The city's Unit 16 power plant stands tall in this 2017 file photo, but a review of the city's power generation business looms equally large. The document examining the business philosophy of the publicly owned power company will arrive at city council on Monday.--NEWS FILE PHOTO
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Hatters will see the long-awaited report and recommendations for the city’s power plant at a special meeting of council Monday.
Global business consulting firm KPMG was asked in late 2023 to examine the “business philosophy” at the publicly owned power generation unit after widespread calls for transparency of profits amid record high pricing for residents.
A special meeting of council on Nov. 25, 6:30 p.m. at city hall, will see the report presented by the authors and discussed by council members.
It’s perhaps the most consequential discussion in 15 years, when a similar report on the natural gas production unit was delivered in 2009.
City Councillor Darren Hirsch has often pointed this fall to the gas report – which suggested sale or setting up an arm’s-length management board – in the run up to this power report.
He outlined the challenges in meetings this fall, which outlined falling profit expectations and potential actions to keep the business onside with coming net-zero regulations.
“Political, reputational, financial, technological, market, are all risks, and typically we only deal with one or two,” he told council on Sept. 16.
“That drove the consideration for the (KPMG) review; I’m just a sitting councillor, none of us really have the breadth of knowledge to determine what might be the right course of action.
“Our friends at KPMG don’t have a crystal ball either but that’s why I was adamant that we needed that sort of review. But at the end of the day it’s important that we become informed with our choices.”
KPMG was commissioned to write the review in late 2023, one of several moves to calm public outrage after power prices spiked to all-time highs that summer.
As well, an interim power rate formula was put in place, and council approved $33 million in total to be credited on residential and commercial electrical accounts, including for customers in Redcliff and parts of Cypress County.
It was a dramatic change in policy, in place since the early 2010s to set power prices at the average around the province, while promoting the advantage of utility ownership of profits – nearly $500 million since 2014 – funding construction and offsetting taxes while avoiding hefty provincial distribution fees.
The city has also promoted the power plant as an economic development driver.
Premier and local MLA Danielle Smith has several times this year touted Medicine Hat as a great place for energy hungry industries to invest and do business, with a sure supply of stable, low-cost electricity under municipal control.
The report will likely examine the use of annual power profits in municipal budgeting, something that local budgeters have attempted to reduce among other aspects.
“(KPMG) has been asked to drive the best value for the community from the energy business,” said division managing director Rochelle Pancoast earlier this month. “They’ve focused analysis at a really foundational level at the governance, ownership and financial considerations.”
Pancoast has referred to the report several times during an unusually busy fall.
It has included not only general budgeting for the next two years, but also a move to purchase the Saamis Solar Park and hours of presentations on potential plans of action for the energy transition.
Each has touched on the challenges facing the generation unit, which produced record profit last year in a hot Alberta market. Administrators now predict the entire sector could be challenged in coming years with low prices and low profits.
That’s as new spending could be needed to modernize and move to lower carbon sources of power production, though top staffers maintain flexibility in strategy until a net-zero and Alberta market redesign is finalized.
