City council discussed how a possible municipally controlled corporation for the city's energy division might come to be during a late agenda item on Tuesday's public meeting. The city's main power plant is shown in this file photo.--NEWS FILE PHOTO
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Putting Medicine Hat’s publicly owned utility interests under the umbrella of a municipally controlled corporation could add an estimated 2 per cent in operating costs, but would require a public hearing before city council could act on such a plan.
That could occur by the end of June, according to presentation scheduled for late on Tuesday night’s council agenda. It was to ask council to approve further work be done on the financial implications and potential benefits.
On the same agenda, council was asked to schedule a series of committee of the whole meetings over the next five weeks, and an open committee meeting in late June – which aligns with the return date on financial analysis.
If approved, a first reading of related bylaws would be scheduled for May 20, and “communication efforts will accelerate from here and be ongoing to support (public) understanding (of the issue),” according to a staff memo.
If approved at a series of stages, the change could be formalized in late August.
Last fall, a long-awaited report into the utility business philosophy and model suggested the city’s energy production units could be better run structured as a “municipally controlled corporation,” according to business consultant KPMG.
That could set rates from a purely financial standpoint, rather than have administrators or elected officials balance political considerations, or consider increases in check compared to property tax changes.
It would house the power plant and both the gas and power distribution companies that are regulated, but not the natural gas production unit, which KPMG stated would be a money-loser in the long term and should be shut down to avoid further losses.
Up-front costs to set up the MCC could be $4-$5 million, then $2-$3 million in new operating costs for board renumeration, new operating systems and software, as well as contingencies.
A rate-review committee could be struck for less than $45,000, then require $185,000 to $215,000 per year in board renumeration.
It would meet to set commodity rates for power, currently based on the Alberta wholesale price, and gas, currently the cost to purchase plus premium.
Both were redesigned after public uproar in 2023 over high prices led to price relief and council requesting the KPMG review.
The cities of Calgary and Edmonton operate municipally controlled corporations, or MCCs, for their utility interests in Enmax and Epcor, respectively.
The City of Red Deer, which owns and operates the electric distribution system in that city, is also in the process of considering a MCC. A public hearing toward it is now set to take place in late June, according to that city’s website.
The City of St. Albert considered creating an MCC in 2019, but that was halted before a hearing by council decision.
Medicine Hat would be the only shareholder in an MCC, and would determine a dividend policy, then leave operational decisions to the MCC structure to meet those targets.
