Starting Jan. 1 all City of Medicine Hat gas customers will automatically switch to a single, monthly natural gas rate, though an option to remain on your current contract does exist.--NEWS FILE PHOTO
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All Hatters will have a single, monthly natural gas rate staring Jan. 1 after city council approved the change and a new rate-setting formula Monday.
The move aligns with power-pricing changes this month when a simplified, non-contract rate was launched after widespread criticism that local prices tied to the provincial average rose to record highs in June as a large number of term contracts expired.
Where the new power price is based on the forecast of wholesale prices in Alberta – charged to minor retailers who add markup – the gas price will be based on actual cost of purchases plus a 3 cent-per-gigajoule handling charge.
Manager of utility business office Travis Tuchscherer says the systems are similar but the two commodities have particular issues in the city’s business model.
“We produce electricity, while on the gas side our production has dwindled,” Tuchscherer told council. “Most of our gas consumed in the city is purchased (off the provincial pipeline system) so our cost to (buy it) is our cost.”
Currently, the utility department sets the monthly rate at the average of default prices in Alberta’s major power distributors, similar to power.
For 2023, council approved new rate setting based on the average price contracted by the city over the previous 120 days. An error in the wording of the bylaw however, forced a reversion to the previous averaging formula while administrators promised formalizing the change in year-end approvals of the 2024 business plan.
That and the new rate were approved unanimously Monday.
Similar to power changes, all customer move to the new gas rate, but have the option until Jan. 30 to revert to their contract price until the term expires.
The current AECO price for gas is in the $2.50 per gigajoule range, said Tuchscherer and he doesn’t expect major changes aside from season increases in cold weather over the next 12 months.
At that rate, the 7-cent markup would equate to about 3 per cent.
Councillors queried about the potential for a high-low cap similar to power, but administrators said the key principal is the department needs to recover its costs.
“We are purchasing gas in the market, and typically in the winter you see higher prices, so we will look at a purchasing strategy in the marketplace,” said Tuchscherer.
