While Hatters wait to hear the findings of an ongoing third-party review of the city's utility business operations, council will still need to debate and pass a budget for the energy division. Medicine Hat's main power plant on the banks of the South Saskatchewan River is shown.--NEWS FILE PHOTO
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A year-long review of how the city’s energy business operates and how employs power profits are used will conclude this fall, but not before a new preliminary energy budget is debated and likely put in place, officials told the News on Tuesday.
City council members will be presented with the division’s budget assumptions for 2025 and 2026 today at a committee of the whole meeting at city hall.
It’s the second of four meetings focusing on city operating divisions this fall before the final draft of the entire two-year budget is debated in December.
But that report, ordered during record pricing and profit-making in late 2023, won’t be made public until late November, and then left with council to determine actions arising from it.
It also comes as revenue from the power export business is forecast to continue a steep fall from all-time highs 12 months ago, and the division is considering major construction of a solar energy field.
Energy division chair Coun. Darren Hirsch has repeatedly said he wants the review in order to evaluate the future outlook for business, potential changes to the ownership model, but also that business needs to continue in the mean time.
“To be reliant on commodity to balance the books is something we shouldn’t rely on,” Hirsch told the audit committee, after hearing staff estimate power profit could be $19 million in 2023, about $50 million less than initial forecasts.
“It’s imperative that we understand and be cognizant of where we are in the budget, it’s the reality that we find ourselves in,” said Hirsch.
Power prices are forecast to remain low for several years, and today’s budget outline could detail just how low when assumptions on export prices, revenue and expenses are laid out for council.
That, say top division officials, is a regulatory requirement, but will be considered fully but separately over the coming months.
“We have an obligation to have a budget in place by Jan. 1,” said manager director Rochelle Pancoast. “We are working a number of things in parallel, including our budget in alignment with the budget for the rest of the city … We’re assuming on regular sustaining capital expense and on an operational basis that they’re continuing.
“We do note there are a number of things that are still moving or not resolved.”
Pancoast says the division plans to present the KPMG review on Nov. 25 at a special meeting of council.
“It’s to be determined if council decides to take related action right away or take time,” she said.
Pancoast told committee and council in a pair of hour-long presentations in September that the department is continuing to operate and plan as a matter of good business practice – including ongoing evaluation of “net-zero” carbon requirements – while the report was being completed.
A new potential rate-setting formula for local customers could also be suggested in the KPMG report, but the budget, for now, assumes a continuation on an interim formula approved in last 2023.
Today’s presentation will also likely not touch on estimates and timelines for the Saamis Solar Park, which the city is in the process of purchasing.
In the past, significant major one-off capital projects in the division, such as the construction of the Units 16 and 17 power plant complex, have been dealt and debated as a budget amendment.
The city is also working on a general decarbonization project that involves studying a carbon capture and storage hub, estimates and city council approvals for which would come forward as stand-alone decision items.
Results in the power division are also considered in tandem with operating results in the gas production business, where prices are also badly depressed.
Overall, the division is expected to provide a $12-million dividend in 2024, down from $134 million in 2023, and the figure could fall further in years to come.
