Council eying single power price for 3-month blocks

By James Tubb on October 4, 2023.

Rod Edwards and Shirley McClennan address city council on Monday seeking funding help for a major expansion project for the Medicine Hat Exhibition & Stampede. NEWS PHOTO COLLIN GALLANT

Collin Gallant

A single price to be updated quarterly for Medicine Hat city electricity customers would be based on a long-term market outlook that sees power prices declining, according to city utility staffers.

But, that won’t be debated until council debates the proposed “interim rate,” and Hatters will have their say at a public hearing later this month.

Council gave first reading to a proposed change that would link a local price for threemonth blocks to projected wholesale electrical rates, which are expected to drop steadily until next summer.

That would be available to all customers, then adjusted quarterly as new long-term forecasts are developed. It could see an immediate drop of 40 per cent on local power rates this fall after widespread complaints about record high pricing and a newly implemented contracting system.

“We expect to see weakness going forward,” said Rochelle Pancoast, head of the city’s energy division. She was charged by council in September to develop a “best in market” rate this fall, which she said was initially thought of as one compared to contract offerings. Instead, that price was higher than the longerterm outlook for wholesale prices.

“We went further. We think this is the best approach to meet the needs of our customers … until we revisit the commodity business model (as directed by council in the new year).”

The issue will next go forward with a public hearing Oct. 16 before second and third reading.

Currently, the best contract average among major Alberta retailers comes in at 16 cents, whereas a wholesale market rate would arrive just below 12 cents this fall, then, according to the outlook, as low as 8 cents next spring

Nicole Frey, a leading voice calling for lower prices and operational transparency, told the News the proposal still needs better explanation. She says the public still has questions about why the city benchmarks its price against other utility companies, or in terms of potential revenue.

“Staff did come back with a best in market, which is what council told them to do, but they should be asked to come back with the best rate,” she told the News early Tuesday.

That rate would be based on local cost of production plus a reasonable profit, said Frey, though she says she often hears others call for a base cost and no more.

Several councillors said Tuesday they are looking forward to broad discussion in the community.

“I look forward the conversation,” said Coun. Darren Hirsch. “It’s a very dynamic, very complicated business that we’re in and citizens are trying to wrap their heads around it.”

Coun. Shila Sharps also said the rate discussion could help clarify the power market for residents.

“There are a lot of rumours out there,” she said.

Coun. Robert Dumanowski called it an “eyes wide open” issue, and asked if the city would consider grid sales in the new rate, either lowering or raising the price to adjust revenue.

“It’s still tying us to the market,” said Pancoast. “Whether we’re profitable or not, that won’t change the best in market formula.”

The power plant, which typically budgets conservatively, is expected to provide a $130-million dividend to the city’s municipal coffers thanks largely to unexpectedly high and highly priced sales to the Alberta grid.

“You can’t have five times the revenue projection and not have anything coming back to customers,” said Frey.

The new rate would be based on a 12-month forecast of wholesale electricity on commodity markets, and would be in effect for three months, then updated quarterly with a new year-out analysis. If approved, all current contract customers would be moved to the new rate, then have a 30-day window, to move back to contract pricing, if they so choose.

“The new rate would be the new default,” said Pancoast. “We don’t want to remove choice entirely, but we’re assuming that it’s in their best interest (with the new rate) … because it’s lower.”

Some of the lower pricing in the Alberta marketplace — predicted by some analysts — is now showing up in the default prices that reflect grid considerations.

Rates published Tuesday in the city — based on the formula used since 2009 — showed a marked decline from the highs in the summer.

As it is, customers without a power contract will pay 17.9 cents per kilowatt hour in October, down from 25 and 30 cents in July and August when opposition to high prices began to ramp up in the city.

Customers began protesting high rates in July when a special offer of 8 cent, held over from 2022, expired and customers were either left on the default or signed on for 12 months at nearly 17 cents.

In early September, council increased a proposed relief package by one third to $800 in total for residences and $2,000 for business at a total cost of $33.2 million that will be paid onto utility bills over three months.

Rod Edwards and Shirley McClennan outlined a $35-million expansion project at the Medicine Hat Stampede grounds that would rebuild the north grandstands and add event space, but require $22 million in city grants and loans.

Councillors discussed the proposal and asked questions of Stampede officials for 90 minutes on Tuesday before receiving the presentation for information.

“We have an interest in making sure this is something that works, but it’s a lot of money in a difficult time,” said Mayor Linnsie Clark.

Edwards told council that the plan, first announced in 2021, could be built over two years without disruption of major events, and would be a greater draw for agricultural and other events.

A proposed funding model of 40 per cent from both the province and the city, plus a 20 per cent interest free loan, would see the city provide $14 million in grants, plus a $7-million loan to the board.

Stampede officials say that matches a funding model that just saw huge trade convention space open in Lethbridge and would benefit the city.

Read more about the proposal and council reaction in Thursday’s News.