The exhaust tower at the City of Medicine Hat's river valley power station creates an optical illusion as heat escapes from the generating station.--News File Photo
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Power demand is rising as heavy heat blankets the province in July, but city officials are reiterating that local electricity rates are more insulated from provincial prices, though power bills will likely be higher as more is used.
Local rates are now set against wholesale prices that are currently under a floor price set by council after last summer’s power price controversy, but the higher prices on the open provincial market will help the city’s energy export profits after depressed pricing this winter and spring.
“We are seeing intense heat and warnings, not just locally, but across the province,” said Rochelle Pancoast, managing director of the city’s energy division in a report to council energy committee on July 18.
“That puts pressure on load as people are using more electricity for air-conditioning.”
Higher demand province-wide should cause prices to rise, and that’s happened in July as the grid has set new record peak demand.
Locally, bills may be higher for July compared to June, said Pancoast, but not because of rate fluctuation and “it will impact bills from a consumption standpoint,” she said.
In July 2023, the default power price from major retailers in the province rose to an all-time high of 32 cents per kilowatt hour – a rate mimicked as the default local price – while the city’s contract price sat at about 15 cents.
The current rate is only about one-quarter to one-half those amounts after city council approved a new interim rate setting formula last fall.
The current rate of 7.9 cents per kilowatt hour will be reset in October based on forecast pricing then. At the same time a report into the city’s power business, potentially suggesting a new rate formula, will be received.
The power division still forecasted a profit in the range of $81 million in 2024 – about half the 2023 record breaking dividend – thanks to continued strong operations, good export volumes and a strong margin due to cheap natural gas fuel.
Alberta power prices are much lower through six months, after a mild winter and supply from now completed coal-to-natural gas plant conversions as well as low-bid wind and solar production.
The grid power price in 2023 was $134 per megawatt, about 13 cents per kilowatt, which was actually down from 2022, but still one-third higher than in 2021.
Medicine Hat director of utility business analysis, Travis Tuchscherer, told the committee that grid prices have been in the range of $74 so far this year and his office forecasts an average of $66 at year end, then $55 for the calendar year of 2025.
“It’s not a great price compared to the last couple years,” but not bad in a “historical” analysis, said Tuchscherer.
Helping out the city’s margin is the extremely low price of natural gas, which it uses as fuel in power generation.
The year-to-date price for gas is $1.53 per gigajoule, with a forecast to soften slightly to year end, but higher to $2.45 in 2025
“Gas storage (across the province) is the highest it has been for seven years due to increased production and less demand due to weather,” said Tuchscherer, adding that LNG exports in future years will eat into over supply.
