city.
That’s according to a News analysis, though city councillors have requested deeper analysis on the breakdown from finance officials.
“We say it out loud that (the dividend comes) from selling to the grid, not off the backs off of our ratepayers,” said Coun. Shila Sharps on July 4 discussions about high power bills. “If our community can see that, then they can know they’re not footing the bill.”
Part of the answer comes from nuances of the budget-making process for the power plant, where administrators are famously conservative when forecasting export sales.
Since internal city sales are more predictable than exports, they are given more weight in business plans to ensure basic costs are covered and margins are met rather than relying on the highly volatile Alberta market.
The 2023 power plant budget, approved last December, forecasts local sales at $105 million and grid sales at $58 million. Sales revenue would total $203 million, including $40 million from extremely stable local industrial contracts.
Each is higher than the 2022 budget forecasts, but only half the actual amounts recorded at year-end for retail customers and grid sales.
The 2023 operating costs are forecast at $126 million, with amortization and other adjustments of $23 million, leading to prediction of a $41-million dividend.
At April 30, however, the plant hit two-thirds of its annual revenue targets just one third into the year thanks to higher volume and prices, especially in March when prices in Alberta skyrocketed.
Finance officials now predict some of that to carry to year-end.
Local home and business sales could now reach $165 million for the year ($66 million more than budget, or about 50 per cent higher).
Sales to the power pool could reach $115 million (up $67 million, or 98 per cent higher that budget). That’s a much greater relative increase than retail sales.
Considering a relative drop in production costs thanks to cheaper gas, unadjusted earnings would triple, and so too the dividend, now expected to be $139 million.
Similarly in 2022, sales to city customers wound up 50 per cent higher than budgeted after 12 months, while grid sales more than doubled expectations, and a $98-million dividend was paid out.
The power plant lost money on operations in 2017 and barely paid a dividend in 2020 – a year when grid prices crashed during the early COVID pandemic.
Since then however, rising prices in Alberta put adjusted profits at $66.4 million and $95 million in 2021 and 2022, respectively.
The city’s next interim financial statements, covering the period up to Aug. 30, are due in early October and would include the lucrative summer power market.
